Smart contract in Malaysia Construction Industry

Abstract

The construction industry plays a vital role in supporting Malaysian economic and social growth. However, because of its unique characteristic, the construction industry is more prone to payment disputes than other industries. CIPAA was introduced to facilitate payment disputes among parties. However, without the root solution, payment disputes will continue to arise. Today, there are new technology available in the construction industry to improve work efficiency, such as building information modeling (BIM), drone technology, Industrial Building systems (IBS), and etc. for the construction contract, the new technology available is smart contracts. Smart contracts are a contract that has been coded into computer language as software using the blockchain platform, thus reducing time and cost when performing transactions. Smart contracts have all the blockchain advantages such as data storage and record tracking, trust, and no intermediaries. All information is stored in batches and linked together chronologically in a continuous line, decentralized, and distributed across network computers (the contractual parties). Hence, contractual parties can track information quickly, and the data tampering can be reduced since all parties have the same real-time information. This paper aims to determine smart contracts’ transactions in reducing payment disputes and determine the challenges in implementing smart contracts adoption in the Malaysia construction industry. Different types of research methodology are used to achieve both objectives. For the first objective, the study papers were collected, and key points are filtered out to understand the smart contracts’ transaction, leading to the creation of theories from various resources on blockchain technology and smart contracts transactions. For the second objective, data was collected through a questionnaire distributed to the selected respondents. The first objective shows that smart contracts’ transaction can reduce the factors contribute to payment disputes; hence reducing payment disputes. The second objective shows the expected challenges in implementing smart contracts in the Malaysia construction industry, such as lack of ICT infrastructures, smart contracts drafting, lack of knowledge, etc. In conclusion, there are possible solutions for payment disputes despite the challenges in implementing smart contracts in the Malaysia construction industry.