Role of private sector in construction industry stressed

The declaration of a policy and creation of an appropriate legal framework for the construction industry are fundamental requirements if the state is to recognise the indispensable role of the private sector as the main engine for national growth and development, said CEO/Secretary General Chamber of Construction Industry Sri Lanka Dakshitha Thalgodapitiya.

He said the State must provide an enabling environment with appropriate incentives to mobilise private resources for the purpose of financing the construction, operation and maintenance of infrastructure and development projects, which are normally financed and undertaken by the Government in association with multilateral development banks or bi-lateral donors.

Such incentives must be apart from financial incentives provided by the BOI laws.

It should include provision of a climate of minimum government regulations and procedures, with specific Government undertaking in support of the private sector, minimising the intervention of political authorities.

Thalgodapitiya said that private sector infrastructure development projects which would have been otherwise funded and operated by the public sector could be implemented wholly or partly by the private sector and includes, power plants, highways, expressways, ports, airports, canals, dams, water supply, irrigation, telecommunication, rail roads and railways, transport systems, land reclamation project, industrial estates and townships in addition to areas such as solid waste management, offshore sand mining among many others.

For the construction stage of these infrastructure projects the project proponents may obtain financing from foreign and or domestic sources but should employ Sri Lankan contractors and engage the services of foreign consultants and contractors if such capabilities are not found locally, he said.

In the event foreign contractors become a partner of the project at least 60% of the work must be carried out by domestic consultants and contractors. Provision must be made for infrastructure development projects to be listed in the Colombo Stock Exchange to facilitate capital formation and broadbasing ownership.

Thalgodapitiya said that Build, Operate and Transfer of infrastructure projects require specific legal provision.

It is a contractual arrangement whereby the project proponent undertakes the construction, including financing of a given infrastructure facility and operation and maintenance.

The project proponent operates the facility over a fixed term during which it is allowed to charge facility users, a reasonable fee, rental or a charge, enabling the project proponent to recover its investment and operating and maintenance expenses. In such an arrangement the rights of the facility users on many occasions the public must be adequately safeguarded to ensure that the project proponent does not hold the public to ransom.

Financing, construction, operation and maintenance of infrastructure projects by the private sector is now increasingly adopted in both developed and developing countries.

The Government should identify and list projects that could be implemented by the private sector to provide a level playing fields - such projects should be notified, which is different from calling for public bids. There must be a clear provision in law for acceptance of unsolicited proposals which should necessarily involve a new concept in technology - facilitating transfer of new technology.

With global construction industry moving towards design and built, contracts and infrastructure development being undertaken on the basis of Build-operate-and-transfer, Build-and-transfer, Build-own-and-operate, Build-lease-and-operate, Build-transfer-and operate, Contract-add-and-operate, Develop-operate-and-transfer, Rehabilitate-operate and-transfer and Rehabilitate-own-and-operate.

The Construction Policy and a Construction Industry Act must necessarily focus on private initiative in construction of infrastructure which is the key to economic development.

The Construction Industry Act is a fundamental requirement and should address these issues as well.