Construction sector :

The importance of rebuilding confidence among stakeholders

by Dr. Surath Wickremasinghe

Over the past five years we have witnessed a huge transformation of not only Colombo, but also several other cities in different parts of Sri Lanka.

The construction industry has been growing at the rate of 22 percent and contributes seven percent to the GDP. Unfortunately, this has declined slightly, hence it is necessary to re-build confidence among the stakeholders of the construction industry, by ensuring continuity of work so that acceleration will continue in the future.

After many representations by the Chamber of Construction Industry and other stakeholders for more than a decade, the Construction Industry Development Authority Act (CIDA) was set up last year. However, some of the important features in the earlier draft Bill tabled in Parliament by Dr Rajitha Senaratne in 2009 were not included in this Act.

Under this Act it is imperative to have a national construction policy. To develop a national policy encompassing all the important aspects, it is advisable to consult all stakeholders of the industry and we will proactively participate in its formulation.

Today, one of the most crucial problems affecting major cities is traffic congestion and pollution. The situation will get worse as we go on. Therefore, we believe that the Government urgently implement the proposed Bus Rapid Transit (BRT) system recommended in the Transport Ministry's policy statement. Its implementation could be a Public-Private Partnership (PPP).

The Inland Revenue Act, has not extended the incentive package given to the Board of Investment from March 31, 2015. This is unfortunate and many of the investors and developers are holding on to their projects until this matter is resolved. This is causing a lot of damage to the enthusiasm of developers.

Costs

There are concerns among investors and developers, that construction costs in Sri Lanka are higher than that of some other Asian countries. However, if the cost is to be reduced, the negative list issued by the Treasury to the BOI, to protect local manufacturers has to be revisited.

However, the situation today is that some of the major items such as steel bars, ceramicware, aluminium extrusions and carpets are cheaper in the region. In this context, if the cess could be removed or reduced, only for such materials, then the building costs can be proportionately reduced, making our industry more competitive.

Unfortunately, today, projects have to obtain approvals from at least 17 agencies and the time taken to eventually obtain the building permit will take about one or two years. This is a huge deterrent, which has to be considered urgently by the authorities.

In this connection, the concept of a 'One-Stop-Shop' is a pre-requisite. In the past, the BOI, took the leadership with the backing of the Head of State, to discuss strategic projects once a month, with the developers and investors so that bottlenecks could be overcome and developers could fast track their projects.

For example, in Singapore, 30 golf courses including 13 international courses and around 18 major multi-sports complexes are available. Sri Lanka could at least promote seven golf courses and facilities for multi-sports including indoor Stadia, within the Western Province.

This concept is possible since land is available bordering the Outer Circular and other Expressways. The projects could be used by schools and the public or exclusively private. It could be offered on a BOT basis to local and foreign investors.

Delay

One of the major constraints facing the construction industry, is executing agencies not following the published procurement procedure. This is applicable not only for road projects, but, also for other contracts.

For example, the delay in the construction of the Northern Expressway, is reportedly due to the relevant agency not following the proper and appropriate procedure. The Chamber of Construction Industry (CCI) is in a position to advise the National Procurement Agency regarding appropriate procurement policy, since our membership includes high calibre professionals in all sectors relating to the construction industry.

Urgent

We wish to support the previous policy decision, to award the Northern Expressway contracts to local contractors, who have proved their ability to construct expressways, and for which Letters of Intent and awards have also been issued by the RDA.

Therefore, to 'fast track' the Northern Expressway project the Government should re-constitute the procurement strategy to ensure the contractors' ability to undertake a project of this magnitude.

This may be achieved, if the local contractors who have been selected for individual packages, are called upon to form joint ventures (JV) with other local contractors. Contractors have invested heavily on machinery, equipment and also manpower resources, to undertake the projects. Hence, they will suffer financial and other losses if the project is stalled at this stage.

Our Chamber is in a position to facilitate this project for the Government by negotiating a equitable solution for the benefit of all stakeholders. The shortage of skills is another reason why the cost of construction is high. This has been caused by skilled personnel leaving Sri Lanka for better prospects overseas. This is a major problem facing the construction industry.

Unfortunately, the number of young school-leavers, joining the industry, is marginal, despite the opportunities in the construction industry being more remunerative and challenging and also the chance to work with new technology.

Several government agencies are training the young, but are unable to meet the demand.

The variety of jobs on offer are immense and the industry looks for trainees from all parts of Sri Lanka, including the North and the East for on the job training opportunities as fabricators, welders, crane operators, electricians, plumbers, masons, glaziers and refrigeration and airconditioning technicians.

The writer is the President of the Chamber of Construction Industry.