Forum with future President to discuss way forward for construction industry | Daily News
Industry professional proposes:

Forum with future President to discuss way forward for construction industry

Ceylon Institute of Builders (CIOB) organized a Members Forum to discuss the present crisis and the way forward in the construction industry.

These findings were forwarded to the Chamber of Construction Industry to formulate a report based on issues and proposed remedial actions to be given to the presidential candidates contesting for the presidency in the forthcoming presidential election.

With the consultation of 12 institutions, about 10,000 professionals and over 300 companies in the membership, the following main issues identified in the construction industry were included in the report compiled by the Construction Chamber. Concerns and proposed actions incorporated in the report to revive the construction industry in Sri Lanka are given below.

Contribution to GDP: The highest growth rate in the Sri Lankan construction industry was reported in the year 2012 and it was a 20% growth. During that period, that percentage was equal to the percentages received in the developed countries in Asia. The contribution to the country’s GDP by the construction industry was 10.6% at that time.

Continuous declining in the industry: Since 2015 the construction industry in our country has encountered with a descending movement. As such the growth has been decreasing towards 8% during the recent times.

With this drop the contribution to the country’s GDP also got reduced to about 5%. Not only the small and medium companies but also major construction companies have encountered with many financial problems. The industry professionals who depend on the industry for their survival, other staff in companies and construction workers are in danger of losing their jobs.

Very high construction cost: The very high cost for construction of a square foot in Sri Lanka is the main issue in the Sri Lankan Construction Industry. Sri Lanka’s cost of construction has only become second to Singapore rates in comparison with the other the south Asian countries. There are many reasons for the high cost in constructing a square foot. High cost of labour and construction raw material, high tax components and waste are some of them.

Reduce Government taxes: There are few suggestions which can be proposed to reduce the high cost of a square foot in construction. One such suggestion is to reduce the very high taxes imposed on the raw materials in the construction industry. Another suggestion is to start a scheme by the Government to attract and motivate the youth for the jobs in construction sector.

Lean Management: Furthermore, to minimize waste in the construction industry, it is proposed to implement new techniques like Lean management practices used in other developed countries. Training in new technology is another method to reduce cost and upgrade the construction industry.

Green Building concept: Implementing green concept in construction should be encouraged in all construction projects. This is another way of reducing cost component and progressing with the new technology in the construction industry.

Create enough work: The government is the main benefactor for the construction industry. If it stated in a different way, the government is the main single client who provide construction contracts to the construction companies.

During the past five years the government work offered to construction companies are very marginal. The delay or non-payment of the funds for the work carried out for the government was another problem faced by the companies. On the other hand, construction companies face problems by obtaining loans from the commercial banks on high interest rates for construction work and their inability to settle them on time.

Fair distribution of work: For any government in power there should be a system that the government work should be distributed not only to the major companies but also to the small and medium companies in a fair manner. The system should be transparent. There should be dynamic Government officials to release funds on time. The government tender boards on construction required to be handled by the officers who have knowledge in construction.

Sub-contracting work: Some major construction companies who are awarded the huge projects in the Government sector carry out their work all by themselves without giving any subcontracting work to the small and medium companies.

Government should introduce rules for the major construction companies who receive big government tenders to allocate at least 30% of the work as subcontracting from such construction projects. Construction industry in Sri Lanka means not four or five leading companies.

There are about 2500 active construction companies in Sri Lanka.

Competition with foreign builders: There is a danger of huge foreign construction companies overrunning the Sri Lankan construction industry. These gigantic foreign companies operate with various incentives offered by their own Governments.

Due to this reason the local construction companies are encountered with a tremendous disadvantage in competing with them. Any Government runs on a foreign loans or Foreign Direct Investments has to join with the foreign construction companies. Yet, those foreign companies have to join with the local companies with at least minimum 40% work sharing on construction projects. Likewise, all the construction contracts based on local funding should be offered to the local construction companies.

Setup a Bank or Infrastructure Development Fund: China Construction Banking Corporation is the second largest bank in the world. This special bank contributed an enormous support to the rapid development of China. Sri Lanka should start such a bank or a fund which can support the construction industry in the form of a development bank immediately. In the last budget speech also there was a proposal mentioning to start a special construction bank like a development bank with the help of the private sector. If such a bank is opened, the capital should be about US dollars 100 million.

Recognition for export of construction services: At present, some Sri Lankan companies carry out consultancy services and construction work in foreign countries without the support of the Government. This export service which brings foreign exchange to the country should be promoted. Yet the Government has not properly recognized this export service like the exports in other sectors. This is a field that can be developed and the ability to bring income to the country.

Therefore, initially the Government should recognize and accept the export services in construction sector as an important sector and provide the incentives offered to the export services in other sectors. A 20% tax levy has been imposed on the income earned from the construction work in foreign countries since 2017. It is better to give a tax relief to the construction export services sector for the next 5 years.

Problems in Tender procedures: Now the Government procurement process is mainly implemented through TEC’s and PC’s, which comprise of Government Officials. There had been many allegations of irregularities on several tender awards.

Some of these allegations could be based on misrepresented facts also. For every TEC and PC for a procurement costing over Rs. 100 Million include a qualified person nominated by a relevant Business Chamber as a member. Such person should not have any conflict of interest. This will facilitate a greater transparency.

In the past there had been many instances of slow or no progress in development activities due to non-technically qualified persons as Secretaries and Chairmen respectively heading the Ministries and Statutory Bodies involved in development work. On the other hand majority of the few technocrats who headed these institutions in the past had performed quite well.

Qualified officers for Tender Boards: Appoint qualified construction professionals to head the Ministries and Statutory

Bodies involved in development as Secretaries and Chairmen respectively for a fixed term of three years unless removed on disciplinary grounds.

Pension scheme for construction workers: This scheme is proposed to ensure the security of the construction workers in case of a disability or in the old age. It can be implemented through an insurance policy as a monthly pension payment.

A life time pension for the worker would encourage the school leavers to join the work force in the construction sector.

Professionals for the National List: In China and Singapore, considered two economic wonders, one of the main reasons attributed to the success is the high number of qualified professionals in the highest echelons of power. In China even today the cabinet is dominated by qualified technocrats.

As a start at least nominate qualified professionals up to 50% of the National List in next Parliament.


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