Construction projects proposed in 2021 Budget should be distributed among all contractors: CIOB

• Construction industry appreciates the benefits given in the 2021 Budget: Tax break for recycled materials, real estate sector capital gain tax benefits and stamp duty reduction 
• Requires Rs. 800-1000 b projects to contribute 10% to GDP
• Construction projects to be fairly distributed among the 3,800 CIDA-registered contractors
• 40% of foreign-funded projects to be allocated to local contractors/consultants 

CIOB President Dr. Rohan Karunaratne

CIOB, one of the oldest and leading institutions representing the construction industry in Sri Lanka, states that construction projects proposed in the 2021 Budget should be fairly distributed among the total of 3,800 CIDA-registered contractors.

CIOB President Dr. Rohan Karunaratne further commented on the distribution of public sector construction projects among contractors.

“The construction industry of Sri Lanka recorded the highest growth in 2014 – a 20% increase. The contribution of the construction industry to the GDP at that time was 9.6%. However, due to political instability, the Easter attack and COVID-19, the industry has seen a major setback since 2015. As a result, contractors, professionals and employees had to face various problems. “During the last five years the Government (at that time) had to pay outstanding bills of around Rs. 150 billion to contractors and consultants. Since the present Government came to power about 119 billion of this has been paid. Also, the Government took steps to provide loans at concessionary interest rates to the industry – both of which we highly appreciate. Under the present Government, the necessary background for the development of the construction industry in Sri Lanka is being prepared,” said Dr. Karunaratne.

The Budget of 2021 also includes some proposals to boost construction in Sri Lanka. It offers to give contractors a 10-year full tax break on selected recycling materials to encourage recycling of waste in the construction sector (as the construction industry is currently responsible for 40% of emissions). It is also proposed to exempt all import duties on new technologies and machinery required for the construction sector. Measures have been taken to release capital gains taxes related to real estate transactions and to reduce stamp duty. These have provided support and relief to the industry and aided its people.

But the biggest obstacle to the growth of the construction industry in Sri Lanka is the unjust distribution of public sector construction projects among the 3,800 CIDA registered contractors. Of this there are 104 large scale contractors (C1-CS2), 600 medium (C2-C4) and 3,100 small-scale (below C5) contractors. If public sector construction projects are shared among stall these groups, it will lead to the growth of the industry, not just partially, but as a whole. For this, CIDA should formulate a formal methodology and take action.

Public/Private Sector construction contracts worth roughly Rs. 800-1000 billion per year are required to successfully sustain the construction industry in Sri Lanka and contribute 10% to GDP.

Government has planned the following projects in the year 2021: 100,000 km road project and 10,000 km x 3 large road projects for the road sector, 420,000 water supply projects for individual households, 10,000 bridges and 100,000 houses will commence. Further, there are numerous projects related to education, health and sports and the construction of the Colombo Port City and the Bandaranaike International Airport is being carried out on international investment. 

These planned projects are quite sufficient to enhance the Sri Lankan construction industry from its present position, on the condition that, 40% of foreign-funded projects are shared with local contractors. To achieve the proposed development targets in the Budget 2021, it is extremely important to focus on ‘fair distribution of work’ by CIDA among their 3,800 registered contractors. When everybody gets their fair share, the work will progress and the benefit will reach to the ground level, from the largest to smallest contributors while simultaneously succeeding the sustainability and the prosperity of the construction industry. 

“We are always ready to support CIDA in helping achieve these development targets with the completion of assigned tasks in keeping with timelines allocated to projects. A feature article will be published to discuss this suggestion in depth, on the successful progression in distributing work accurately and efficiently in the construction industry of Sri Lanka,” said Dr. Karunaratne.