What could Budget 2022 have done better for construction industry?

Being one of the largest employment providers in Sri Lanka, and a key contributor in various supply chain, from manufacturing and raw material purposing to labour, the construction industry requires adequate work to uphold the livelihood of Sri Lankan people and ensure the continuance of all these supply chains and systems – Pic by Shehan Gunasekara

The Government aimed to increase the construction industry’s GDP contribution to roughly 8-10%, initially. However, in practice, the 2022 Budget implies a significant reduction in construction turnover (inferred to be around 300b). This brings down our GDP contribution to about 6%. 

Being one of the largest employment providers in Sri Lanka, and a key contributor in various supply chain, from manufacturing and raw material purposing to labour, the construction industry requires adequate work to uphold the livelihood of Sri Lankan people and ensure the continuance of all these supply chains and systems. Be that as it may, we should mention that the 2022 Budget gives a nod to our requests. 

Most importantly however, we note that few of the greatest issues in our construction budget remain:

First is the fact that Government procurement of office buildings has been halted for the next two years. At the minimum, we request the Government to promote funded-projects and provide incentives to the private sector for private projects, to fill this gap. 

Secondly, construction material (and labour) prices are skyrocketing at an abnormal rate. For this, we have pleaded for the inclusion of price escalation clauses adopted to all projects unconditionally.

This second issue could also be counteracted by the Government promoting the local manufacturing of construction materials, which would reduce dependence on imports. We see that the Budget has allocated substantial funds to push forward local manufacturing of materials. However, simply pumping money into this issue is not sufficient. To effectively support this venture, transparency and practical support is necessary. The allocation of lands would largely help facilitate local manufacturing. Similarly the Government should prompt banks to support the funding of local manufacturing ventures for reasonable interest rates.

As a result of bureaucratic and pandemic issues, payment delays, material scarcities and economic hardships, many contractors are facing the bitter end of their contracting careers. In some cases, when the fault lies with the bureaucrats who have not made payments on time or have not provided necessary information/instructions for the contractors to continue work, these same officials proceed to cut LD, claim bonds, etc. and push the contractors to the edge of their demise. If the contractor loses, so do the hundreds of thousands of people they employ, the numerous supply chains they support and the economies they stabilise. 

We request the Government to bail out these contractors and allow them to survive. This Government has supported the industry from the first day it came to power and settled bills from previous administrations. We hope that Government doesn’t lose hope of the construction industry after all they have done to help us thus far. 

Transparency of the procurement system in construction: The industry hopes for a transparent and just procurement system for construction, to rid ourselves of disputes and unregulated procurement.

Requirement for centres managed by institutes/chambers which focus on adopting (training, purchasing, etc.) novel technologies, specifically BIM modelling. 

Sustainable and green development: Unfortunately, construction is one of the main industries in Sri Lanka that is one of the most environmentally damaging. Therefore prompt application of green and sustainable guidelines is needed, to protect the industry and nation’s future.

Development bank/fund: This has been repeatedly requested and has not yet been accomplished by us. We need Government support for this to become a reality. 

(The writer is CIOB President.)