CCI President calls for Infrastructure Development Fund to benefit local construction industry

Following are excerpts of the address delivered by President of the Chamber of Construction Industry Sri Lanka Dr. Surath Wickramasinghe at the inauguration of the ‘Build SL’ International Exhibition and Trade Fair at the BMICH on 17 May.

Minister for Economic Development Basil Rajapaksa was the Chief Guest and the Guests of Honour were Minister of Construction, Engineering Services, Housing and Common Amenities Wimal Weerawansa, MP Thilanga Sumathipala and Chamber of Construction Industry Sri Lanka Vice President Manilal Fernando

The Chamber of Construction Industry Sri Lanka needs no introduction but nevertheless I wish to briefly mention that it is the apex body of the construction industry. I am proud to record that the cream of Sri Lanka’s professionals from the different disciplines, members of the corporate sector, State agencies, contractors, manufactures and suppliers of building materials are members of our chamber.

The chamber’s primary role is to serve its members while focusing on national interest and facilitating the development of the construction industry. It is also the voice of the construction industry. We publish a monthly bulletin on relevant subjects to all sectors of the construction industry. We publish a construction industry trade catalogue which is much sought after by the construction industry and the public once in two years. We conduct regular seminars and workshops on national issues related to the construction industry.

Servicing the SME Sector by facilitation, training of craftsmen such as carpenters, masons, electricians, plumbers, etc., are also part of our objectives. We also promote through allied organisations the training of site and project engineers, construction managers, quantity surveyors, etc.

The mega event each year in the calendar of the CCI is the ‘Build SL’ International Exhibition and Trade Fair. The exhibition, with over 200 trade stalls, will display the latest products and services covering all aspects of the construction industry, for the benefit and information of our stakeholders. In addition, there will be many more activities for the whole family to enjoy and be educated on simple construction solutions to building their dream homes and at the same time, getting exposed to different types and methodologies available to the construction industry at present.

This year we have organised two major events. The first comprised Infra Sri Lanka 2020 in association with the National Physical Planning Department, Sri Lanka, a full-day symposium in late July with Minister Wimal Weerawansa as the Chief Guest. Its focus was mainly for prospective investors, State sector infrastructure development agencies and other State sector institutions responsible for urban development, industries, tourism, housing and the trade, to engage in a dialogue with the private sector to formulate investment packages to implement their projects on a Public-Private-Partnership basis. For example expressways, new rail-tracks, airports and seaports, power generation plants, water supply schemes, planning sustainable villages, urban regeneration projects, etc. We consider its outcomes if accepted by the Government would ‘fast track’ it’s priority projects in an organised and planned manner.

The second of our major events comprise a seminar on achieving energy security in Sri Lanka, using alternative energy sources (e.g. solar, wind, tidal, agricultural biomass) to reach 25% energy security by 2025. The seminar is being organised with renowned local and international experts and will be held in August 2013. It is designed to establish a firm public-private-civil society-partnership, for recognising the ways and means of developing renewable energy and energy efficiency technologies for achieving energy security in Sri Lanka.

Our chamber is fully supportive with the massive development going on in the Hambantota District, in particular, the airport and seaport, administration complex and other infrastructure improvements. We believe that these developments are very futuristic, not so much for today, but we will reap the benefits within the next 10-15 years when further industrialisation, agricultural production, tourism, educational institutions, recreational and leisure activities are underway. Therefore the cost of providing these infrastructure projects in 15 years would be at least three to four times more. Consequently, the current investment on these projects is justified.

For example, if the expressway network around Sri Lanka was constructed 20 years ago, we would have been far more advanced in terms of spatially balanced development in the country and most probably would have avoided the internal conflict due to more interaction between the north and south. The cost of construction of the expressways would have also been about 20% of what we spend on it today.

Having said that, I must mention that the procedure adopted to design and build the airport and the seaport using foreign funds, consultants, contractors and labour was detrimental to the local construction industry. None of our members benefited by this exercise unless of course with sub-contract assignments.

Our chamber has been appealing on a regular basis to the Treasury to include, in their contracts with donor funding organisations that, a substantial portion of the work be entrusted to the local construction industry. Unfortunately this never happens and as a result, most of the infrastructure projects are handled by the foreign counterpart at huge cost to the Government. The irony of this matter is that when we check with the donor countries or multilateral development banks, they maintain that it is not their fault but that of the Treasury for not negotiating for the involvement of the local construction industry when funding is sourced for projects.

Our chamber has therefore, over the past six years, been promoting the setting up of a Infrastructure Development Fund similar to the Infrastructure Development Fund in India and many other countries, where such funding institutions has helped to accelerate development of the physical infrastructure in their countries (e.g. Singapore, Malaysia, S. Korea, China are some of them). Unfortunately, the Treasury is not thinking out of the box. They are still adopting old models of economic theory, which is ineffective in today’s technologically advanced world.

Our chamber made a presentation at the Budget 2012 meeting with the President regarding the setting up of this Fund, and from the President’s body language it was very evident that he believed that such a Fund was appropriate. We mentioned that in the post conflict period, infrastructure projects have been undertaken in all parts of Sri Lanka, mainly by foreign consultants and contractors with loan funds from their own countries or from multilateral funding agencies. The construction industry accepts this position as many countries were reluctant to invest in Sri Lanka at that time on a Foreign Direct Investment basis.

However, today the situation in Sri Lanka is different as the local construction industry has significantly advanced their expertise in both consultancy and in contracting in several sectors such as roads, highway construction, irrigation, high-rise development, urban development and urban regeneration projects. Therefore, the need for foreign consultants and contractors to undertake domestic projects should be minimised.

The problem that the local construction industry is facing is the accessibility to finance at reasonable interest rates. It is easy to point out that the local banks can fund infrastructure projects. They could, but not mega-scale projects of national priority such as new expressways, urban regeneration projects, low-cost housing projects, etc., to fast-track economic development in the country. Therefore, we do not agree with the point of view that promoting an Infrastructure Development Fund to undertake these mega projects is unnecessary due to the difficulties in setting up such funds, providing government guarantees and having to manage same.

The Chamber of Construction Industry (CCI) proposal is for a Public-Private-Partnership model similar to funds created in other countries mentioned before, without Government guarantees. However, the Government or Government agencies such as banks, EPF and ETF could be shareholders. The Government could also promote IFC, ADB, World Bank or other international funders to invest in this Fund. For example in India the Infrastructure Development Finance Corporation (IDFC), the Government holds 60% of the shareholding. Why can’t Sri Lanka also think more proactively, as the benefits to Sri Lanka’s economy would be enormous? CCI is in a position to work with the Government agencies towards establishing this Fund as we have the necessary information and expertise to do so.