CCI President calls for National Policy on Construction post stakeholder consultation

Following is the address delivered by CCI President Dr. Surath Wickramasinghe at the inauguration of Build SL 2015 on 29 May. The inauguration was also attended by President Maithripala Sirisena and Minister of Urban Development 

Rauff Hakeem

CCI President Dr. Surath Wickramasinghe and President Maithripala Sirisena

I believe some of the issues I am raising today may not be opportune in the light of an impending general election. However, as the issues are important to the construction industry, I am taking this opportunity to do so, with the hope that we could have a continuous dialogue with the respective ministries. 

We have witnessed in particular in the last five years, a huge transformation of not only our city in Colombo, but, also several other cities in different parts of Sri Lanka. The construction industry sector has been growing at the rate of 22%, and contributes 7% to the GDP. Unfortunately, these have now slightly declined; hence it is necessary to re-build the confidence among the stakeholders of the construction industry, by ensuring a continuity of work. If so, we are confident that the acceleration will continue in the future.

We are pleased to mention that after many representations made by our Chamber and other stakeholders for more than a decade, the Construction Industry Development Authority Act (CIDA) was enacted last year. However, I regret to mention that some of the important features that were present in the earlier draft Bill tabled in Parliament by Dr. Rajitha Senaratne in 2009 were not included in this Act. 

These sections concerned assurance of payments for work done by consultants and contractors and also ensuring that planning approval to be given within 90 days for projects. I earnestly request Minister Sajith Premadasa to re-introduce these important Sections as an Amendment.

Also as per this Act it is imperative to have a National Policy on Construction declared. To develop a National Policy encompassing all important aspects, it will be advisable to consult all the relevant stakeholders of the construction industry and we will be pleased to proactively participate in its formulation.

Fast-tracking development

Mr. President, I have noticed that you have been pointing out various areas, where the country needs to ‘fast-track’ development. You will also agree, that today one of the most crucial problems facing major cities is the traffic congestion and consequent pollution. The situation will get worse as we go on. Therefore, we believe that there is an urgency that the Government implements the proposed Bus Rapid Transit (BRT) System recommended in the Transport Ministries Policy Statement. Its implementation could be a Public Private Partnership Venture (PPP). 

Now that the Minister for the Board of Investment is aware, the Inland Revenue Act has not extended the incentive package given to the Board of Investment as from 31 March. This is unfortunate since many of the investors/developers are holding on to their projects until this matter is resolved. This is causing a lot of damage to the enthusiasm of the developers. In the past, the power to provide incentives was with the BOI, within its own regulations. However, these powers have now been withdrawn; presumably, because the Strategic Development Act is now in operation. We believe this Act should be immediately revested with the BOI.

High construction costs

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

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

Unfortunately, today the projects have to obtain approvals from at least 17 agencies and consequently the time taken to eventually obtain the building permit prior to construction, will take close on one or two years. This is a huge deterrent, which has to be considered urgently by our President. In this connection, the concept of the ‘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/investors so that the ‘bottlenecks’ could be overcome and developers could fast track their projects. This practice is followed in Singapore. 

Outdoor sports and a recreation infrastructure

Now that high-end tourism, Port City and similar development projects are happening, it is the appropriate time to commence outdoor sports and a recreation infrastructure to be competitive with other Asian countries. To give one 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 stadiums, within the Western Province. 

This concept is possible since land is available bordering the outer circular and other expressways. These projects are for dual purpose to be used by schools and the public or exclusively private. These projects could be offered on a BOT basis to both locals and foreign investors. 

Procurement problems

Regarding procurement, one of the major constraints facing the construction industry, is due to not following the published Procurement Procedure by the executing agencies. This is applicable not only for the road projects, but, also for other contracts. 

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

We wish to support the previous policy decision, to award the Northern Expressway contracts to the local contractors, who have proven their capabilities to construct expressways, and for which letters of intent and awards have also been issued by the RDA. Therefore, the new Government in order to ‘fast-track’ the urgent Northern Expressway Project should re-constitute the procurement strategy to ensure the contractors’ capabilities to undertake a project of this magnitude. 

This may be achieved, if the local contractors, who have been selected for individual packages, are requested to form joint ventures with other local contractors. It is pertinent to mention that the respective 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 to be stalled at this stage. Our Chamber, if necessary, is in a position to facilitate this project for the Government by negotiating an equitable solution for the benefit of all stakeholders.

Shortage of skills

Shortage of skills is another reason why the cost of construction is high. This has been caused by the skilled personnel leaving Sri Lanka for better prospects overseas. This is now become a major problem facing the construction industry. 

Unfortunately, the share of the young school leavers, joining the industry, is marginal, despite the opportunities in the construction industry being much more remunerative and challenging, working with new technology. 

Several Government agencies are now training the young, but the demand is much more. The variety of jobs on offer are immense and the industry is looking for trainees from all parts of Sri Lanka, including the north and east for on the job training opportunities as fabricators, welders, crane operators, electricians, plumbers, masons, glaziers, refrigeration and air conditioning technicians, etc. 

We like to request the Government to assist us regarding this matter and also to introduce a Pension Scheme to ensure security for long term employment in the informal sector of the construction industry.