01 September, 2011
His Excellency Mahinda Rajapaksa
Presidential Secretariat, Colombo
Your Excellency,
Issues confronted by the construction industry and proposed remedies
May we first of all take this opportunity to thank Your Excellency for having given our Chamber the opportunity to put forward issues faced by the Construction Industry and associated proposals for incorporation in the Budget 2012.
Construction sector issues
- The Construction industry is now on the threshold of a major boom. Which will result in completed projects from the different economic sectors bringing revenue to the Government.
- At present around Rs. 200 billion per annum worth of work is handled by both local and foreign consultants and contracting organisations.
- Of this amount 65% of the work is handled by the overseas companies.
- The anticipated growth of the Construction Industry over the next 4 years will exceed more than Rs. 400 billion per annum. This will reflect how the economic growth over 10%, and the per capita income of US$ 4000, can be achieved if the projects are completed on time.
- In order to achieve this target several impediments have to be overcome:
- Human capital and the local materials will be greatly in demand, since even now there are shortages due to restrictive practices — example, sand mining and metal quarrying and supply of earth.
- With this increase in the demand for imports of building materials such as, cement and steel in particular will increase where, the quality of these materials will become an issue.
- Issues related to the procurement procedures and process need to be addressed simultaneously.
- The challenge facing the Construction Industry even today is to source skilled craftsmen and unless these issues are addressed we foresee time and cost overruns and consequently the quality of the end product will be affected.
- We anticipate that the demand for the different skills from the present level will increase by at least 20% or 30,000 persons per annum.
Budget proposals Procurement:
- The prevailing procedure should be streamlined to ensure equitable distribution of Public Sector work or projects among the key stake holders in the Construction Industry.
- Government should make it mandatory that on Donor Funded Projects all foreign consultants and contractors to have collaborative arrangements with the local counterpart.
- Where a “total solution” is sought by the Government particularly for Infrastructure Projects on a “Turnkey Design/Build with Funding” either unsolicited or on a donor/ private funded basis, equal opportunities for both foreign and local investors/ developers to participate should be permitted.
- In order to “fast track” mega projects, the Government should set up land banks in prime locations in the city and the land should be unencumbered. In addition, the following information should be made available. The extent of land, survey information, valuation, soil reports, zoning, design guidelines, planning clearances from all State agencies, infrastructure services up to the site and concessionaire agreements predetermined to attract investors/developers.
- Government to recognise local consortia consisting of consultants and contractors to enable them to obtain pre-qualification and resources to undertake mega projects.
- To continue providing Treasury guarantees for projects already identified by the line Ministries requiring funding to be provided by the domestic banking system utilising the local Construction Industry for its implementation.
- Enhance the mobilisation advance for “fast tracking” construction projects, from 20% to 30%.
- Granting of tax incentives for adoption of new technologies and manufacturing facilities.
- Human capacity building within the domestic construction industry:
- Construction crafts persons training to be industry driven and demand driven as a public private partnership initiative, optimising the utilisation of available public sector owned resources and assets targeting a minimum deliverable output of 30,000 crafts persons during the next three year period.
- Accreditation of construction craftsmen already in employment using Recognition of Prior Learning (RPL) mechanisms to facilitate an accredited construction industry workforce.
- Training of Supervisory staff using NVQ framework and continuous professional development of middle level technical officers in employment.
- A Contractor Development Programme to be implemented using PPP mechanisms with public investment and/or multilateral development bank/bilateral donor assistance to upgrade, micro, small and medium scale construction companies.
- Tax incentives and concessionary funding to be made available to construction craftsman training providers.
- Government grants to be made available to non state actors engaged in micro and SME contractor development. Micro and SME sector development programmes to be launched on PPP basis qualifying for multilateral development bank/donor funding.
General proposal
As the National Physical Plan has already been approved by the Government, our Chamber would offer our multi-disciplinary professional services through our membership in the following manner.
We could prepare at no cost to the Government Integrated Master Plans of Cities and Towns initially in the North and East, to design guidelines prepared by the National Physical Planning Department and the UDA.
Thereafter, if the proposals are acceptable to the authorities, payments to our members could be obtained from the different developers/donors, ex Banks and other service providers at the time of implementation of their projects. If this concept is accepted by the Government, we are confident that the North and the East could be transformed to meet the challenges of the future within the next few years.
Assuring Your Excellency and the Government of Sri Lanka our utmost cooperation
With kind regards,
Ar/Planr Deshabandu Surath Wickramasinghe
President — CCI
