Redefining the construction sector to stimulate growth.
- How has the construction sector performed post-COVID?
To start off, most countries in the world have permitted the construction industry to operate despite the pandemic, given that the industry has been identified as one that could function amidst the prevailing situation. However, operations in Sri Lanka were directly impacted due to the various curfews and restrictions that were imposed during the first two quarters of
However, after the government identified the importance ofcontinuing construction sector operations, whilst abiding to the relevant precautions that have been set, there has been a substantial improvement and increase in construction activities during the 3rd and 4th quarters. Despite this, we do notice a slowdown in the overall industry when taking the whole year into consideration.
According to the July Monthly bulletin published by the Central Bank of Sri Lanka this year, the value of construction activities carried out in the 1st quarter of 2020, at current market prices, was Rs.245.7 Bn. This is a reduction of 14.6% in comparison to the 4th quarter of 2019. At 2010 constant prices, the value of construction activities in the 1st quarter of 2020 was Rs.149 Bn, a reduction of 14% compared to the 4th quarter of 2019.
From a company perspective, Access Engineering’s turnover during the April-September How has the construction sector performed post-COVID? 2020 period was Rs.7.9 Bn. This was a Y-o-Y reduction of 7.3%. Hence our company has outperformed the industry norms during the post-COVID period. The primary reason for this comparatively better performance is due to us carrying out work in some of the strategically important and economically vital projects in the country. Our Q-o-Q growth during the 2nd quarter of this year was over 50%, as a result of us being able to carry out more work during this period. We are currently continuing work on most of our projects, and are hopeful of a satisfactory performance during the 3rd quarter too.
- Where is Sri Lanka placed in the global construction spectrum?
In 2018, the global construction market stood at $10 trillion, while in 2019 the local construction industry stood at $6 billion. Hence, the local construction industry is approximately 0.06% of the global market.
Sri Lanka is geographically located along the OBOR (One Belt One Road) initiative. The initiative is expected to be worth well between $4-8 trillion and will offer important economic opportunities to Sri Lanka.
The construction industry in Sri Lanka experienced growth well above the country’s GDP growth levels during the last 2 decades, due to the large-scale infrastructure development projects carried out in the country.
The Government’s initiatives to award some of the large infrastructure development projects have provided the opportunity for the industry to gain the necessary experience, exposure and pre-qualification in implementing such projects. The project management skills of some of the leading contractors are considered to be on par with international contractors. This provides the opportunity for local contractors to further expand their businesses by looking for opportunities in their respective overseas markets. However, the global opportunities for the local construction industry are quite limited, due to the funding mechanisms in place to promote such activity. Sri Lanka’s economy is not in a position to support the industry to venture into global markets with attractive development financing.
Our industry has its own specialist skills and competencies, including good project management, where some of the leading contractors have carried out work overseas. We have been invited by one of our European construction partners to join them to carry out construction work involving the building of bridges and flyovers, which we are currently carrying out in Kenya.
Similarly, we were invited by one of our Chinese construction partners to carry out specialized construction-related work on a port project in Papua New Guinea. The construction
activities anticipated to take place within the port city development project would also contribute to Sri Lanka being a focal point for the industry.
- Is Sri Lanka ready for a modern construction environment?
Most Sri Lankan engineering professionals including structural, civil, and design engineers and consultants are reluctant to use innovative and unconventional construction methodologies. Hence, they tend to design and build structures that give very little attention to efficient space utilization, material consumption, innovative construction methods and etc. In addition to this, most of the curriculum at local universities and technical colleges are conventional and traditional. As a result, students are given very little exposure in their academics to explore new construction methods. Local universities also have very limited capacity for research and development efforts including laboratory facilities. Due to these reasons and more, the engineering fraternity produced by the local higher education system has a lack in new thinking and innovation.
Despite all these hindrances, there are industry players that have adopted modern construction methods and applications to create value for the services they offer where the staff provide the required aptitude, attitude and capacity to absorb and apply the same. The provision of opportunities and an environment for local contractors to be involved in the major infrastructure development projects in the country will provide the required exposure and experience needed in the modern construction environment.
Looking at it from a company perspective, Access Engineering has been in the forefront of embracing new technology, exploring and introducing many new and innovative construction methods in the industry. As a result, we have been recognized as the “Best Tech Savvy” business in the industry, receiving various accolades and awards. From an R&D perspective we tie up with the R&D divisions of implementing agencies in order to continuously make necessary product and process improvements. Our most recent initiative is the creation of an “Innovation Hub” in order to facilitate the development of innovative ideas in students and academics attached to the industry.
For example, some of the modern construction environments our business has been exposed to include Sri Lanka’s first largest wind power project in Mannar and Sri Lanka’s largest single roof warehousing facility in Kimbulapitiya.
- What needs to be done in order to become a globally Competitive player?
As mentioned above, structural changes in our education system is necessary in order to focus on globally required skills. Having said this, we do have excellent human resources with the obligatory intelligence and aptitude needed to absorb such skills. A vital part of construction would be getting the necessary pre-qualification. In order to acquire this pre-qualification and experience, our industry must be given every opportunity to be involved in large scale infrastructure development projects that are carried out in the country.
In order to become a globally competitive player, value creation, value addition and exposure to large scale local projects will help enable the industry to be more competitive locally which could be thereafter taken on to a global scale.
- Has the 2021 Budget addressed these matters in order to incentivize the sector, to be globally competitive?
The 2021 budget has recognized the construction industry as a major contributor to the national economy, including a provision of necessary incentives for investment and growth of the industry. The government has been consistent with the commitment of maintaining the tax rates and concessions given over a period of 5 years. The budget has not only directed its focus on providing opportunities to the construction industry to be involved in construction development projects carried out in the country but also to deliver the relevant income tax incentives for the local construction companies who carry out work overseas.
However, it is important to note that there are many other factors to be considered, for the industry to be a globally competitive player.
- How will the construction industry compliment the economic growth vision set up for Sri Lanka?
For the past two decades, the construction industry has been a major contributor to the development agenda of the country. It has been a catalyst for economic growth in Sri Lanka. This is evident through the contribution made by the construction sector to the country’s overall GDP which has been very significant. In addition, the employment generated through the industry has been consistently in the range of 6%-8%. The industry would need to play a vital role in the economic growth vision set up for the country where usage of local resources, material and finance needs to be maximized in order to retain the much needed foreign exchange in the country. Furthermore, the construction industry has the required capacities, capabilities and competencies to carry out large scale infrastructure development projects in the country in a very cost effective manner and is well positioned to complement the economic growth and vision set up for Sri Lanka.