CONSTRUCTION SECTOR HIT BY TERROR ATTACKS REQUESTS GOVERNMENT ASSISTANCE
The construction sector has an important role to play in the development of the economy and keeping it active is vital for the achievement of socio-economic development goals of providing shelter, infrastructure and employment. Thus it goes without saying the industry is vital for the continued growth of the economy. Sri Lanka’s construction space is aspiring, but according to its stakeholders, the industry is plagued by low construction volume, skilled worker shortage, high construction costs, and unequal competition from foreign contractors. The sector came under fire overnight following the Easter Sunday terror attacks that brought the entire country to an almost stagnant state. The sentiments and precautions that followed the shocking event that took place on April 21, 2019, are observed to be drastically crippling the construction sector, and brought about a whole new set of issues. Mirror Business recently sat down with the Chamber of Construction Industries (CCI) Secretary General and CEO Eng. Col. Nissanka N. Wijeratne to gain some clarity on the status of the industry given the recent events. During the interview, Wijeratne pointed out the sentiments, challenges and assistance sought to help sustain activities. Failing which, the entire economy would feel the negative spillover effects in time to come. Following are the excerpts from the interview. What is the current sentiment in the construction sector?
Very bad. It is a culmination of several events starting from October 2018 where the political instability led to a setback on whatever developments that were putting the industry on the path of recovery. Then came the Easter Sunday terror attacks.
After October there were many delays in payments especially public sector for government contracts. Those payments were made only in march. The government paid about Rs.80 billion but still according to the Finance Ministry about Rs.30 billion is outstanding. However, according to contractors it’s more than that. The Rs.30 billion is of the certified ones that came to the Finance Ministry. Due to the frequent occurring of issues, many certificates were held up and haven’t been processed.
With this current scenario the investors will think twice and those who have already kicked off are already witnessing a damp as they are unaware what lays in the future, especially private sector developers. There will be a lull period.like they say, tourism will take about eight months to recover, the construction will take longer.
What is the immediate hit?
In this situation what could happen is many companies could go bankrupt. Architects and engineers passing out from universities, and those following vocational training courses will not find employment as projects are unable to progress. There will not be enough work load.
We have had meetings with the ministry and relevant authorities, unless the government does something to jump start the economy, there will be a serious problem.
We need an innovative approach. Like what Former President Ranasinghepremadasa initiated at the time, the 200 garment factory programme within three months, where each employed 500 people. We need something similar.
There is also the issue of making available commercial explosives. The supply of explosives for quarrying has stopped completely. Crusher operators have complained to us that the stock has run out and they are unable to carry out any work going forward. Even during the height of the war with the LTTE, commercial explosives were made available under strict monitoring where a request would have to be made to the authorities in writing beforehand and the blasting would take place in the presence of armed forces.
We understand that there is a situation at hand and that unwanted parties want to get their hands on such elements, we don’t want that, but a system is necessary. We have to be cautious but we need to get things going. The government has to take some measures to promote development and keep it going. They need to be more proactive in their efforts.
The tourism sector collectively requested for concessions to prevent further bleeding. Is the construction sector, that is similarly impacted, requesting for relief along these lines?
Our processes are hampered, almost all of it. The government should think of giving concessions for the construction sector to help ease off the liquidity problems of the contractors. One measure suggested is to freeze the capital-land interest payment on all loans and over drafts (ODS) taken by contractors for at least six to 12 months so they are given some breathing space.
To ease the working capital problem, we suggested the government to look at extending a soft loan at a reduced interest rate of eight percent that is repayable over a period of eight years. The amount of loan can be considered as 15 percent of the annual turnover during the last three years. This will help iron out issues to a certain extent.
Is the government being proactive enough in supporting industries, especially at a time where the country could be caught in the middle income trap? Could they be speedier in identifying issues faced by industries and providing realistic solutions?
Definitely, they certainly could. The government has to take some measures to promote development. Foreign direct investments (FDIS) will take few months to come in so immediately the government will have to start some projects with loans to reactivate the economy. We need to keep active. They need to borrow and start some useful projects. Earlier the issue was that the projects that kicked off weren’t paying. They need to be smart about it and have the economy active. They could start with renovating the old irrigation tanks, the returns would be faster.
The construction sector was expecting an improvement in growth rate starting 2019, how has that changed now?
We were expecting a nine percent growth. Now it is difficult to say. It most likely will be negative actually.
What are the challenges that have surfaced after the Easter Sunday Terror attacks?
The challenge is to keep afloat in this situation. At normal times we expect to expand and grow in some way, but now that is challenging.
Now it’s about managing to sustain. Unless we grow we won’t be able to find employment for the new people. The construction sector provides employment for approximately 600,000 persons and provides new employment for about 3,000 individuals per year.this was not considered enough when we look at the projected workload.
We needed about one million workforces for about four years. But now all things have changed. Are the challenges region/ district specific?
Not entirely. Its common islandwide and the impact to the construction sector is felt across the country. The slow decision making by the government is having the entire space affected.
Is the construction sector having a conversation with the government?
We have and we are. We are waiting for some solution for the concerns we have expressed. They are trying.
What is the status of the ongoing projects around Colombo 03, where luxury hotels came under attack?
Ongoing projects have restarted, no issues there. Some are however going at a slower pace. It is unlikely to be stopped since they have already taken off.
What is the message you have for the government and the construction sector stakeholders?
Performance of the construction industry is considered the barometer of the economy. If the economy is going down, it is first felt by the construction sector. The immediate action the government has to take is giving a boost to the sector.
For the stakeholders we would like say that we have requested for a soft package to help cope.
Performance of the construction industry is considered the barometer of the economy. If the economy is going down, it is first felt by the construction sector. The immediate action the government has to take is giving a boost to the sector
CCI Secretary General and CEO Eng. Col. Nissanka N. Wijeratne Pic by Damith Wickramasinghe