28 February 2013

 Strong project pipeline to underpin $32b in contracts 

 

Mr Lee: Singapore cannot keep relying on "infinite supply" of foreign labour

PHOTO: STEPHANIE YEOW/THE STRAITS TIMES

[SINGAPORE] Contracts for the construction sector could surge to $32 billion this year through a strong pipeline of public sector projects, but the demand has to be met with higher productivity and not more foreign workers.

That was the message yesterday from Lee Yi Shyan, Senior Minister of State for National Development and Trade and Industry.

He was speaking at the 2013 Built Environment and Property Prospects Seminar, organised by the Building and Construction Authority (BCA) and Real Estate Developers' Association of Singapore.

Mr Lee said the construction sector is having one of its longest growth runs since Singapore's independence, chalking up an average 10 per cent growth annually between 2006 and 2012, and contributing 3 to 5 per cent to GDP each year.

Last year, the total value for construction contracts awarded was about $28.1 billion, he said, and "the growth momentum is likely to be sustained into 2013."

The BCA expects demand to hit $26-32 billion this year.

Of that, more than half, or $14-17 billion's worth, will be for public sector works, due to the ramp up in public housing and rail construction. This compares with about $9.3 billion last year.

Construction demand for the private sector, however, should slip to $12-15 billion from about $18.8 billion last year. An anticipated economic slowdown and a glut of housing supply over the next few years are the main reasons for this, the BCA said.

While demand is expected to moderate to $20-28 billion a year for 2014 and 2015 amid a more subdued growth outlook, BCA expects a strong pipeline of public housing and infrastructure projects to still hold up the sector.

"And you got to see this in perspective; seven, eight years back you were talking about $12-16 billion a year," John Keung, CEO of BCA, told reporters on the sidelines of the event.

While some companies have asked for more workers to meet demand, Mr Lee said Singapore cannot keep relying on an "infinite supply" of foreign labour.

More importantly, he said, is that the construction sector here lags advanced economies by as much as 40 per cent in terms of productivity.

Singapore's target for productivity growth is 2-3 per cent a year up to 2020. MTI figures show the value added per employee for the construction sector was -1.5 per cent in the third quarter of 2012, after positive growth in the first half.

Song Seng Wun, regional economist at CIMB, believes there will be consolidation of smaller players that fail to be more efficient, given the tight labour supply and potentially higher material costs.

BCA's Dr Keung urged companies to tap the Construction Productivity and Capability Fund. About $80 million of the $250 million fund set up in 2010 has been committed to date.

"So funding is not an issue," he said.

At the forum yesterday, Mr Lee also spoke of a need for homegrown talent in the built environment industry as there is demand from employers and good pay prospects. The built environment industry includes construction and consultancy firms.

To that end, the BCA has rolled out two new initiatives. The first is a sponsorship for full time undergraduates for at least $10,000 per year. The other is a scholarship for Institute of Technical Education students, which will cover full course fees and provide a monthly allowance of $500. 

 

(The Business Times, 17 Jan 13)

(Related Article in The Straits Times, 17 Jan 13)