Present status of construction contractors and construction industry in SL

Need for urgent reforms for improvement

(This article is an excerpt of the book ‘PRESENT STATUS OF CONSTRUCTION CONTRACTORS AND THE CONSTRUCTION INDUSTRY IN SRI LANKA AND THE NEED FOR URGENT REFORMS FOR IMPROVEMENT’, which was published in Jan. 2021. – Ruwan De Silva)

CONTINUED FROM YESTERDAY

The hotel and tourism sector came to a complete standstill. This had a cascading effect on other sectors, including the construction sector. There were suspension of construction and refurbishing of hotels by hotel owners which affected the construction contractors badly. There were many outstanding payments due to contractors who have been working on tourism- and hotel-related projects due to suspension of loans and financial facilities given to hotel owners. However, with the changing of Government, in 2019, the Prime Minister intervened and presented a Cabinet paper to settle the long overdue amounts, totaling Rs. 400 billion, to the contractors. As explained above, the construction companies had faced a severe crisis during the last six years.

In fact, the construction industry was the worst-hit during this period, even more so than other industries, such as tourism, exports, etc. The contribution of the construction industry to the country’s economy has declined enormously, during the last six years, and hence considerable amount of resources need to be channelled to affect a swift ‘v – shape’ revival of the industry and to get it back to its growth stage. Therefore, I earnestly request both President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapakse to make radical changes necessary to make the industry great again.

At present, there are many Government institutions and authorities that are involved in construction-related matters, either directly or indirectly. CIDA, NBRO, UDA, RDA, Water Board, Education, Health, Irrigation, Land Reclamation Board, HDFC and National Procurement Commission are some of the entities with stakes in construction sector. All these organisations have their own development agenda, procurement procedures and regulations which are more often contradictory to each other’s. This creates confusion among the industry firms and result in decision-making delays. Establishing a dedicated unit, under the Ministry of Finance, to act as a single widow for providing solutions to all the problems faced by the construction industry, will go a long way in alleviating the innumerous problems faced by the contractors, and the industry, currently. This unit should be given the necessary legislative authority to issue directives and circulars, as and when necessary, to ministries, departments, authorities, provincial councils and local government institutions to strictly implement clear and consistent policies and should have the power to enforce these directives. The unit should have the authority to hold the public sector officers accountable for implementing its directives.

Since this unit should have the authority to issue directives to a multitude of Government institutions, that deal with the construction industry, it is suggested that this unit be setup under the Finance Ministry. The Finance Ministry already issues and enforces directives across all the government ministries; and hence the circulars sent by them will be more authoritative across all the ministries. Setting up this unit under the Ministry of Construction or any other ministry will not

serve the purpose for which the unit is setup as the directives issued by them will not be taken seriously by the institutions that come under different ministries, provincial councils and local authorities.

In addition, this unit could regularly monitor the regulations and payments to be made to the contractors by line ministries, departments, provincial councils, etc., and ensure that the ministries don’t deviate from the established standard contract document, procurement procedures and directives issued by this unit. There is also a necessity to issue public finance circulars and directives regularly to address anomalies in tax structure, depreciation of the Rupee against Dollar, etc., and to protect the contractors from future payment delays and mitigate disputes. This unit also should have the authority to issue temporary circulars for specific periods as and when unforeseen risks strikes the industry; and should have the mandate to formulate and reform policies, rules and regulations as and when necessary with immediate effect. This unit also should look into settling the outstanding payments owed to the contractors in an effective manner. This will greatly ease the financial burden that the contractors are saddled with at present and ensure speedy delivery of development projects.

This unit should incorporate private sector participation by inviting representatives of the construction industry, construction professionals and academia to serve in the advisory panel. This would enable the Government to have a holistic view of the construction industry. Private sector participation will facilitate the unit to not only find out the problems faced by the industry but also to understand the measures that could be taken to make the Sri Lankan construction industry to be on par with the world’s best.

The construction contractors contribute in no small measure to the GDP of the country. The Government should view the construction contractors as partners in nation building. There is an urgent need for the Government to seriously address these issues that are crucial for the long term survival of the Sri Lankan construction contractors.

The construction industry is the backbone of a healthy industry.

(Concluded)