THE escalating construction costs are not likely to have a significant impact on the economy, said Trade and Industry Minister Lim Hng Kiang yesterday.Responding to media questions on the sidelines of a ground-breaking ceremony for the new Formula One pit building, Mr Lim said that the construction industry amounts to only 4 per cent of gross domestic product (GDP) - and so, a rise in construction costs would not significantly impact the economy.
Explaining the spike in costs, he said that there was a consolidation within the construction industry during the relative lull of the previous years. 'So, our capacity was reduced.'
But now, a big spurt in projects has upped demand for construction. Plus material prices, of steel for instance, have also gone up.
The most recent example of this - the Marina Bay Sands integrated resort project expects the price tag to rise by up to US$1.4 billion (S$2.1 billion), a significant increase on the original US$3.6 billion estimate.
'We are struggling quite frankly to stay within budget,' said Las Vegas Sands president William Weidner earlier this week.
The higher cost was attributed to recent increases in construction prices, including the cost of sand, as well as various refinements to the design.
Yesterday, Mr Lim said that the Government can help try to mitigate the impact of the rising construction costs by adjusting the quotas for foreign workers for the industry for instance.
Officers from the Ministry of National Development are also talking with the Singapore Contractors Association, he said.
This to avoid a situation where contractors were 'creating a self-fulfilling prophecy' by factoring in their expectations of higher costs in building tenders.
Mr Lim said: 'We don't want to have a situation where... contractors... (are) padding their tenders with high expectations of continued cost escalations.
'We must have a realistic view of situation... and know the measures that different parties are taking to mitigate it and ride this boom.'
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