Wednesday, October 22, 2008

Construction Sector In For Tough Times

Source : The Straits Times, Oct 22, 2008

Industry hopes the Govt will resume deferred public-sector projects

THE construction sector will not escape the global financial turmoil but the Government will help cushion an anticipated fall in demand, said National Development Minister Mah Bow Tan last night.

'Accordingly, we must all be prepared to face some tough and challenging times ahead,' he told an industry gathering.

'Fortunately, we have had a good run so the momentum is sustaining us one year and, if we are lucky, another year.'

Domestic construction demand is estimated at $30 billion this year, but it is expected to fall, he said.

The global crisis has not caused any disruption or slowdown so far and progress payments of projects have remained prompt and stable.

'But we still need to be watchful because the situation is very fluid and can deteriorate as the financial crisis feeds into the real economy over the next few months and quarters,' warned Mr Mah, who was speaking at the Singapore Contractors Association's annual dinner.

The financial meltdown overseas has brought rapid changes to the once red-hot construction sector.

While there remains a lack of capacity, raw material prices have already started to come down, said industry experts.

Mr Jon Button, director of Gammon Construction, said: 'There'll be a levelling off of demand for the next couple of years. Quite a few (private-sector) projects are already deferred.'

He added that contractors continued to tender for work.

Association president Desmond Hill told the gathering that they hope to see the Government bring back deferred projects by next year or in 2010 as existing jobs will be coming to completion.

Mr Mah said in his speech the Government is prepared to consider suggestions that it resume deferred public projects.

'It is something that we are in a position to consider and will certainly do so, should the need arise. However, we must consider the timing carefully,' he said.

The Government has since last November deferred $4.7 billion worth of public- sector construction projects to ease the pressure on building costs.

Mr Mah said the Government will monitor the situation closely, taking into account construction demand, contracts awarded and cost trends.

Injecting some of the deferred projects back into the market now, when the availability of skilled manpower, equipment and other resources is still 'pretty tight', will not help, he said. 'It will only drive already high construction costs up.'

But there was a brighter note from Mr Mah: 'Look beyond the gloom...and see whether the slowdown presents an opportunity for the industry to consolidate and strengthen its capabilities after recent years of strong growth.'

The industry, he said, must start preparing to tackle the increasingly challenging business environment, as well as exploit future opportunities and 'continue to stay relevant and remain sustainable'.

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