Tuesday, December 23, 2008

Bleak Times Ahead For Region's Building Sector

Source : The Straits Times, Dec 20, 2008

Report sees value of projects shrinking but analysts say situation here will be better

THE construction sector in South-east Asia and Hong Kong faces bleak times next year, a new report by information provider BCI Asia has found.

The value of projects under construction in the region would contract by at least 16 per cent next year and, in a worst-case scenario, would shrink by a hefty 32 per cent - or about one-third.

The preliminary forecast is part of a major study on the construction industry to be released by the firm next month.

'All the data indicates that construction spending in this region peaked in 2008. The value of projects at design and documentation phases has contracted 2 per cent this year and we have seen major projects abandoned for lack of finance,' said BCI Asia's managing director Thor Kerr.

'There will be far fewer new industrial facilities and utilities being constructed from 2009. As local economic conditions deteriorate further, developers will postpone the construction of new offices, hotels, recreation facilities and downtown retail centres,' he said.

BCI Asia reported that the value of projects under construction leapt from US$107 billion (S$154 billion) last year to US$140 billion this year. It estimates that this will decline to US$118 billion next year in a best-case scenario.

In the most pessimistic recession scenario, the value of the projects under construction would slump to US$96 billion.

Despite the grim predictions, some analysts say Singapore will not be as badly hit as the region as a whole.

Mr David Cohen of Action Economics said: 'I think the situation in Singapore would not be as severe. There is still a substantial backlog of projects to go through.

'The growth might slow down next year and we might see some job losses, but there would not be a major impact on the economy.'

Mr Cohen predicted that there would be a contraction of less than 5 per cent in the construction sector here next year.

Mr Ng Yek Meng, assistant secretary-general of the Singapore Contractors Association, agreed that things were still looking stable for the year ahead.

'In general, the trend is that the construction industry is slowing down.

'But in the next 11/2years, most contractors should have enough jobs and work in hand. When they signed on for jobs in 2008, they signed two-year contracts,' he said.

'We also haven't seen any major retrenchments yet.'

He added that major construction projects such as that of the SMRT Downtown Line would continue to help boost the local industry.

But he warned of impending uncertainties for the industry in 2010, after the two integrated resorts have been constructed, and when contracts come to an end.

'After contractors have finished their jobs, there might be no new jobs and some might have to go overseas to search for new projects,' Mr Ng said.

'No one knows what's going to happen in the future for now.'

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