SINGAPORE: The construction industry has come out of the doldrums this year due to new mega projects. Demand has not only been fuelled by the integrated resorts and the new business and financial district, but also by petrochemical projects on Jurong Island, as well as new residential and commercial developments.
The sector has seen a strong boost, with nearly S$22 billion worth of demand, and analysts said they expect to see growth continuing into 2008, at a rate of some 16 percent. On the other hand, the boom is creating problems such as a lack of manpower and materials.
John Keung, CEO of Building and Construction Authority (BCA), said: "For this year, the very strong construction demand is one key feature. We are projecting a possible demand of S$19 billion to S$22 billion this year. Compared to 2006, it is an increase by at least S$3 billion to S$5 billion. "
Because of this strong demand, the supply of construction resources is tight. Contractors and developers are adjusting to bring in more resources, so the challenge is really how to handle this happy problem.
Not unexpectedly, prices of raw materials vital for construction such as sand and granite soared, resulting in some projects being delayed. The strain on resources was also exacerbated by the sudden ban on sand exports by Indonesia in February.
Construction costs are estimated to have gone up by as much as 15 percent. The industry has also seen a push from a squeeze in the residential and office rental markets as demand for space increases. David Cohen, Economist, Action Economics, said: "Related to the construction sector has been the tightness in both the residential and the office rental markets. That is reflected in a bit of pressure on prices overall and it showed up in the latest consumer price index."
To ease the crunch, the government has delayed some S$2 billion worth of construction projects until 2010 or until main projects such as the integrated resorts have been completed. This is expected to reduce the demand for manpower in the construction industry by up to 40 percent over the next two years.
Alvin Liew, Economist, Standard Chartered, said: "They are actually freeing up the resources... when we look at the global situation or the countries in many parts of Asia and Middle East, construction is also booming in these places."
The BCA is working alongside contractors in efforts to bring a more skilled construction force to Singapore to ease the load. Mr Keung said: "As far as BCA is concerned, we have been working with some developers and contractors to get new foreign contractors to come into our market.
We want them to bring in the full team – not just the managerial ones, but also the technical personnel to work in our market.
"On top of this, BCA is also stepping up our efforts to test skilled workers before they come into Singapore. Our overseas test centre has registered more than double the number of workers we test each month and we have recently expanded some of the qualification (criteria) for resident engineers and technical officers so that more qualified people can join our workforce in construction."
In addition, the BCA is heading the push to look into alternative methods of recyclable resources and technologies to solve the lack of building materials for future projects.
"Next year, I think what is important for the industry is to really try and adopt new technology to make sure that we are building environmentally friendly buildings," said Mr Keung.
Analysts said they expect to see a 16 percent growth next year in the industry as the projects that are already underway should be enough to sustain a healthy momentum.
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