The Straits Times says

Reconstructing an important sector

The construction industry has been placed on a path of no return by plans for a higher-skilled workforce that would be able to generate 20 to 30 per cent more output in the next few years. The target is numerically substantial, given that about 300,000 foreign workers are employed in the construction sector. The labour-intensive industry needs to understand that it cannot move out of step with the productivity improvements necessary to transform Singapore's economy as a whole. The days when ease of import of foreign labour allowed firms to bypass productivity expectations are well and truly over. Singapore has embarked on a course in which the cost of labour, markedly foreign in the industry, must incentivise employers to substitute manpower with technology, and invest in raising the skills profile of their employees. Some firms may not survive the transition, but the sector as a whole should be able to make it, with the help of prefabrication and other labour-saving technology, along with incentives to ease the pain of transformation.

Such technology includes building information modelling, and design for manufacturing and assembly. The techniques may cost about 10 per cent more than conventional building methods in their initial years of adoption. However, companies, particularly small and medium-sized enterprises, can tap official help such as the Construction Productivity and Capability Fund. What is necessary is a managerial mindset that is pro- automation and capable of looking beyond the current housing market downturn, and the generally conservative economic environment, to develop lean-and-mean plans for the future.

Rich pickings await survivors. An infrastructure boom lies right ahead as China's Belt and Road Initiative seeks to reconfigure the economic geography of Asia, Europe and Africa along both the land and the sea routes reminiscent of the ancient Silk Road. South-east Asia, the region that lies closest to China on that international trajectory, will benefit from ambitious construction projects. Singapore construction companies that are adept at making the most of opportunities provided by a land-scarce city-state in difficult times would be able to bid convincingly for a part of this ambitious redevelopment. But they must be competitive within Singapore, in order to win outside it.

Meanwhile, Singapore must factor changes in the construction sector into the fate of national projects. The public housing programme, the expansion of the rail network, and the building of a new airport terminal are mega-programmes whose timing, safety and maintenance will require a robust construction industry. A judicious mixture of disincentives and incentives will be needed to nudge the industry out of its over- reliance on low-skilled labour and towards automation and higher productivity.

A version of this article appeared in the print edition of The Straits Times on June 27, 2017, with the headline 'Reconstructing an important sector'. Print Edition | Subscribe