WhyItMatters

Tech push for building sector

The construction sector here needs a breakthrough in adopting new technologies - but it also needs a significant shift in mindset.

An infrastructure boom is expected in Asia, so it makes sense for construction firms to build up their capabilities to tap lucrative growth opportunities.

Drones, automation, 3D printing and digital technologies have revolutionised many industries. This sort of buzz, however, has been slow to catch on in the construction sector. Firms have dragged their feet, partly because of the cost of upfront investment amid a squeeze on their margins and slower business. Abundant cheap labour has not helped.

But that changed from 2010, with a concerted push by the Government to wean the sector from being over-reliant on foreign manpower. It was a carrot-and-stick approach: Raising foreign worker levies and tightening worker numbers, while offering incentives for adopting new technologies and upskilling workers.

Coupled with the growing focus on prefabrication and digital technologies for building projects, firms have had to roll with the punches. Their efforts bore fruit as site productivity, measured by site area per man-day, improved from 0.3 per cent a year in 2010 to 2 per cent a year from 2014 to last year.

Some small contractors, with less wiggle room on pricing and downsizing, struggled and went out of business. What can smaller firms do? Market players suggest: Merge with another firm to scale up, go abroad, collaborate with big firms or go into niche areas like building information modelling services.

None of this is easy, even with government support. Consolidation will likely continue and the weakest firms should be allowed to fail.

A frail construction industry poses risks to others linked to the sector, including the Government, real estate and infrastructure businesses and investors.

Consolidation will also mitigate the downside risks related to projects running into problems.

Ultimately, a construction sector that is competitive and financially and operationally stronger will benefit Singapore.

Wong Siew Ying

A version of this article appeared in the print edition of The Straits Times on June 22, 2017, with the headline 'Tech push for building sector'. Print Edition | Subscribe