Private-sector building still facing rough times

Stiffer regulatory controls, labour shortages and rising costs are said to be hobbling construction firms. Many are expecting the second half of the year to be sluggish for private-sector projects.
Stiffer regulatory controls, labour shortages and rising costs are said to be hobbling construction firms. Many are expecting the second half of the year to be sluggish for private-sector projects.ST PHOTO: ALPHONSUS CHERN

Weak demand, rising competition weigh upon industry even as govt projects cushion slump

The construction sector has been stuck in the doldrums amid mounting competition and a lacklustre property market - and company bosses here do not expect the gloom to lift any time soon.

Major government projects, including new MRT lines and the expansion of Changi Airport, have helped bolster activity but private-sector building is likely to stay sluggish in the second half-year.

The weak conditions will persist as contractors continue to grapple with restructuring and labour shortages, they told The Straits Times.

The value of construction contracts awarded is expected to grow this year compared with last year, according to the Building and Construction Authority (BCA).

The value of construction contracts to be awarded this year is expected to hit $28 billion to $35 billion, higher than the estimated $26.1 billion for last year.

The bulk of this - about 70 per cent - will come from the public sector, BCA said.

But construction firms say times are still tough. On top of a dwindling number of private-sector projects, construction firms are also grappling with stiffer regulatory controls, manpower shortages and rising business costs, said Singapore Contractors Association Limited (Scal) president Kenneth Loo.

"With intense competition, more construction firms are bidding on projects at thinning margins, and some at below cost to sustain their businesses. In particular, struggling small and medium-sized enterprises (SMEs) are strapped with cash-flow concerns and financing needs."

Mr Loo, who is also a director at Straits Construction, said contractors involved in building works are experiencing a 20 per cent to 50 per cent decline in project volume from a year earlier.

"We do not expect the outlook to improve over the coming months. The government sector would continue to cushion the decline in the private sector but total demand will continue to be weak," he added.

Still, some companies are keeping their heads above water.

Home-grown infrastructure and civil engineering firm OKP Holdings saw revenue rise 21 per cent in the first three months of the year. The company has both private and public construction projects, including trains, airports, roads and flyovers.

"Last month, we clinched two new infrastructure projects amounting to $20.5 million from Jurong Town Corporation. To date, we have a net construction order book of $326.6 million, with contracts extending till 2019," said group managing director Or Toh Wat.

Mr Loo noted that it is crucial for construction firms to identify cost-effective measures, adopt productive technologies, stay lean in managing their businesses and be flexible and responsive to changes in the business environment. He also pointed out that the influx of government projects could "favour SMEs more".

The Government plans to boost the construction industry by bringing forward some $700 million in public sector infrastructure projects this year and the next. Construction firms can bid for these projects, which include upgrading of community clubs and sports facilities.

A version of this article appeared in the print edition of The Straits Times on July 06, 2017, with the headline 'Private-sector building still facing rough times'. Print Edition | Subscribe