Budget 2024 a “non-starter” for construction sector: CCI Chief

• Expresses displeasure, stating the budget neglects local construction sector challenges
• Says their proposals ignored; jobs of over 300,000 individuals at risk
• Casts doubts over the viability of government’s experimental strategy, citing a failed similar proposal during CBK’s tenure
• Says the proposal may favour foreign companies with financial means, leaving the local sector adversely affected

By Shabiya Ali Ahlam

Despite the government’s attempt to introduce innovation to revitalise the local construction sector from its depressed state, industry experts assert that the proposals outlined in the 2024 budget are a “non-starter.”
The Chamber of Construction Industry (CCI) shared its displeasure with the solutions listed in the 2024 budget as it completely ignored the plight of the local construction sector.

Speaking to Mirror Business, CCI Secretary General and CEO Eng. Nissanka N. Wijeratne shared that 15-point proposals, which was cut down from the initial 50-point list, shared with the authorities during the budgetary consultation brought no outcome as none of it was incorporated in the final policy document.

The proposals shared by the industry took into account the plight faced by all stakeholders, but with the committee, appointed by President Ranil Wickremesinghe, turning a blind eye on the real issues in construction has put the jobs of over 300, 000 individuals at stake.The said committee was headed by Senior Advisor to the President Sagala Ratnayaka.

Commenting on the “experiment” the government plans on conducting in the construction sector, Wijeratne opined it is highly unlikely it will work since the previous time such a strategy was rolled out, it failed.
The 2024 budget proposes that government agencies will offer free lands to construction companies for the erection of buildings based on the plans provided by the respective government agencies. The reimbursement mechanism involves construction companies charging rent to the agencies.

 During President Chandrika Bandaranaike Kumaratunga’s government, a similar proposal was implemented. According to Wijeratne, the plan failed as the rent payable was too high.

He also highlighted that the proposal would be impractical for local construction companies, as they lack the financial resources to undertake such an endeavour. Even if they consider securing a loan, the prevailing circumstances make banks hesitant to lend to construction firms.

He highlighted that loans to the construction sector make up 20 percent of the banking sector’s exposure.
The export of construction services is also hampered due to the non-acceptance of US dollar guarantees issued by local banks to overseas clients awarding contracts.

However, the proposal might work for foreign construction companies, such as those from China, as they have the financial means, and would obtain funding from banks with no hassle if required, said Wijeratne, asserting that once again, it is the local construction sector that will take the hit.

Wijeratne emphasised that for the sector to make strides toward recovery, foreign-funded construction projects, like those supported by international agencies such as the Asian Development Bank (ADB) and others, are crucial. However, he added that Sri Lanka must first complete its debt restructuring process to unfreeze funds for this purpose.

The construction industry, which is one of the primary contributors to the Sri Lankan economy, that used to contribute between 8-9 percent to GDP, has faced significant difficulties during the last three years, making it impossible for the companies involved in construction to continue with business operations.