Sri Lanka’s construction chamber calls for critical policy reforms

• Emphasises need for transformative measures to drive economic growth and reduce reliance on foreign loans
• Highlights importance of enacting the Public Procurement Law
• Stresses the need to implement Presidential Commission’s recommendations to simplify laws and regulations

Nissanka N. Wijeratne

By Nishel Fernando

The Chamber of Construction Industry of Sri Lanka (CCISL) has urged the government to implement a series of 17 priority policy measures aimed at revitalising the construction industry.

Key proposals include conducting mandatory feasibility studies for large-scale projects, establishing a development bank, enacting a long-overdue public procurement law, and boosting construction service exports to place the industry on a sustainable growth path.

In a recent media release, the Chamber outlined its outlook for 2025 and highlighted the pressing need for reforms despite signs of recovery in the sector.

“As we step into 2025, based on the performance of the construction industry during the period January to September 2024, we can hopefully look forward to a period of positive development.

During the first three quarters of 2024, the construction industry recorded satisfactory positive growths of 14.2 percent, 15.5 percent, and 23.8 percent, respectively. This is a strong indication that we have overcome the recession the industry faced during 2020–2023,” CCISL Secretary General/CEO Col. Nissanka N. Wijeratne said.
The Chamber emphasised the need for transformative measures to drive economic growth and reduce reliance on foreign loans. Among its key proposals is the requirement to undertake proper feasibility studies for projects exceeding Rs. 200 million. In the past, several large-scale projects initiated without comprehensive feasibility in order to fast-track, however, only to be faced with  significant challenges later on, including legal disputes.
“To ensure this, a National Planning Commission (NPC), similar to that in India, should be established, and its approval should be mandatory for all projects exceeding Rs. 150 million,” the Chamber stated.

The Chamber also highlighted the importance of enacting the Public Procurement Law, which has faced delays despite repeated recommendations, including from the IMF. The proposed law aims to close loopholes in the current procurement system, reduce corruption, and ensure competitive bidding.

“Procurement should be only on competitive bids based on BOQs, completed designs, and documentation to ensure timely completion and minimize cost overruns. There shall be no unsolicited proposals considered,” it noted. To further enhance transparency, the Chamber proposed that procurement committees for projects over Rs. 200 million include a senior professional nominated by CCISL as an industry representative.

The Chamber also backed enacting a Building & Construction Industry Security of Payment Act, modeled on Singapore’s legislation, to improve financial security within the sector.

To streamline project approvals, it called for the implementation of the Presidential Commission’s recommendations to simplify laws and regulations, enabling development permits to be issued within three weeks. The Chamber also suggested adopting a fully online approval process within 12 months.

Highlighting the need for better financial support, CCISL called for establishing a development bank to promote innovation and project funding, a policy that the Central Bank (CB) has been attempting to move away from. 
It also proposed reintroducing a housing loan scheme at a concessionary interest rate of 5 percent repayable over 40 years for first-time homebuilders, similar to European models.

To reduce costs for housing developments, the Chamber urged the government to exempt housing and apartment projects from turnover taxes, which burden individual buyers.

The Chamber advocated for amending the Arbitration Act to conclude hearings and awards within three months, aligning with practices in Singapore. Additionally, it recommended adopting a Code of Ethics for stakeholders in infrastructure and building development processes.

The Chamber reiterated the importance of harnessing local resources such as graphite, rock phosphate, and mineral sands, particularly in the East Coast and Puttalam, through high-tech investments.

The Chamber called for amendments to the Construction Industry Development Act, No. 33 of 2014, and the establishment of a Standing Steering Committee on Construction to oversee policy implementation and industry growth.

Furthermore, the Chamber also listed out policies to Promote Good Governance &; Reduce Corruption to attract more FDIs.