Construction sector continues to weigh heavily on economy despite setback: Rishad

Minister Rishad Bathiudeen checking out some of the stalls at Construction Expo 2018
Pic by Kithsiri De Mel

Sri Lanka’s construction sector is increasingly played by foreign investments (FDI), rather than locally generated funds. The main reason for this is the sector’s annual output value now totalling to a huge US$3 billion without even adding values of mega projects such as the Colombo Port City or Hambantota Port related constructions.

“Sri Lankan construction sector has become increasingly responsive to FDI flows,” said the Minister of Industry and Commerce Rishad Bathiudeen addressing the launch of seventh construction industry exhibition, ‘Construction Expo 2018’ at the BMICH yesterday. The expo is a collaborative effort of Lanka Exhibition and Conference Services (Pvt) Ltd and Ceylon Institute of Builders (CIOB). 

‘Green building’ is a major theme at this year’s expo. Over 240 local and international vendors, including 20 Indian companies by Export Promotion Council of India (at India Pavilion) and 30 Chinese firms in the Chinese pavilion (mostly from Liaoning Province- China’s industrial and steel province) are displaying a wide spectrum of construction products, services and information for the local construction sector. 

A China Liaoning –Sri Lanka Business Forum was also held on the sidelines of this expo. Liaoning Province Commerce Department Section Chief Qyu Wanliang addressing the Forum said that Sri Lanka is an important stopover of China’s One Belt One Road (OBOR) and an important trade partner of China. “Liaoning-Sri Lanka total trade in the first five months of this year was US $51 million. Liaoning Province believes it has opportunities to partner with Sri Lanka’s economy which is growing steadily,” he said.

“Though Sri Lanka’s construction sector declined somewhat in the first three months of this year by 5 percent, it still has an important place in our economy at 7.4 percent in our GDP,” said Minister Bathiudeen and added “This is a larger share than our agricultural sector. More importantly this sector has increasingly become responsive to our FDI flows.  The sector grew by 6.6 percent in 2014 but thereafter slowed down recently, syncing with somewhat weaker FDI inflow to Sri Lanka. Construction Expo 2018 will therefore be a great step and in fact the much needed promotional effort that this sector urgently calls for. I commend the organisers and all the stakeholders for their commitment in highlighting our construction sector’s capacities to the international, local participants and visitors especially at a time when such an event is really needed to uplift it.”

President of Ceylon Institute of Builders (CIoB) Dr. Rohan Karunarathna was even more forthright on the FDI impact on the Lankan construction sector, and said, “CIOB has given a new lease of life to our construction sector which has become very competitive due to foreign contractors. At present almost 40 percent of Sri Lankan construction projects have been taken up by Chinese firms. The China International Contractors Association (CHINCA) is bidding and winning them. These projects are other projects apart from the Port City and Hambantota Port area related projects. In the next three years CHINCA wants to increase their stake in Sri Lankan construction industry to 70 percent of total projects. This can be detrimental to our local firms. As a result, the Construction Chamber of Sri Lanka has signed a MoU with CHINCA to share all their projects here with Lankan construction firms so that the risk is mitigated. We have also moved a Cabinet paper stressing that all such projects by foreign firms should have a Sri Lankan partner from now on.”

CIoB’s Dr. Karunarathna added that the total output value of Sri Lankan construction industry in 2017 is now estimated at a huge US$3.03 billion. “This is without even adding the values of mega projects such as the Colombo Port City or Hambantota Port related constructions. Imagine how big the total values are when you add all these,” he asked.