CIOB urges government not to halt procurement for infrastructure projects

The Ceylon Institute of Builders (CIOB) says the recent Cabinet decision for cessation of government procurement for infrastructure projects with immediate effect, is not the way to relieve the country of its dangerous economic predicament. 

The concern regarding the construction Industry’ use of imported materials and its heavy reciprocal impact on Sri Lanka’s foreign currency reserves may be one reason that pushes officials to halt the industry in such a way. However, the answer lies in increasing the local production of these materials (and possibly pushing exports) and other novel measures such as focusing on green buildings which use majority materials manufactured in Sri Lanka, and not halting government projects completely.

The CIOB points out the following dangers of this decision:
The Sri Lankan construction industry, employs in/directly 1 million people and (as of 2014) contributes 9.6 percent to the GDP. It is one of the sectors in the group that generates the second highest employment opportunities in the economy (Department of Census and Statistics, 2018). It should be understood that hundreds of thousands of people from material suppliers, manufacturers and sub-contractors down to the poorest laborer is affected by contractors. The finances and stability of the contractor trickles down to all levels of society and through various supply chains. Therefore, halting the industry harms all these systems and obstruct the daily survival of thousands of everyday workers.

The construction industry is one of the main cells in the chain of function which holds together Sri Lanka’s industries, workforce and economic systems. Halting government procurement can hinder the activity and employment in these other sectors like manufacturing and break the smooth function of the country and its people.
Since 2015, the construction industry in Sri Lanka has been experiencing severe financial difficulties and cash flow problems due to government changes, terrorist attacks, payment delays for the work completed by construction companies at government ministries and institutions, Covid 19 and subsequent closure of all the construction sites etc.

Amidst these, when many new tenders for construction and infrastructure development were called by the Government from 2020 onwards, this gave us new hope and zeal to revive construction and thereby support the nation.

Accordingly, the banks and financial institutions that were hitherto hesitant to provide additional financial facilities to construction companies were beginning to respond favourably to the requests of construction companies, based on the potential increase in cash flow that the construction industry would experience when the proposed tenders were awarded and realized.

Upon hearing the news that there would be a halt to government tenders of infrastructure and construction projects, the banks have again started tightening their position with regard to facilities granted to construction companies. We once again fear that this will lead to further deterioration of our peoples’ financial condition.

 Furthermore, many construction companies have invested substantially on human resources, machinery, leasing and money, in pursuing the tenders that have already been called. They have also incurred financial payments in arranging bank guarantees for the tenders. Cancelling these tenders, many of which are ready for awarding, will result in these companies incurring further losses.

As such, CIOB’s advice to the government at this difficult moment in time is to discard any projects that are deemed to be unwanted/ impractical and only allow projects that are necessary for the country. In this way, the livelihood of our people will be protected without further damaging the country’s economic stability. Hence, CIOB genuinely hope that the government understands our plight and vulnerability amidst the numerous obstacles we have had to face throughout the last decades. And how, this cabinet decision shocks us to our core, arousing fear that we- as one of the largest workforce-based industries in country- would not be able to withstand the next couple of years.

As CIOB sees that these suggestions cannot be achieved alone, we extend our fullest support and cooperation in finding measures to relieve any issues that the government may incur in fulfilling this critical request.