Mr Desmond Hill, President of SCAL
Members of SCAL
Ladies and Gentlemen

BRIGHTER CONSTRUCTION OUTLOOK

1 A very good evening to you. I am glad to be able to join you at SCAL’s Annual Dinner again this year.

2 I am sure many of you have heard the Prime Minister’s speech at the National Day Rally, setting out his vision of Singapore as a vibrant global city. As part of this vision, Marina Bay is set to become a new waterfront city, with the Business Financial Centre, an Integrated Resort and world-class bayfront gardens as its distinctive landmarks. There are also plans to rejuvenate the Orchard Road and Bras Basah, Bugis areas. For the construction sector, these new developments, together with HDB’s upgrading programmes and new private residential projects, will bring about more opportunities and better prospects for the construction industry.

3 BCA has projected domestic construction demand for this year to be around $11 billion. This exceeds the demand of $10 billion in the past two years. BCA has also revised its projected annual construction demand for the next five years to between $13 to $15 billion, up from the previous estimate of $12 to $14 billion.

4 The expected uptake in construction demand is indeed good news for the industry, after having weathered many challenges in recent years. However, I urge the industry not to allow the promise of better days ahead to lure it into complacency. Your efforts to upgrade and strengthen yourself – increasing your capabilities and expanding outside Singapore, must continue. Only then can the construction industry maintain its importance and relevance to our economy.

INDUSTRY ADVANCEMENT

5 We need to adopt a long-term view to advance the industry. The mindset must be to continually innovate and transform the industry into a highly professional and progressive outfit, and make quality and safety its hallmark.

6 During the Committee of Supply debate in March this year, I mentioned that the industry needs to adjust faster in order to position itself for long-term competitiveness, and broadly highlighted several measures that BCA was considering to advance the industry. Many of these measures are also in line with the recommendations of the Committee of Inquiry for the Nicholl Highway incident, and the Joint MND-MOM Review Committee on Construction Safety.

7 BCA has been working with you to develop a framework to build a modern industry with highly professional firms and a progressive workforce capable of delivering high-quality projects. Let me elaborate on some of these measures that BCA is working on.

Professional Firms through Licensing

8 The industry needs to raise its level of professionalism. We have to put in place a formal system to set basic competency criteria for firms, and to recognize and distinguish firms with good fundamentals. BCA will be introducing a builders licensing scheme to facilitate the development of professional and competent firms.

9 To be licensed, firms will be required to have key personnel with appropriate experience and qualifications to ensure that they can perform the statutory and management duties required of them. Firms must also have good safety records and be financially sound. BCA will continue to consult SCAL on the licensing details before finalizing the scheme.

Professional Firms with Good Financial Health

10 We also want our firms to adopt good financial management practices, especially given that cash flow issues tend to be relatively more tricky in the construction industry. A good rating gives clients confidence and assurance that the firm is well managed and more likely to be able to fulfil its contractual obligations.

11 We can consider using credit rating as an indicator of the financial health of firms, similar to what the travel and manufacturing sectors are already doing. We need an objective and practical tool to help our firms improve their financial management.

12 As credit rating is new to the construction sector, I have asked BCA to start by pilot testing an appropriate credit rating system. This will help the industry understand the system better, provide feedback and suggestions so that we can fine-tune the system further.

Productive & Progressive Workforce

13 We must also start developing a productive and progressive construction workforce that can deliver the kind of quality and safety standards that the industry desires. Human resource development does not happen by chance and will not reap results overnight. We must recognize its long-term benefits and embark on this journey sooner rather than later.

14 The industry today relies heavily on foreign labour. Although foreign labour helps to keep construction cost low, it is short-term in nature. Over time, the local skills base of the industry will fall. While existing local workers like the ‘kepalas’ or foremen are aging, local youths continue to shun construction jobs.

15 We must build up a core of localized skilled workers in selected key trades to be the cornerstone of our workforce. We need to start training new batches of localized workers to be the next generation of ‘kepalas’. A stable core of localised workforce will be more prepared to upgrade their skills and can accumulate experiences. They will anchor the workforce by setting high standards on productivity, quality and safety, and providing strong supervisory leadership. BCA is currently exploring a scheme to facilitate the skills certification and registration of these core workers.

REWARDING GOOD PERFORMANCE

16 To inspire firms to continually raise standards of professionalism, quality and safety, we have already put in place several incentives and schemes. The Bonus Scheme for Construction Quality rewards contractors for quality buildings in public sector projects. The Price-Quality Method, to be introduced at the end of this month, will give added emphasis to safety and quality. Contractors who have good safety and quality records will have a competitive edge when tendering for public sector construction projects.

17 What about private sector projects? Here I am pleased to note that some forward-looking private developers are also rewarding their contractors who achieve good CONQUAS scores or attain the Construction Excellence Award for their projects. This is a very positive development. We can only become a truly professional and progressive industry, when the industry itself is proactively involved and self-motivated in setting the pace for quality.

NEW AREAS OF OPPORTUNITIES

18 Having a professional industry with quality will also put us in a good position when we compete overseas. Singapore already enjoys a strong brand name. This plus our credibility can be our competitive advantage. In the longer term, given that Singapore is already highly built up, the best way to grow our market is to export our construction services.

19 In 2004, our firms clinched a record high of $2.5 billion worth of overseas construction contracts.
This was more than double the amount achieved in 2003, and equivalent to 25% of our domestic demand in 2004. India, China, Southeast Asia, and the Middle East continue to offer tremendous opportunities.

20 To compete more effectively, local firms can consider forming consortia and strategic partnerships to offer wide-ranging construction services. The Middle East region, for example, has strong demand for turnkey projects.

CONCLUSION

21 My vision for the construction industry is one that can deliver high quality services in a professional and safe manner. Firms must be well managed and financially strong. Workers must be skilled, quality-conscious and proud of their work.

22 All key stakeholders in the industry have a part to play to realise this vision. To achieve this, we must adopt a pro-active approach and look beyond the short-term.
I urge you to take up this challenge and work together to transform the industry into a professional and progressive one.

23 Thank you.

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