Mr John Lim, Chairman of BCA,
Mr Kwee Liong Keng, President of REDAS,
Distinguished guests,
Ladies and Gentlemen.

Introduction

1 The industry has faced several tough challenges in the last few years. Recovery has been sluggish despite the strong rebound in the other sectors of the economy. Nonetheless, the good news is that the volume has stopped sliding further downwards. Total contracts awarded in 2004 just surpassed $10 billion, which is about the same as 2003. This year, construction volume is expected to also range between $10 billion and $11 billion.

Construction Outlook

2 The industry may gradually ride the wave of the economy upswing, but revival is likely to be moderated because of the maturing industry. Contractors must accept and be prepared to adjust to the construction sector contributing between 4 to 5 percent of the GDP, as in developed countries with buildings and infrastructure at an advanced state of development. Realistically, the buoyant growth in the good old days of the 1990s, where domestic demand peaked at $24 billion and accounted for 7 to 9 percent of the GDP, is not likely to return.

3 There is also a limit to what Government can do in building roads, MRT lines or HDB flats. The industry should therefore adjust to the new level of local demand, which we expect to average $12 billion to $14 billion per year for the rest of this decade.

Opportunities for Business Development

Exports

4 Some of our better construction and consultancy firms have ventured overseas. Overall, we have experienced some success in exporting our niche areas of expertise. In 2004, our firms secured an estimated $2 billion worth of overseas contracts.

5 Conditions for construction export will improve in 2005. Asian economies are expected to grow strongly at an average rate of 6.5%. Despite SARS and Bird Flu, South East Asian economies have generally gained a vigorous recovery. This is unlikely to be derailed by the recent tsunami disaster. Successful elections and the smooth transitions in power in the region will bring about more political stability. More countries in the region are adopting liberal economic policies to create conducive business environments for foreign investments. These factors will stoke the region’s growth and generate demand for infrastructure, building and other developments.

6 The BCA and IE Singapore are well positioned to help our firms ride this regional wave of growth. BCA facilitates the formation of consortia between local consultants and contractors to tender for overseas projects. Six major consortia were formed in the last two years, securing township and residential projects in China and India. These efforts will be further intensified in 2005.

7 Despite the promising outlook, our firms will be attractive overseas only if they have a competitive edge over the local firms and other international competitors. Our firms must band together, by consolidating or forming consortia, to expand their scope of services and expertise along the value chain. They must strive for greater quality, productivity, cost effectiveness, technology and adoption of international best practices. In some cases, they must offer total solution packages (from design, consultancy, financing, development, construction etc) if they are to be competitive. These improvements will benefit our firms and the industry in the international as well as local arena.

8 I am pleased to announce two key initiatives that will help the industry players to expand their expertise to move beyond merely providing contractor services so as to maximise the opportunities created: -

Public Private Partnership (PPP)

9 First, the Public Private Partnership scheme, or PPP in short. Under this scheme, the public sector engages the private sector to provide services to the public. The private sector’s level of involvement varies for each project. In its most developed form, the private sector may design, build, finance, own and operate the public amenity. The SingSpring Water Desalination project is Singapore’s first PPP project. SingSpring will design, finance, build, own and operate the desalination facility for the Public Utilities Board (PUB) under a 20-year agreement. PUB’s 4th NEWater Plant at Ulu Pandan, which is being undertaken by Keppel Engineering, is another such project. Other projects under consideration are the 5th Incinerator Plant of the Ministry of the Environment and Water Resources, and the Sports Hub of the Ministry of Community, Youth and Sports.

10 Through the PPP scheme, Government hopes to leverage on the market discipline, skills, knowledge and expertise of the private sector to deliver public services. Contractors and consultants will have to gear themselves up to meet this change. Their traditional expertise will have to be expanded to cover disciplines such as commerce, financing, accounting, and operations and facilities management. They will have to pick up new skills and knowledge in managing PPP projects and, where necessary, form alliances or consortia with other players. The public will also demand greater value-add through more innovative designs and solutions that minimise cost, conserve energy and maximise efficiency and productivity.

11 As the industry is still new to the scheme, BCA and the Ministry of Finance will work with the industry to facilitate the PPP familiarisation and education programme.

Green Mark For Buildings

12 The second initiative is the Green Mark scheme, which I am pleased to launch today. BCA has developed this scheme to evaluate the environmental impact and performance of buildings in Singapore. This is part of BCA’s overall strategy to promote sustainable development in the construction industry.

13 The scheme will be a voluntary one. Buildings that apply for Green Mark certification will be checked for design, construction and operation. They will also be assessed on various criteria i.e. energy and water efficiency, site and project management, building operations and management, indoor environmental quality and environmental protection, as well as innovative green technologies adopted by the developers and designers. Site ecology and restoration are also included within the assessment criteria. This aims to encourage developers and designers to look at buildings not only as an entity on its own, but also as part of the entire landscape, and to enhance the greenery that are part of the buildings or their surroundings. BCA will issue different types of Green Mark awards depending on the standards achieved.

14 Green buildings will enjoy lower running costs from the reduced energy, water and materials consumption. They will also offer a more pleasant working environment, which is beneficial to employees’ productivity and health. Organisations that promote green buildings gain from the possible boost in property values and rental returns as well as in their public image as responsible corporate citizens. Designers and builders who adopt the Green Mark standard will stand to gain a competitive edge.

15 Not surprisingly, there is already strong interest from leading private and public sector organisations to adopt eco-friendly features and green architecture in their projects to be assessed under the Green Mark programme.

16 The increasing global concerns over the environment make the launch of this scheme a timely one. Already, there are strong and rapidly growing interests in green buildings in the United States, the United Kingdom and Australia. The built environment in developed countries account for up to one-third of energy, water and materials consumed, as well as pollution discharged. The Green Mark scheme will demonstrate Singapore’s commitment to balance the development of our built environment with sustainability concerns. It will help to maintain our position as a global city of distinction that offers quality and environment-friendly buildings to our people and international investors.

17 I am glad to note that the National Environment Agency strongly supports the Green Mark scheme as well. Nonetheless, Government cannot champion this alone. I would therefore urge the industry to take up the scheme, and demonstrate its commitment to adopt an environment-friendly approach to develop and build Singapore’s urban landscape.

Opportunities for Change

18 While the industry tries to cope with the many challenges posed by the low demand, it has to keep up with the expectations of clients and the public on value-for-money. Projects will have to be completed on time and within budget. Construction will have to be of a higher quality and durability. Designers and builders must look beyond the upfront costs of getting the amenities built. They will also have to explore designs and technologies that focus on the life-cycle costs and long-term environmental impact in maintaining and operating the infrastructure or building.

19 Some of these can be achieved by closer cooperation among the industry players. Today, developers, architects, engineers, designers and builders make individual decisions that serve their own interests but create huge inefficiencies overall. This may be why the industry lags behind the aerospace, automobile, and other manufacturing industries in terms of efficiency. The different players must learn to adopt an integrated approach to generate innovative ideas that result in value-for-money products for their clients.

Conclusion

20 Players who are in the construction business for the long haul will have to be prepared for change. They should not be afraid to break away from the traditional mold and approaches. Those who are innovative and adaptive will rise to these challenges. Hopefully, a new and more compact, productive, technologically advanced and eco-friendly industry core will emerge.

21 I wish you all success in your business in the year ahead, while we ride out the challenges in the industry together.

Thank You.

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