State of the Industry

1. Sir, the construction industry today faces two fundamental challenges, namely over-capacity and over-reliance on foreign workers. These challenges have direct impact on the professionalism, productivity and quality standards of the industry.

Over-Capacity

2. Construction demand hovered around $10 billion in 2003 and 2004, less than half the peak demand of $24 billion in the mid-1990s. In the next five years, BCA projects annual demand to be between $12 billion and $14 billion a year. This is to be expected because our infrastructure development has reached a mature stage.It is not realistic to continue building flats, roads, MRT lines or schools at the same rate as before.

3. Despite the sharp drop in demand, the number of construction firms has not correspondingly declined. The over-capacity has resulted in firms resorting to price-cutting, with ramifications on professionalism, quality and also safety.

High Dependence on Foreign Workers

4. The other fundamental challenge facing the industry is its high reliance on foreign workers. This is a structural problem. While low cost foreign labour has kept construction costs down, it has also contributed to low productivity level in the industry. Contractors would rather turn to lower cost foreign labour than adopt efficient building technology. Local labour participation has also declined, given the unattractive low wages.

Recent Measures to Assist the Industry
5. Recent measures to improve professionalism, quality and productivity have had some limited success. For example, the number of top-tier contractors that can vie for public sector work has come down through tighter registration requirements. Man-Year Entitlements cuts and wider adoption of buildable solutions have reduced Non-Traditional Source foreign workers by up to 30% in certain projects. However, we still lag substantially behind developed countries, such as Australia, in terms of the value-add per construction worker.

A More Proactive Approach

6. The construction industry will need to adjust faster. Otherwise, I fear that the industry will weaken further, with our better firms becoming casualties of cut-throat competition. As the industry contributes 4 to 5% to our GDP and is integral to our economy, the Government will need to be more proactive in positioning the industry for recovery and long-term competitiveness.

7. MND and BCA are conducting a mid-term review of the implementation of the Construction 21 (C21) plan, which was launched in 1999 to address the problems in the industry. We are consulting industry stakeholders to evaluate the effectiveness of the C21 initiatives, and explore additional measures to advance the industry. I will highlight some of the measures under consideration.

>>back to top

Measures to Raise Professionalism

Licensing of Contractors and Further Tightening of CRS Requirements

8. To raise professionalism, BCA is considering the licensing of main contractors and specialist subcontractors who carry out works that require building control approval. This means that only contractors that meet licensing requirements will be allowed to carry out general building works that require building approval and other specialized works that have a significant impact on quality and safety. BCA will study the practices in other countries and implement a suitable system for Singapore.

9. BCA will also consider a further refinement to the registration requirements in the Contractors’ Registry System (CRS) for public sector projects. This is to ensure that only highly competent and financially stable firms are allowed to undertake public sector projects. Together with licensing, this will raise the quality of our construction firms.

Promoting Exports

10. To supplement the limited domestic demand, the industry needs to venture abroad. BCA will step up efforts with IE Singapore to facilitate the formation of consortia among local firms to export construction services. The early signs are promising, with local firms securing $2 billion worth of overseas contracts in 2004. There is still much scope for our contractors in the overseas markets, which stood at $6.6 trillion in 2004. The size of the market in China and India alone was $580 billion last year.

Measures to Raise Productivity and Quality Standards

Regulating Foreign Labour through Higher Levy

11. BCA is working with MOM to moderate the number and improve the quality of foreign worker in the construction industry through a combination of higher levy and skills certification. This should help improve labour productivity and construction quality.

Increasing Local Participation

12. At the same time, BCA will study the feasibility of building up a pool of locals for some core construction trades. The focus will be on trades where sustained growth in quality, productivity and safety are badly needed. Unlike the transient foreign workforce, a stable local workforce will be more prepared to upgrade their skills every few years and can accumulate experiences, which make for higher quality and safety.

13. BCA will study the merits of introducing registration and skills certification for construction trades. We can also consider incorporating local hiring requirements for these trades in the licensing of contractors.

Emphasis on Quality Performance

14. Also under consideration is the public sector procurement system for construction works. BCA intends to give more weightage to quality and non-price attributes, such as contractors’ past performances and safety records. We already have a price-quality system for evaluating tenders for consultancy services in the public sector. This would be extended to the procurement of construction works. The principles of value for money and transparency will still be upheld. With this, contractors who have consistently performed well will stand to gain. Over time, a group of better performing contractors would emerge, setting benchmarks for construction quality in Singapore.

Raising Buildability

15. BCA will continue to promote buildable designs, such as pre-fabricated solutions, which are more innovative and less labour intensive. It will raise buildability requirements progressively over the next few years.

Construction Safety Review

16. MND and MOM are undertaking a comprehensive review of construction safety. The review will take into account the findings of the Committee of Inquiry into the Nicoll Highway incident when they are released.

Conclusion

17. Sir, in summary, MND and BCA will proactively address the fundamental challenges facing the construction industry. We will consider the measures outlined above to upgrade the industry, and will work closely with stakeholders in the industry to achieve this goal.

>>back to top