It is important that the government removes all impediments to attract investments to the country. Measures should be taken to develop infrastructure project proposals ensuring a return for investors. The need to ensure transparency in the procurement process is essential, Secretary General / CEO, Chamber of Construction Industry, Sri Lanka (CCISL) Eng. Nissanka N. Wijeratne said.
The construction industry is badly affected due to the severe shortage of labour. Therefore, it is necessary to conduct a major publicity campaign to attract school leavers to enrol for vocational training in construction and other industrial skills.
There is also a severe shortage of skilled workers for construction projects at present. Due to this, companies have resorted to employing foreign workers. It is reported that there are 180,000 foreign workers in the country at present.
These workers have to be paid in US dollars. The country is losing foreign exchange as a result and this should be seriously looked at to avoid the foreign exchange drain, he said in an interview with the Business Observer.
However, he said that if the government can remove impediments and establish an environment free of corruption, various Chambers and the private sector could ensure a growth rate of over 7 percent over the next few years, he said.
Excerpts:
Q. What are the key priorities that the Chamber needs to further its agenda?
A. The main objective of the Chamber of Construction Industry Sri Lanka (CCISL) is the protection and development of the construction sector. The construction industry contributes about 9 percent to the GDP and provides employment to 625,000 skilled and unskilled labour. When the economic growth retards the impact is first felt in the construction sector.
Today, our cost of construction per unit area is considered the highest in the South Asian region and even higher than in Singapore and Dubai. To attract more investments to Sri Lanka it is essential to consider how the cost of construction could be reduced.
One critical area is the high taxes and duties on construction materials. In Sri Lanka vast majority of building materials are imported. A good example is the imposition of taxes and duties totaling 90 percent on imported ceramic tiles and sanitaryware.
Definitely, the tax regime on construction materials has to be reconsidered if we are to promote investments. But the irony is major property development and hotel projects catering to the rich class which are handled by foreign companies are not affected by taxes.
It is the projects undertaken by local companies that are affected. The Chamber is concern of this situation and working towards the betterment of the local contractors.
Q. How have you gained commitment from your team?
A. The CCISL has a membership of 12 professional institutions and trade associations in addition to nearly 300 companies. By constantly making representations on key issues affecting the industry and organizing public forums to discuss sensitive topics our membership is quite focussed.
We also publish a construction bulletin with the Daily News on the last Thursday of every month, to discuss important construction topics. We are making arrangements to publish a Sinhala Bulletin to address the lower level engaged in construction activities.
Q. Is the regulatory environment in the country supporting the opportunities for industrialists today?
A. Not at all. After much lobbying by the industry the Construction Industry Development Act, No. 33 of 2014 was passed. But very important sections included in the draft Act tabled earlier in Parliament in 2009 to protect the industry were omitted from this Act.
To give effect to the various provisions in this Act to regulate and develop the industry it is essential to Gazette nearly 25 Regulations and Rules, without which the Act is ineffective. So far after 4 years only 5 of these are Gazetted.
The Amendments to the Act, essential to protect the industry, have not been approved as yet. Due to lack of a proper regulatory environment the local companies are facing a real threat from the competition from the foreign companies.
These companies are increasingly undertaking even locally funded projects effectively out maneuvering local companies. These foreign companies also benefit from the tax and other concessions given by the government. It is not a level playing field for local and the foreign companies hence, the local companies are at a disadvantageous position.
Q. Is it hard to be optimistic about growth in industries when you look at where the world is today?
A. Today world economic environment is very competitive. Many countries in the South Asian region are aggressively promoting foreign investments. Still we do not have the enabling environment to attract foreign investment on a large scale.
This is evident as still Sri Lanka attracts FDI only up to 2 percent of GDP whereas in Malaysia 3–4 percent and Vietnam 5–6 percent. We have to liberalise the laws on employment, immigration, outward remittances etc and quicken the project approval process with less corruption to attract more investments.
Now some times it takes as long as one year to get all the approvals to start even a straight forward project. This delay has discouraged a lot of potential investors and hampers the FDI inflow further.
Q. How much can business and the private sector do to really drive change?
A. Business and private sector can only lobby and highlight the impediments. In most instances the change has to be effected by the Government. If there is a proper enabling environment the private sector can initiate new projects on a larger scale.
Q. How do you propose to increase PPPs in industries?
A. With debt to GDP standing close to 75 percent there is very little space left for the Government to borrow further for infrastructure and other development work.
The Government is compelled to seek FDI’s for infrastructure development to ensure economic growth. It is possible to develop all future power generation plants, water supply projects, housing development for under served families, public buildings etc on PPP basis. But for this it is necessary to change some legislations. For example under the Sri Lanka Electricity Act, No 20 of 2009 it is not possible for private sector to develop a power plant larger than 25mw without giving 51 percent shares to CEB.
Who will invest with this condition? The CCISL has already entered into a MOU with CHINCA, which is the official umbrella organization of all Chinese construction companies operating internationally, to facilitate investments. The Government Agencies and our companies can use this MOU to attract investment as it was quite evident at the ninth International Infrastructure Investment and Construction Forum recently concluded in Macau, that the Chinese were looking for investment opportunities and Sri Lanka is a potential market.
Q. What are the immediate steps that the government should take to tackle GDP growth?
A. Remove all impediments to attract investments. Amend section 9 of Sri Lanka Electricity Act, No. 20 of 2009 to enable large power plants from private sector.
Develop infrastructure project proposals ensuring a return to the investors. Ensure transparency in the procurement process. Conduct a major publicity campaign to attract school leavers to enroll for vocational training in construction and other industrial skills.
Today, there is a severe shortage of skilled workers for construction projects. Due to this, companies have resorted to employing foreign workers. It is reported that there are 180,000 foreign workers.
All these workers have to be paid in US dollars.
The country is losing foreign exchange as a result and this should be seriously looked at and avoid the foreign exchange drain.
Q. How could the industries support government’s plan?
A. If the government can remove the impediments and establish enabling environment free of corruption, various Chambers and the private sector will ensure a growth rate of over seven percent as it is happening in India at present.