CONSTRUCTION INDUSTRY
Compiled by Yamini Sequeira
SEEKING MARKETS OVERSEAS
Rananjaya Fernando detects global prospects for the construction industry
Q: How would you describe the state of the construction industry over the last two years or so?
A: It has been quite volatile. The boom experienced following the end of the war has tapered off. Furthermore, the inflow of foreign construction companies to our country has reshaped this industry.
Financial constraints in the industry have also been significant over the last two years. As a result, margins have contracted to a large extent and many companies are facing challenges.
Q: What are the positive and negative factors that have impacted the industry?
A: The main positive factor relates to an infusion of the latest technology into our industry due to many new large-scale projects undertaken in Sri Lanka. This has helped improve overall standards in the construction industry. At the same time, many employment opportunities were created as a result of such positive developments.
As for negatives, as an industry we have not conducted adequate R&D programmes. So we’re compelled to rely on foreign expertise for new technology and development. Of course, adopting new technologies and products can be expensive for local manufacturers as the requisite initial investment is substantial.
Q: In your opinion, what are the main challenges affecting the growth of the construction industry?
A: The manufacture of construction materials continues to depend on the import of raw materials and many other finished goods, which account for 70 percent of the materials required.
If we aren’t able to reduce imports to below 40 percent over time, Sri Lanka will not benefit from foreign direct investment (FDI) projects – because a majority of the funds would be flowing out of the country to settle the cost of imports.
Therefore, an environment that is more conducive to local manufacturers needs to be created to increase domestic production.
Q: Are there new trends in the industry and customer purchasing patterns or preferences?
A: Customers are more information oriented than ever before. The growth of the IT industry – especially in terms of handheld devices – has changed the habits and information gathering patterns of end users.
As people become busier, they tend to opt for prefabricated products over more basic items. And certain consumers are willing to pay a premium for timesaving and easy to use products. Having identified these trends, we’ve introduced value additions to the product offering to cater to emerging consumer needs.
Q: So what is on your wish list for the industry?
A: My wish is to create better protection as well as a friendlier environment for Sri Lanka’s manufacturing industry, especially to infuse greater social acceptance and dignity for skilled labour – for example, masonry, carpentry, and operating electrical and heavy equipment.
Moreover, there’s a need for improved research and development programmes in the industry.
Q: What are the strengths and weaknesses of the industry, in your view?
A: Firstly, Sri Lanka boasts a high standard of professionalism in the construction industry. We have better standards and quality in construction work compared to others in the South Asian region. And a well-connected road network makes it easier to reach any part of the island in a relatively short time.
As for weaknesses, the industry is vulnerable to volatile international market conditions and exchange rates as it is dependent on imports. Furthermore, the cost of construction is comparatively higher than in the region due to the importation of many materials.
Q: How are Sri Lankan firms geared to cater to demand in the future? And would they lose substantial business to overseas material suppliers when it comes to local projects?
A: Amid globalisation, there’s no shying away from international competition. When the industry is growing, it is the manufacturers’ responsibility to adopt new technologies or trends and systems, to improve efficiency and increase capacity.
Apart from a handful of companies, many have not responded well to market demands – and they’re falling behind in the race.
Over the past two years, some companies have embarked on expansion and diversification projects with the expectation that development projects in the pipeline would materialise soon. As long as the risks taken by these companies are calculated properly, they will be rewarded in time.
Of course, competition from abroad is a universal fact; therefore, we as manufacturers should be ready to face it at any given time if we’re to be successful in this market.
Q: What growth avenues do you perceive for the industry?
A: Ours is a small country and opportunities for further development of the industry are limited. However, as we’re equipped with experienced professionals in the industry, we should focus more on overseas projects using the know-how that we possess especially given the many opportunities opening up in the African region.
With one of the most high quality construction industries in the South Asian region, Sri Lanka has the know-how to develop a niche market whereby our companies can cater to exclusive projects in the region that demand the highest standards.
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