Sector braces for inactivity till mid-2019

By Madhusha Thavapalakumar The upcoming presidential election is expected to exacerbate issues faced by Sri Lanka’s already struggling construction industry and drag them into the middle of 2020, according to the Chamber of Construction Industry of Sri Lanka (CCISL). CCISL President Eng. Maj. Ranjith Gunatilleke told The Sunday Morning Business that this challenging period may extend even further depending on the outcome of the election. The industry has started to witness the impact of the election already with little or no investments coming into the industry while developments are being undertaken at snail’s phase. Gunatilleke noted that it is usual for the performance of the industry to be disrupted for a period of six months prior to and following an election, but given the current poor performance of the construction industry, it would be harder for the industry to face an election. “The industry is not doing well already and the election would worsen it. Every developer is waiting until the election ends,” Gunatilleke noted. According to Gunatilleke, the election will have a severe impact on small and medium-scale construction companies that are on the verge of bankruptcy, in the face of mounting financial troubles aggravated by the aftermath of the Easter Sunday attacks. In August, Gunatilleke told The Sunday Morning Business that small and medium-scale construction companies are burdened with multiple issues which could lead to these companies closing down soon unless the Government addresses their concerns swiftly. According to Gunatilleke, the lack of a national economic policy, payment delays on government projects, and the rejection of requests for a construction sector debt moratorium following the Easter Sunday incident have devastated the financial position of the companies. However, when we asked whether the industry received any support from the Government within these two months, he noted that the Government started clearing outstanding payments for state projects and the industry received some of the payments, while most of them are yet to be received. The National Construction Association of Sri Lanka (NCASL) also confirmed to The Sunday MorningBusiness recently that small and medium-scale construction companies are facing severe financial burdens, mainly due to delayed payments from government contracts. An NCASL official, who wished to remain anonymous, noted that therefore, these companies are finding it really difficult to pay salaries as well as to settle bank loans. The Sunday Morning Business spoke to few small and medium-scale construction companies to know the status of their financial performance. Sam Dam Engineering and Constructions (Pvt.) Ltd., a medium-sized company, Director of Operations Sudam Pravinda Wijayasiri told us that the Government has to settle payments for long-completed projects, as any further delays could push small and medium-scale companies to bankruptcy. Nuwani Construction (Pvt.) Ltd., another mid-sized construction company, warned that unless the Government addresses issues raised by the industry, not a single small or medium-scale construction company would survive much longer. A company official noted that the construction industry had been affected severely and so far, there had been no assistance whatsoever from the Government to revive it. A few weeks after the Easter Sunday tragedy, CCISL, the construction industry representative body, requested the Government for a one-year debt moratorium to ensure its sustenance amidst mounting financial troubles. A month later, Finance Minister Mangala Samaraweera said that he would not consider this request as the construction industry had not been sufficiently affected by the Easter attacks. However, he added that he was open to a discussion on general issues the industry is facing, which were unrelated to the attacks. Sri Lanka’s Gross Domestic Product (GDP) was Rs. 14,449 billion in 2018, of which the construction sector’s contribution was approximately Rs. 1,083 billion, according to CCISL. The total debt from the construction sector to private and state banks stands at 20% of their contribution to GDP, which is over Rs. 216 billion.