Construction Sector in Sri Lanka

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Construction Sector

in Sri LankaBy R. Rameezdeen

COWAM SeminarWednesday, 19th April 2006

Koggala Beach Hotel, Sri Lanka


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Construction Output

Housing

Other Buildings

Civil Engineering Projects

The constructionsector produces a

wide range ofproducts, fromindividual houses

to majorinfrastructure suchas roads, powerplants andpetrochemicalcomplexes.


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CONSTRUCTION INDUSTRYDefinitions:

The activity, which creates all types of new buildings & civilengineering projects, as well as the maintenance & repair of

existing facilities (Wells, 1984).

The construction industry, is a broad conglomeration ofindustries and sectors which add value in the creation &maintenance of fixed assets within the built environment


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ILO (2003) defines the industry saying,

The construction sector produces a wide range of

products, from individual houses to majorinfrastructure such as roads, power plants andpetrochemical complexes. In most countries output is

roughly equally divided between housing, otherbuildings and civil engineering projects. Althoughattention is mostly focused on new construction, the

renovation and maintenance of existing structuresaccounts for almost 50% of total construction output insome of the more developed economies and an evengreater share of employment.


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CONSTRUCTION INDUSTRY

Land

Materials such as cement,sand, bricks, timber, steel

etc,.

Equipment

Manpower

Capital/Finance

Organization

INPUTS OUTPUTS

PROCESS Buildings

Roads & HighwaysPortsAirports

TunnelsBridgesDamsIrrigation NetworksPower Plants

Oil Platforms

Etc.


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In the Sri Lankan context:

Construction is the 4

th

largest sector,contributing 6-7% to GDP over past decade

Responsible for more than 50% of GDFCF

Provides employment to 4-5% of labour force

Contributes around 30% to trade balance


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1446

2756

3976

7377

14745

0

2000

4000

6000

8000

10000

12000

14000

16000

Salar ies Value Added Value of Raw

Materials

Value of Work

Done

Value of

Contract

Indicators

Selected Indicators of Construction Activity, Year 2004

(Annual Survey of Construction Industries-Department of Census & Statistics, Sri Lanka)


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Unique characteristics ofconstruction

The construction industry has

characteristics that separately are sharedby other industries but in combination

appear in construction alone.

(Hillebrandt, 1984)


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Some Unique characteristics

The final product is large, heavy,

expensive, and spread over a large

geographical area.

The product is made specially to the

requirement of each individual customer.

Design is separated from construction.


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Some Unique characteristics (Cont.)

Production takes place on site itself.

Affected by the external environment.

Price of the product is determined inadvance.


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CONSTRUCTION PROCESS

(Ofori G, 1990)

Construction

Repair, maintenance& alteration

Demolition

Planning

Designing

Activities

ConstructionIndustry

ProductsBuildings Reclamation,

sewers dams,canals pipelines

Airports/harbors

Roads, bridges,railways, tunnels,

viaductsElectrical,Telecommunication and

gas works


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Construction industry is composed by an integration of

various STAKEHOLDERS

Consultants

Clients Contractors

Plant Hirers

Research &

Development

Organizations

Financing

InstitutionsEnvironmental

Lobbies

Regulatory

Bodies

Material

Manufacturers &

Suppliers

Insurance

OrganizationsSkill

Development

Institutions

Construction

Industry


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PARTICIPANTS OF THE INDUSTRY

Direct Stakeholders Indirect Stakeholders


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DIRECT STAKEHOLDERS

Client

Consultant

Contractor


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CLIENT

1. Initiates the project

2. Finances the Project

3. Directly & indirectly monitors the progress, time,

cost, and quality and command any variations tothe design during design and construction phase


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TYPES OF CLIENTPrivate sector

Individuals (investors in housing, commercial and industrial) Organizations (Sole proprietors/partnerships/Ltd. liability companies)

Public sector

Central government

Ministry (Highway, Health, Housing), Department, Authorities (UDA,NHDA, CEA)

Provincial council Local government authorities (MC, UC, Pradeshiya Saba)

Non-Government Organizations (NGO)UN/UNESCO/SARVODAYA/WHO


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Value of Contract

Public sector,

87%

Private

sector, 13%



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Value of Work DonePrivate

sector, 15%

Public sector,

85%



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CONSULTANTS Architect:

Leader of the building team. Interpret the clients project

requirements into a specific design. Architect would obtain theplanning permission for the project.

Engineers: (Structural, Electrical, Mechanical, Geo-technical,Hydraulic)

Services Eng: Analyze the clients requirements and advice theArchitect on most suitable design solutions, prepare diagram ontheir services. They make sure that all the required comforts areachieved by the client.

Structural Eng: Acts as an advisor on all structural problems, suchas stability of the proposed structure, suitability of selected

materials, sizes of structural members of the project.


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CONSULTANTS (Cont.) Quantity Surveyors:

Involved in dealing with matters related to construction cost andadvice client and architect on cost of the proposed project. Hemakes sure that the project is kept within the clients cost limit.

Project Managers:

In large projects a project manager is employed for the overallcontrol of the project from inception to completion to keep abetter coordination of the parties involved.

Other specialist consultants:

Eg: Surveyors, Interior Designers, Landscape designers, Planners


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ConsortiumsThe most popular in Sri Lanka

DCL, ECL, Design Group Five

Specialized servicesPicking up slowly

Quantity surveying: - Cost Consultancy, Q-ServeStructural:-Stems consultants

Architecture:- Jeffry Bawa

Project management: - LAN Management,

Foreign consultants

Entering the market, but negligible

TYPES OF CONSULTANTS


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CONTRACTORS

Contractor is a person or firm who undertakes to complete aconstruction project in accordance with the contractdocuments on behalf of the employer

Sub contractors

Domestic sub contractorsNominated/Specialist sub contractors


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CLASSIFICATION OF CONTRACTORS1. Size

Large - M1, M2, M3 (Above 50 Mn)Nearly 50 contractors are operating in the market

Medium - M4, M5, M6 (5-50 Mn)

About 200 contractors are operating

Small - M7, M8, M9 (below 5 Mn)

About 1500 contractors are operating


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CLASSIFICATION OF CONTRACTORS

2 . Location: Operating in a particular location International

National level

Regional (Provinces)

Local level (Village)


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CLASSIFICATION OF CONTRACTORS

3. Nature of work

Building

Civil Engineering

Specialist services

Electrical installation, telecommunication, fireprotection, A/C systems, Lift installation, Securitysystems, Piling, finishes, aluminum work, pre-cast worketc.,


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Value of Work Done by Type of Construction (Rs. Mn)

Buildings, 3875

Highway, 1750

Other, 450

Bridge, 325

Water Supply

and Drainage,200

Irrigation and

Land Drainage,

700

Dredging and

Reclamation,

50



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Value of Raw Materials Used by Type of Construction

Buildings

56%

Highway

19%

Bridge

5%

Water Supply and

Drainage

3%

Other

6%Irrigation and Land

Drainage

10%

Dredging and

Reclamation

1%



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Value of Work Done by Type of Building

School Building,

5%

Other Building,

36%

Repair and

Maintenance, 23%

Factories, 7%

Off ice Building, 9%

Market Complex,

0%

Collective Living

Quarters, 9%

Housing Units, 5%

Hospital Building,

6%



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SPECULATIVE BUILDERS

Usually they dont undertake contracts but they arebuilders.

1. Land developers

2. Property Developers


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MATERIAL MANUFACTURERS/SUPPLIERS

Raw material suppliers: Sand, aggregate/metal, lime

Unit element suppliers: Bricks, tiles, roofing sheets etc.,

Component suppliers: A/C units, electrical units, lifts Element: Doors,Windows

Length: Steel, Aluminum, Plastic, Bituminous materials, cables

Sheets: Plywood, Asbestos, Glasses

Liquids: Paints, Varnishes, Thinner, Adhesives


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Hiring plant for construction is very popular in Sri Lanka

Only the M1 grade contractors have their own plant

Plants as Lorry, Truck, Tractor, Excavator, Crane, AirCompressor, Concrete Vibrator, Concrete Mixer, Bowser,

Electric Welding Plant, Roller etc. are hired by medium and

small time contractors

PLANT HIRERS


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FINANCIAL INSTITUTIONS

Banks

Construction Guarantee Fund

Property Investment and Development companies

Investment Promotion Agencies


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Banks

Commercial Banks: Bank of Ceylon,Peoples Bank, NSB

HNB, Commercial Bank, Nations Trust Bank, DFCC, Seylan Bank

Merchant Banks: Ceylon Merchant Bank Merchant Bank of Sri Lanka

Peoples Merchant Bank

Development Banks: National Development Bank Sanasa Development Bank

Development Financial Company of Ceylon

Specialist Banks:

State Mortgage Bank

N.H.D.A. H.D.F.C.

NDB Housing Bank


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Construction Guarantee Fund

Provide contractors bonds and guarantees at a

reduced fee without collateral

Government funded service under the ICTAD

Fore-runner to a proposed Construction Bank of SriLanka


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Land developers, Land sellers,Finance companies:

The Finance Company

Ceylinco Developers

Central Finance

Functions: Financial assistance to construct or purchase a house or

purchase a land

provide construction assistance loan facilities up to 20 million

Loans for purchase materials and finishing materials

Provide designing and planning for construction

Property Investment & Development Companies


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Investment Promotion Agencies

These organizations encourage and promote investors.

1. Board of Investment (B.O.I.)

2. Bureau of Infrastructure Investment (B.I.I.)


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Insurance Organizations:

Legal and Monetary protection to construction industry

Government and Private

- Insurance corporation of Sri Lanka

- Eagle Insurance

- HNB assurance

- Union assurance

- Ceylinco Insurance


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1. Contractors All Risks Insurance Will be applied when 25% civil work of erection at the site

2. Erection All Risks Insurance Provide coverage for unexpected accidents and damages

3. Workmen Compensation Insurance Provide coverage for unexpected accidents which can cause

injuries and deaths

TYPES OF INSURANCES IN CONSTRUCTION

INDUSTRY

Employees

ElectriciansWelders

Mesons Watchers Clerical workers

etc


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Research and innovation are inseparable

R & D is necessary to maintain international competitiveness

Developing countries on average contributes around 1% of

GDP to R&D while Developed countries around 2-3%. SriLanka contributes only 0.15%.

Organizations involved in R&D are mainly government

organizations such as NBRO (National Building ResearchOrganization), CHPB, NERD, and Universities

Construction companies should contribute certain % of their

income on R & D expenditure

RESEARCH & DEVELOPMENT

ORGANIZATIONS


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REGULATORY BODIES

Entities which impose control on design, construction

and operation of a project.

Local Authorities (MC, UC, Pradeshiya Saba)

UDA

CEA

CCD

ICTAD


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Male dominated

Most of the activity happens in the Western Province

Has very high backward linkages Buy mainly from

Manufacturing followed by Services sector Sell mainly to the Services sector

Some Special Features of the Sri Lankan

Construction Industry


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0 10 20 30 40 50 60 70 80 90 100

Types of Employees

Skilled Labour

Unskilled Labour

Technical

Professional

Other

%

Percentage Distribution of Persons Engaged by Type

of Employees and Gender

Male

Female



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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Value

Western

Central

Southern

Northern

Eastern

North-West

N

orth-Central

Uwa

Sa

baragamuwa

Province

Some Selected Indicators of Construction Activities

Classified by Province

(Rs.) Salaries

(Rs.) Value Added

(Rs.) Other Expenditure

(Rs.) Services

(Rs.) Raw MaterialsConsumed(Rs.) Value of Work Done

(Rs.) Value of Contract



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0.000

0.500

1.000

1.500

2.000

2.500

Rubberprocessing

Teapro

cessing

Postandcommunication

RiceMilling

Hotelsa

ndrestaurants

Construction

Tourist

shopsandtravelagents

Publicadministrationand

Transpo

rt

Plantationdevelopment

Fisheries

Coconutprocessing

Nonmertralicandothermineral

Textiles,Footwearandleater

PlasticandRubberproducts

Banking

,insuranceandreal

Otherpersonalservices

Food,Beveragesandother

Petroleumindustry

Livestock

Potatos

Vegetables

Wholesaleandretailtrade

Rubbergrowing

GarmentIndustry

Teagrowing-Lowelevation

Coconutandtoddy

Fabricat

edmetalproducts

Fruits

Miscella

neousagricultral

FlourM

illing

Basicmetalproducts

Ownershipofdwellings

ChemicalsandFertilizer

Electricity,Gasandwater

Woodandwoodproducts

Paddy

Otherm

anufacuring

MiningandQuarrying

Paperandpaperproducts

Minore

xportCrops

Tobacco

Teagrowing-Highelevation

HighlandCrops

Firewoo

d

Betelan

dArecanuts

Forestry

Teagrowing-Mediumelevation

Average =1.339

POSITION OF CONSTRUCTION BACKWARD

LINKAGE IN THE 2000 ECONOMY


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CONSTRUCTION BACKWARD LINKAGES

IN THE 2000 ECONOMY

Construction occupies the sixth place having an output

multiplier of 1.641 within the 48-sector economy

Indicates the nature of construction operations involving

the assembly of many different products purchasedfrom a large number of industries

High output multiplier denotes the potential ofconstruction to trigger off production in many sectors

linked to it


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TREND OF CONSTRUCTION BACKWARD

LINKAGES

0.000

0.500

1.000

1.500

2.000

1970 1976 1981 1986 1995 2000

Backward linkage indicators Output multipliers


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TREND OF CONSTRUCTION BACKWARD

LINKAGES WITH OTHER SECTORS

0.000

0.100

0.200

0.300

0.400

1970 1976 1981 1986 1995 2000DirectBackwardLinkages

Agriculture Mining & Quarrying Services Manufacturing


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POSITION OF CONSTRUCTION FORWARD

LINKAGE IN 2000 ECONOMY

0.000

0.500

1.000

1.500

2.000

2.500

3.000

3.500

Rubbergrowing

Basicmetalproducts

Forestry

Teagrowing-Lowelevation

Teagrowing-Highelevation

Woodandwoodproducts

Teagrowing-Mediumeleva

tion

Rubberprocessing

Electricity,Gasandwater

Paddy

MiningandQuarrying

Nonmertralicandothermine

ralproducts

Tobacco

Petroleumindustry

Miscellaneousagricultralproducts

Construction

PlasticandRubberproducts

Transport

Banking,insuranceandrealestate

ChemicalsandFertilizer

Livestock

FlourMilling

Otherpersonalservices

Firewood

Fabricatedmetalproducts

Wholesaleandretailtrade

Fruits

Potatos

Othermanufacuring

Coconutprocessing

Paperandpaperproducts

Publicadministrationanddefence

Coconutandtoddy

Plantationdevelopment

Postandcommunication

Textiles,Footwearandleaterproducts

Hotelsandrestaurants

Vegetables

HighlandCrops

Food,Beveragesandother

RiceMilling

MinorexportCrops

Fisheries

GarmentIndustry

BetelandArecanuts

Teaprocessing

Touristshopsandtravelagents

Ownershipofdwellings

Average =1.498


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CONSTRUCTION FORWARD LINKAGE INTHE 2000 ECONOMY

Construction occupies the sixteenth position with aninput multiplier of 1.595

This high input multiplier implies that significant portionof construction output (about 40%) cater to the repair

and maintenance sub-sector of construction


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TREND OF CONSTRUCTION FORWARD LINKAGES

0.000

0.500

1.000

1.500

2.000

1970 1976 1981 1986 1995 2000

Forward linkage indicators Input multipliers


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TREND OF CONSTRUCTION FORWARD

LINKAGES WITH OTHER SECTORS

0.000

0.050

0.100

0.150

1970 1976 1981 1986 1995 2000

Agriculture Mining & Quarrying Manufacturing Services


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Thank You

Documents

Construction Sector in Sri Lanka