Construction Sector Opportunities

Over the past nine years, the construction sector has multiplied in the growth of high-end residential, industrial, hotel, and resort building and infrastructure, with areas contributing to GDP estimated at 7.5% in 2018. The construction industry provides almost 9 per cent of the GDP of Sri Lanka, employing some 600,000 workers. The construction sector's annual value estimated at $3 billion. Several construction companies, locally and internationally, are involved in the industry. Many major infrastructure projects are under construction, including a new Port City within the city limits of Colombo on newly reclaimed land.

The newly elected government has identified the construction industry as a critical industry that can contribute immensely to our development plans. It has acquired maturity in terms of knowledge, experience and technology use. Sri Lankan companies have, therefore, operations overseas. They intend to prepare the background for this industry to expand abroad as an environment-friendly industry with typical Sri Lankan characteristics. Hence, the following are the benefits and opportunities to foreign investors interested in the construction sector:

·         To facilitate relevant approval processes, we plan to establish a system in which construction firms can obtain all required approvals in one place or through the Internet.

·         The time taken for approval of any building to construct will reduce to a total of 3 weeks. A system will be put in place to make all urban construction agree with prevailing urban development plans.

·         Companies will receive the opportunity to pay past loans subject to negotiable grace periods.

·         The government will scrap the 15 per cent VAT on apartments.

·         The direct and indirect taxes exceeding 300 per cent the incumbent government has imposed on the industry will be changed, by replacing the present system with the 2014 tax system.

·         Currently, the banks demand bid bonds, performance guarantees, advance payment guarantees from companies seeking a line of credit concerning massive constructions. To minimise the hassle caused by these, the government will institute via the Central Bank, a new system in the handling of relations between construction firms and banks.

·         The licensing system that operates today to regulate construction firms in their procurement of raw material will be revised.

·         The new government will ensure the security of domestic small and medium sub-contracting firms through legislation.

OSL Take: The government also announced the Western Region Megapolis Project, which hopes to radically modernise urban infrastructure in and around Colombo using innovative technology (e.g. innovations in smart cities) to propel it to the status of a ‘high-income developed nation' by 2030. Foreign firms have significant opportunities to sell a variety of equipment and technology, from earth-moving equipment and building appliances to machinery and heavy equipment related to the construction industry.

VBS/AT/06122019/Z_TB1