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Monday, 6 April 2009

Construction faces crunch

CONSTRUCTION firms that rely heavily on private-sector projects face tough times ahead as more property developers delay building works.
Even public spending recently earmarked for infrastructure work may not be enough to tide contractors over the slump in demand, as 60 per cent of such spending is for specialised civil engineering works which a typical contractor cannot take on.

The Government recently pledged $18 billion to $20 billion for public infrastructure works this year, and another $15 billion to $17 billion each for next year and 2011.

Of the amount, 40 per cent is for building works such as schools, hospitals and museums, said the Building and Construction Authority (BCA).

The other 60 per cent will go to civil engineering contracts such as extending the Downtown MRT Line and the widening of the expressways.

Industry experts told The Straits Times that contractors which build private residential condominiums will feel the full brunt of the global recession - likely to be after next year, when existing projects are completed.

While the private sector contributed an estimated $20 billion in construction demand last year, this is expected to plunge to between $5 billion and $9 billion this year.

Revenue from private residential projects, in particular, is expected to drop from $6.5 billion last year to just $1.7 billion to $2.3 billion this year, said BCA.

Contractors say this figure could be worse come 2010 and beyond, and it looks like the public pie will not be big enough for everyone.

Mr Lim Yew Soon, managing director of a unit of local builder Evan Lim & Co, noted that civil engineering projects are very specialised, which 'only very few' experienced contractors can carry out.

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