30th Anniversary of National Construction Association of Sri Lanka: ADB Construction Industry of Sri Lanka

Speech | 11 February 2012

Speech by ADB Sri Lanka Resident Mission Country Director Rita O'Sullivan on 11 February 2012 in Sri Lanka

Thank you for inviting me to deliver the lecture on "ADB Construction Industry of Sri Lanka".

ADB, is a key development partner of Sri Lanka. Since the time the first loan was given in 1968, ADB has approved a total of $5.2 billion in loans, $190 million in project grants (major portion of which was for the post conflict reconstruction) and technical assistance grants amounting to around $100 million.

ADB's current support to Sri Lanka consists of an ongoing portfolio of 42 loans with a net loan amount of around $2.1 billion. Contracts have been awarded for almost $1.3 billion. This means that about another $1 billion worth of contracts are still to be awarded. Looking ahead, under the Country Partnership Strategy, ADB expects to provide direct assistance under its public sector lending operations of around $300 to 350 million each year. The new strategy is also designed to crowd-in further funds through for example Public-Private Partnership (PPPs).

The bulk of ADB assistance is for civil works and equipment procurement in the field of large and small infrastructure such as, roads, ports, fisheries harbors, water supply and sanitation works, buildings of various kinds, including at the local community level.

The private sector is a key source of investment, whether in power generation, the telecommunications sector, the construction of factories, hotels and resorts, offices and condominiums. We see this development taking place all around us before our eyes transforming the way we live. So construction is a key sector and the development of the construction industry should be a priority for the country. ADB certainly supports this objective.

I understand that there are over 2500 contractors registered with ICTAD and graded as M1 to M10. Some of them are the members of the National Construction Association of Sri Lanka. Many of these contractors do participate in ADB-financed projects as lead contractors on both national competitive bidding and international competitive bidding contracts.

Sri Lankan contractors are already involved in major public and private infrastructure projects that demand an international quality of work. Some companies, are also beginning to seek opportunities overseas to compete in the global market place. The government is also keen to help this development. These are all good signs that the industry is maturing.

Of course, the development of the industry also faces many challenges. We are aware of the difficulties that domestic contractors can face as a result of delay of payments. ADB makes direct payments to contractors for their interim payment certificate if the value is more than $50,000. Normally payments are processed within five to ten days after the Executing Agency submits the withdrawal application to ADB.

Recruiting and retaining well qualified staff is another challenge, given rising demand in reconstruction activities in North, including in overseas markets.

At the same time, the sound development of the industry depends critically yourselves and your commitment to your work. Key issues here are:

  • Ensuring high quality of works.
  • Companies need to recruit, train and retain good construction managers, contract administrators, contracts and claims specialist, more technical staff;
  • There is also demand for good operators of heavy equipment particularly in road construction. As such, construction companies, in collaboration with government agencies should provide training opportunities for young people;
  • Construction companies need to recognize the value of competition and develop their capacity to bid effectively for the projects under competitive bidding procedure;
  • Finally, in terms of the responsibility of the construction industry, the most important thing is to implement projects on time and in a cost effective manner.

While Sri Lanka earlier used to benefit from the domestic preference on contracts, with the increase of country's level to a middle income country, this preference no longer applies under ADB projects. But as we have seen, some domestic companies can still bid and win on international competitive bidding contracts, while many contracts are still also considered on the basis of national competitive bidding.

While some people feel that awarding a contract to an international contractor is as a taking work away from domestic contractors, like other sectors, construction is now very much globalized. The presence of international contractors, especially in the large and more complex projects should be seen as a way of helping to developing local experience. Forming joint ventures with international firms can help to build the capacity of the local industry.

ADB looks forward to continuity to work with you as vital partners in our work here in Sri Lanka.