Construction industry too requests debt moratorium
By Charindra Chandrasena
Following the Government’s provision of a debt moratorium to the tourism sector, the construction industry too has requested the Government for a one-year moratorium, to ensure its sustenance amidst mounting financial troubles.
The request was made last week by the industry representative body, the Chamber of Construction Industry Sri Lanka (CCISL), citing long-running financial issues which had been exacerbated by the Easter attacks three weeks ago.
Minister of Finance Mangala Samaraweera last week introduced a “relief package” with a moratorium announced by the Central Bank of Sri Lanka to tourism sector institutions and individuals, on a case-by-case basis. The moratorium period will be until 31 March 2020 for both capital and interest payments granted to the tourism sector as of 18 April 2019.
CCISL President Eng. Maj. Ranjith Gunatilleke told The Sunday Morning Business that the request had been made during a meeting held earlier this week with the Minister of Housing ,Construction, and Cultural Affairs Sajith Premadasa and a representative of Prime Minister Ranil Wickremesinghe along with officials of other relevant ministries.
“There are many construction companies going bankrupt. Many companies have purchased machinery, equipment, and various items but are unable to give them on hire. We are negotiating with the Government for a lot of assistance. Minister Premadasa had taken our request up with other ministries. Hopefully, we will get a good response,” said Gunatilleke.
He added that the Government was responsible for the plight of the industry as delays in payments by the Government had created severe cash flow issues for the companies, and the Government must release the retention money that it held of various projects.
Furthermore, apartment sales which had been slow even prior to Easter had come to a standstill in the aftermath of the attacks, resulting in developers lacking the financial resources to settle their dues to contractors.
Sri Lanka’s Gross Domestic Product (GDP) was Rs. 14,449 billion in 2018 in which the construction sector’s contribution was approximately Rs. 1,083 billion, according to Gunatilleke. 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.
Furthermore, Gunatilleke said that the construction industry, which had been hampered over the years due to bureaucracy, had experienced another blow in the past three weeks as the Government had restricted the sale of explosives. Explosives are used in drilling, controlled blasting, and to break rock for excavation, and are utilised often in mining and quarrying.
He added that for the past two weeks, no explosives had been issued for quarries which had led to the unavailability of metal and concrete in the market. He also highlighted that quarry owners find it difficult to pay their workers’ wages without any output which will, in the long term, result in quarry workers losing their jobs.
“I understand that they had to stop issuance immediately, but subsequently, authorities should introduce a way in which to issue these and ensure that they do not fall into the wrong hands,” Gunatilleke said.
He added however, that the CCISL was in discussion with the Geological Survey and Mines Bureau to issue controlled quantities of explosives, and expect a solution this week.
He also added that no construction projects were stalled following the Easter attacks and that in fact, some investors had intimated their intentions to ahead with their plans in spite of it.
However, Gunatilleke noted that supplies, including sand, would be subjected to certain security checks, and there was a possibility of a hike in supply costs, leading to further challenges.
“When considering foreign supplies, sometimes shipping insurance costs might increase; the rate charged might go up, and this is normal in any country.”
Meanwhile, we spoke to Maga Engineering (Pvt.) Ltd. Director Finance and Planning Mega Kularatne to assess the impact of the attacks on their company’s performance. He stated that it was too early to note the medium and long-term impact on Maga’s performance.
Explaining the short-term impact, he added that the past two weeks had been dull for the company in terms of supply delays and shortage of labour.
“The outlook will improve in time. For the past two weeks, there was trouble in getting workers and there was a minor drop in worker turnout. This week, it has drastically improved. It will be back to normal next week. There were delays in supplies, but we are managing.”
Kularatne also noted that the major companies in the construction sector had requested certain relief measures from the Government, particularly in financial and banking aspects.
“We are in discussion and they are in the early stages.”
Meanwhile, a spokesperson for Sanken said that worker attendance had reduced to 30% but that all Sanken projects islandwide were progressing, except in the affected locations.
“We expected the workers to return back by 22 April, after the New Year holidays, with 100% attendance, but due to the unrest, immediate attendance reduced to 30%. However, it was now normalising and reached close to 80-90%.”