Construction industry lauds Budget but laments approval inaction

– CCI and National Construction Association comment

– Red tape and delays not addressed: CCI

By Madhusha Thavapalakumar

The Chamber of Construction Industry (CCI), the apex body of the local construction industry, commended the Budget 2019 proposal which supports the growth of its industry but expressed disappointment at the missed opportunity to address the time-consuming approval process prevalent in the industry.

Speaking to The Sunday Morning Business, CCI President Eng. Maj. Ranjith Gunatilleke said that he was satisfied with the Budget proposal and appreciated it disallowing foreign construction companies to tender for Government projects unless the project is fully financed by foreign entities, without the formation of joint ventures with local construction or consultancy companies.

“This is a very good Budget proposal because Government contracts need following up. We have noticed that sometimes, foreign contractors lack continuity; they do not follow up,” he said, highlighting the value added by local contractors available on the ground as opposed to foreign contractors that may leave the island on completion of certain projects.

Even though the construction industry was lobbying for a 50% reduction of cess on imported construction material, Gunatilleke appreciated the reduction of 30%.

“Unnecessary taxes and levies should be taken off. It looks like the Government might get less income, but the industry overall, gains. I would have preferred if they reduced cess by 50%, and a further 50% next year, but they reduced it 30%, and that is something.”

However, the CCI Chief lamented on the absence of any proposals to address the lengthy approval procedure that deters investors.

“At present, unnecessary approval procedures ensure that it takes a minimum of one year for any construction project to receive approval. That has not been addressed in the Budget. Someone should address that.”

According to Gunatilleke, during all stages; from the time of completing an application to the time of getting the final nod to commence the work, approvals are required from a number of institutions. These take a minimum of one year and can stretch beyond two to three years.

“Even if the project is in Kandy, you are asked for coast conservation clearance, and you have to write a letter and get it.”

He stated that the ideal time period for bureaucratic processes should be three months or less, and stated: “People will start investing, thereby increasing our FDI figures. People will come as they know they can get the approval.”

Commenting on the move to implement the imposition of a 15% Value Added Tax (VAT) on the supply of condominium housing units with effect from 1 April 2019, Gunatilleke noted it would weaken apartment sales which are already not fast-moving.

He said: “Now, for some reason, apartment sales are not fast-moving. VAT is also being levied so the prices of apartments will increase further and that situation may not encourage apartment sales.”

Meanwhile, The Sunday Morning Business spoke to the National Construction Association of Sri Lanka (NCASL) Chairman Athula Priyantha Galagoda, who welcomed the proposal of not allowing foreign companies to tender for government projects.

Galagoda said that this proposal along with the proposal to remove the Nation Building Tax (NBT) on the main construction contractor were put forward by NCASL during a meeting held with several ministers a few weeks ago.

He stated that the proposal to make buildings disability-friendly by 2023 was crucial as most other countries have disability-friendly facilities.

“There should be facilities for the differently-abled. These facilities are provided in other countries – only we do not have it. Some new architecture drawings have incorporated the necessary facilities in the construction design, which is a good move.”

Further, he added that imposing 15% VAT on apartments was a good measure.

In addition to these proposals, Budget 2019 proposes the granting of residential visas for three years to foreign nationals who invest $ 400,000 or more in condominiums, but that the visa will be withdrawn if the foreigner exits the investment.

With a view to impose minimum standards on construction materials, the Budget also proposed that Sri Lanka Standards Institute (SLSI) update and implement minimum standards on sanitaryware, taps, showers, and pipes by April 2020 in order to address major sources of water wastage.