Govt defers projects worth $1.7b

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http://www.straitstimes.com/Prime%2B...ry_260324.html

July 23, 2008

Govt defers projects worth $1.7b

Move to ease pressure on building costs

By Joyce Teo, Property Correspondent


THE Government is deferring another $1.7 billion of public sector construction projects to ease pressure on red-hot building costs in the next two years.

This is the third time since November that public projects have been postponed amid high demand for building contractors and materials.

A total of $4.7 billion of public sector projects will now be pushed back to 2010 and beyond, the Building and Construction Authority (BCA) said in a statement.

'That's good news,' said the chief executive of property firm Overseas Union Enterprise, Mr Thio Gim Hock. 'Construction costs have more than doubled in the past year. It's hard to find contractors to bid for a job. When I tender, a lot of them decline because they are too busy.'

The latest move means projects such as the Jurong General Hospital will be deferred to 2010, although the hospital will still be ready and open as scheduled by 2015.

Other delayed projects include less urgent improvement works, but public housing and upgrading programmes will not be affected.

The move will allow construction resources to be used to ensure the timely delivery of big projects such as the integrated resorts, Marina Bay Financial Centre and the Downtown MRT line. Most should be finished by late next year.

The BCA also said that the resources freed up then can be used later for the deferred projects, ensuring a better spread of construction resources beyond next year.

Market experts said on average, costs have risen 20 to 35 per cent in the past year.

Mr Seah Choo Meng, executive chairman of construction consultancy Davis Langdon & Seah, was upbeat about the latest move. 'It will not bring costs down but it will lessen the pressure on existing resources.'

Singapore could now be among the world's most expensive nations in terms of construction costs, though this is not likely to last, said Mr Jackson Yap, CEO of developer cum construction firm United Engineers.

The total value of construction projects here is forecast at $23 billion to $27 billion this year, compared to $24.5 billion last year, and is set to stay high next year, BCA said. It is a far cry from 2003 and 2004, when the figure was just $10 billion.

Last November, the Government took what was then a rare step of deferring $2 billion worth of projects. Then in February, it deferred another $1 billion worth of projects.

Dr Chua Hak Bin, Asian strategist at Deutsche Bank Private Wealth Management, is not convinced the latest deferment is needed as building growth has eased.

'Construction orders will likely continue coming off, given a softening residential and commercial property market,' he said, adding that the Government may need to consider bringing forward deferred projects in a slowdown.

Some private projects, particularly residential, may also be delayed, said Mr Seah. 'While this year's rate of escalation in construction costs is expected to be in the double digits, it may be affected by the potentially weaker economic outlook in the region.'

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Public projects put on hold

Some of the $1.7 billion worth of projects to be postponed:

# Jurong General Hospital

# Improvement works to selected schools

# Upgrading of sports facilities in some educational institutions

Earlier projects postponed include:

# National Art Gallery

# National Addiction Management Centre

# A section of Changi Prison Complex

# Several institutional projects such as student hostels and hawker centres

# Extensions to the Asian Civilisations Museum and the Peranakan Museum, and the Communicable Disease Centre

Source: BCA

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http://www.businesstimes.com.sg/sub/...88813,00.html?

Published July 23, 2008

More public sector projects put on hold to ease squeeze

Move will free up resources for integrated resorts, other key projects

By UMA SHANKARI


(SINGAPORE) The government will postpone construction of another $1.7 billion worth of public sector projects - on top of some $3 billion worth that have already been put off - as it looks to manage rising construction costs.

With this move, the government is deferring a total of $4.7 billion worth of public sector construction projects to 2010 and beyond.

'The additional deferment will allow the existing construction capacity and resources to be channelled towards the timely delivery of some big projects such as the integrated resorts, Marina Business Financial Centre and the downtown MRT line,' said regulatory body Building and Construction Authority (BCA) in a statement yesterday.

Most of these projects are expected to be completed around end-2009. The construction resources freed up at that time would then be available for the deferred public sector projects, therefore achieving a better spread of construction resources and activities beyond 2009, BCA said.

Projects postponed in this round include the main building of the proposed Jurong General Hospital and upgrading works at schools.

Developers and analysts BT spoke to were hopeful that the government's response could help to slow down the increase in construction costs.

Construction costs shot up some 20 to 30 per cent in 2007. And in the first quarter of this year, building costs rose by another 3-5 per cent, Minister for National Development Mah Bow Tan said in a statement.

The building boom also means that contractors were in short supply, with some private developers here reporting difficulties in hiring contractors and sub-contractors.

The new postponements could therefore be helpful in keeping the sector on a more sustainable growth path, said Citigroup economist Kit Wei Zheng.

'Anecdotal evidence suggests that some contractors may have even refused to take up contracts, because of concerns that rising costs would wipe out initially projected profits or even result in losses,' he said.

However, there were some concerns that the reduction in government spending was coming at a time when the sector, and the overall economy, is seeing a slowdown.

'To some extent, given the downside risks to growth, one would have thought that perhaps the government may have contemplated boosting construction demand to shore up growth,' said Mr Kit.

But he added that with the sector suffering from capacity constraints, it is not clear that GDP growth would have received a significant boost even if the government had increased construction demand.

Chua Hak Bin, chief Asian strategist at Deutsche Bank Private Wealth Management, similarly pointed out that the outlook for the construction sector is 'not as rosy as it was a year ago'.

Growth in the construction sector is tapering off. Growth slowed to 16.9 per cent in Q1 2008 and then to 15.2 per cent in Q2 2008. By contrast, in Q4 2007, the sector grew by 24.3 per cent.

Dr Chua, however, said that the new deferments could help reduce current supply bottlenecks.

Before yesterday's move, the government had announced two rounds of construction postponements for public sector projects, in November 2007 and February 2008. Projects put off included the Ministry of Health's National Addiction Management Centre and part of the Changi Prison Complex.

For the whole of this year, construction demand is likely to come in within current estimates of $23-$27 billion, BCA said.