Singapore’s Construction Sector Struggles Under Pressure as the Pandemic Continues

September 30, 20219:43 am814 views
Singapore’s Construction Sector Struggles Under Pressure as the Pandemic Continues
image source: Strait Times Files

Singapore’s construction sector has been facing rising problems during the pandemic, from acute labor shortages to surging material costs, leading to the downfall of some companies. Accounting and Corporate Regulatory Authority (Acra) statistics showed 1,538 construction-related businesses discontinued operations in the first eight months of this year. This represents about 2.86 percent of the total number of construction business companies registered with Acra as of August 31, which stands at 53,707, Straits Times reports.

Rising Costs for Materials

Material supply disruptions caused by factory lockdowns, as well as greater freight expenses, have compounded project delays and sent costs skyrocketing. Steel rebar has increased by 54% since January 2020, aluminum by 59%, copper by 81%, and concrete by more than 20%, according to the Singapore Contractors Association (SCAL). Five subcontractors left a residential project they are working on in Sengkang after failing to have their existing contracts repriced to account for rising labor and raw material prices.

Limitation of Migrant Workers 

Despite the fact that most construction activities resumed in August of last year, tight border restrictions remained in place, limiting the entry of migrant workers, driving up labor prices, and delaying projects. Last year, the foreign construction workforce dropped by 52,800 to about 288,700 as of December 31. The majority of these workers are from India and Bangladesh, with small proportions from China, Myanmar, and other countries. Labor contributes to around 40% of total building expenses. SCAL added that manpower wage costs have increased by 46% on average for similar jobs compared to the pre-Covid period.

Government Initiatives

A series of government initiatives to support the struggling sector, as well as extraordinary legal efforts under the Covid-19 Temporary Measures Act, have helped prevent a massive increase in sector closures, even as these are steadily rising.

On April 5, an amendment extended the exemption period for construction contracts, supply contracts, and any performance bonds until September 30. It was also changed to impose co-payments for qualified costs incurred as a result of pandemic delays from April 7 to September 30. A SCAL spokesperson said the agency believes that the exemption from legal action for companies’ failure to meet contractual commitments can be extended beyond September 30. 

With little relief in sight due to ongoing restrictions on bringing in migrant workers, rising labor, raw material, and freight prices, and other problems, industry experts believe that the interim measures, even if extended beyond September 30, will be inadequate.

Allowing more migrant workers to enter the country may be beneficial to address the crisis. However, public health issues are as important. In comparison to the Singapore population’s vaccination rate of more than 80%, the construction sector has a relatively high vaccination rate. When compared to the number of workers lost, the number of migrant workers entering Singapore is lower. The industry will recover if this can be normalized.

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