Financial Times

Discrimination against local consultants, contractors
By Surath Wickramasinghe, President, Chamber of Construction Industry of Sri Lanka (CCI)
It is unfortunate that bureaucrats and key advisors to the government as well as the Chairman of the BOI feel foreign consultants and contractors are cheaper, faster, and better than local consultants and contractors. They are also of the view that foreigners are respected for their designs and reports indicating that therefore obtaining of funds is much easier.

Another statement is that Sri Lankan consultants and contractors should be able to compete with their foreign counterparts in an open economy even on locally funded projects. Sri Lankan consultants and contractors have now acquired adequate competence in the fields of physical planning, urban design, high-rise buildings, highway construction, telecommunication and other infrastructure services. In fact some have been commissioned by foreign countries to undertake assignments.

Therefore at a time when the construction industry in Sri Lanka has insufficient work it is unfair for the BOI and UDA to offer Sri Lankan funded projects to little known foreign consultancy firms and contracting firms without offering them to locals who could do it at a much lower cost. The biggest offenders are the BOI and the UDA.
If there are shortcomings, the only way local contractors will upgrade their skills would be to collaborate with the best firms in the world and to design and construct buildings which become icons not only to the City of Colombo but also to the whole of Sri Lanka. This is what Singapore, Malaysia and even China are doing.

There was a recent newspaper announcement that the Colombo-Kandy highway was to be awarded to a Malaysian firm. If it is the government policy to award this project to a nominated firm without competitive bidding we believe it is unfair and irregular.
Once again we cannot see this Malaysian firm investing many millions of US dollars without adequate financial guarantees from the government.

If this is the case it is only fair that Sri Lankan consultants and contractors should also be invited to compete with the foreign counterpart on the same terms. Recently the BOI commissioned a little known firm, a subsidiary of the Housing Development Board of Singapore, to prepare a Western Regional Plan for Sri Lanka. This is another anomaly.

Before the plan is even completed, this firm has already commenced canvassing for design assignments of the mega projects identified by them for implementation. It would be interesting to find out if the BOI will once again gift this work to this firm without inviting bids from local counterparts.

In most countries in the world including Sri Lanka there are stringent laws and regulations and registration formalities to prevent foreigners working in each other's countries. In India it is mandatory that if a foreign firm works there, they have to collaborate with a local firm. The local firm will be the lead firm and certainly not have an independent practice as in the case of the Singapore firm referred to above.

In Sri Lanka the government is openly flouting the very regulations and the registration formalities that Parliament has enacted to safeguard local consultants and contractors. Advisors and bureaucrats may not know it but IT has transformed the construction industry in Sri Lanka to be comparable and competitive with most countries in the world.

Out of the $ 4.5 billion pledged to Sri Lanka at Tokyo by multilateral agencies and other donors, the loan part should be carefully studied by Sri Lanka to obtain maximum benefit to the island.

For example if the loan funding on construction related projects amount to around 30% of the total amount pledged and if the payments to foreign consultants and contractors is in the region of 60% - 70%, the net benefit to Sri Lanka from the huge loans will be minimal.

The Japanese consultants are said to command fees of around $ 20,000 per man/month while the cost of Europea consultants is a little less. The fees of those from South Asian countries are perhaps the lowest. Sri Lankans will ask for fees between a maximum of $ 2,000 and $ 5,000. Therefore when these loans are negotiated Sri Lanka should insist on a greater proportion of local participation for Sri Lankan consultancy and contracting inputs.

Otherwise when the repayments of these loans have to be made, Sri Lanka will be at a disadvantage having to repay the entire loan as there is no direct benefit to the country through using local consultants.

Why shouldn't the government include a representative of the CCI when negotiating teams are sent to negotiate loans for projects? The chamber representative will ensure that CCI members' interests are assured and that the domestic capacity is fully utilized. The CCI is willing to meet the cost of travel and subsistence of the CCI representative so that there is no additional cost to the government.

The CCI has been continuously highlighting the need for the government to identify at least 3 - 4 mega projects of national importance to 'kick start' the construction industry, and create several thousands of job opportunities which would in turn result in the socio economic development of the country.

CCI has also indicated that it is more than willing to partner the government to identify construction related priority projects. If the government's recent announcement that Rs. 17 billion will be pumped into development projects over the next 18 months is to be taken seriously its apparatus for implementation will undoubtedly fail them. It is prudent for the government to entrust this task to the CCI for its implementation through member associations.

At the same time to 'kick start' the construction industry the government should commission the CCI by forwarding a list of priority projects identified for implementation from the 'Regaining Sri Lanka Document' and the North and East Rehabilitation and Reconstruction Post-Conflict Report by funding agencies.
The designing and planning of these projects could then be distributed to member associations.

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