Ripple effect felt by Singapore's building sector

The coronavirus crisis has left Mr Andy Lim in limbo, wondering if he should go ahead to commit to several commercial projects that have been in discussions for the past few months.

This is because Mr Lim, who owns GF+A Projects which supplies tiles to condominiums and hotels, has not been able to confirm the delivery of tiles from China. He said: "The current situation is also (making it) challenging for me to travel to China to inspect the tiles."

Mr Lim, who also imports tiles from Italy, said it would cost more to substitute tiles from China with Italian ones if China fails to deliver.

Just when the construction sector was starting to look promising, having swung back to growth mode last year, the coronavirus crisis is now threatening to slow down the sector.

The impact of the epidemic in China was immediately felt when Chinese workers were unable to return to work in Singapore after the Chinese New Year holidays, leaving many construction sites short of manpower.

Beyond that, there is growing concern that supply chains of building materials such as tiles, ironmongery and glass panels from China could be disrupted, leading to further delays and losses in projects.

A spokesman for the Singapore Contractors Association Limited (SCAL) told The Straits Times: "One of the major concerns is the isolation of workers for 14 days after returning from China, to ensure that the virus is not invariable spread to other workers and job sites."

The spokesman said construction players are also worried about the extent of disruption to the supply chain here as a result of the suspension of production activities in China. "If the situation does not improve, it would definitely have an impact on costs and delays in projects," he said .

In a bid to contain the virus, the Chinese authorities have ordered firms and factories to remain shut until today. But with the number of confirmed coronavirus cases in China surging every day - more than 30,000 people have been infected - industry players are bracing themselves for further delays as local authorities urge factories to remain closed.

Last week, Manpower Minister Josephine Teo said about 30,000 work pass holders from China who left Singapore over the Chinese New Year break have not returned.

HUGE DISRUPTION

It's basically chaos and there's no clarity when it comes to information from China. The manpower shortage is enough to cause a huge disruption to the construction sector here... add on the possible disruption in terms of supply chain of materials and it will definitely impact the construction sector.

DBS BANK SENIOR ECONOMIST IRVIN SEAH, on the impact of the coronavirus outbreak on the construction industry here.

Said the SCAL spokesman: "While we appreciate the latest announcement by the Government for the $100 per day for workers on leave of absence (LOA) and levy rebate over the period, the absence of these workers would affect the progress of projects, as many of them are skilled workers and/or have supervisory roles."

Addressing industry concerns, a Building and Construction Authority (BCA) spokesman told The Straits Times that contractors involved in public sector projects can submit claims for more time if work progress has been delayed due to impact from the coronavirus.

On Friday, the Ministry of Law and the Singapore Land Authority said that listed developers who meet certain criteria can apply to be exempted from the qualifying certificate (QC) scheme, which currently requires them to complete their projects within five years of acquiring the site, and to sell all the units within two years of completion.

The announcement was a relief to industry players amid the current challenging market conditions.

Last month, BCA had projected this year's total construction demand, which is the value of construction contracts to be awarded, to range between $28 billion and $33 billion, following a 9.5 per cent growth in the sector last year.

About 60 per cent of this will be public sector construction demand spurred by major infrastructure projects such as the Integrated Waste Management Facility, infrastructure works for Changi Airport Terminal 5, Jurong Region MRT Line and Cross Island MRT Line.

Economists said the construction sector, which accounts for about 4 per cent of Singapore's total gross domestic product (GDP), will not be the worst hit.

But a ripple effect is inevitable.

The construction sector might even see a contraction in the first quarter, said Maybank Kim Eng senior economist Chua Hak Bin.

DBS Bank senior economist Irvin Seah said: "Some factories have further extended their closures. It's basically chaos and there's no clarity when it comes to information from China. The manpower shortage is enough to cause a huge disruption to the construction sector here... add on the possible disruption in terms of supply chain of materials and it will definitely impact the construction sector."

Hua Teng Builders director Guo Yu Chen said that with China being a big supplier of building materials and tools to Singapore, any disruption to the supply chain here would definitely lead to delays in projects and higher costs to source for materials from other countries such Vietnam and Malaysia.

Mr Guo said: "Even if factories reopen this week, workers will still face problems travelling to work with the quarantine orders and the closure of roads, especially in the smaller provinces. Factory output will definitely be affected."