During the lockdown, there was no construction activity in the country at all and nearly all projects came to a standstill. It has been estimated that the construction industry lost around Rs 65 billion. The other industries directly linked with the construction sector also took a major hit. It was also difficult to hire labourers. To get an insight into the harrowing time faced by the industry, Nepal News talked to President of Federation of Contractors’ Associations of Nepal, Rabi Singh. Excerpt:
How has the construction sector evolved over the years?
Before the advent of democracy the constructor sector in Nepal was literally non-existent. We did have a few buildings being made but most were for residential purposes. There were a few infrastructure projects but not a scale that we see at present. I entered the industry around 1990 after Nepal became a democracy. Since then the construction business has picked up pace. To focus on infrastructure development the government too provided concessions on the import of various construction materials. Moreover, foreign aid to Nepal also increased substantially which helped boost our industry.
However, the industry witnessed a lull for around a decade due to the Maoist insurgency. Since there was political instability and issues related to security we suffered a lot. After the Maoists joined mainstream politics the sector has revived but the various political movements we had in between has not helped us realise our potential. I would say that the construction sector may not be as big as it is in other nations but we are growing. One good example of the sector’s growth would be the various hydropower projects – some small and some big – being made in different parts of the country. The government has also emphasised on infrastructure development in recent years and has announced the construction and refurbishment of different highways across the country. This will only lead to further growth of the sector.
How did the COVID impact the sector and what were the losses?
After the Maoist insurgency, it was the coronavirus pandemic that really hit our business hard. To be honest not only us in Nepal but the entire world was not prepared for a calamity of such proportion. It is not only Nepal’s economy but the global economy that has borne the brunt of the pandemic. Businesses closed down and millions lost their source of income. During the lockdown there was no construction activity at all. Construction of nearly all projects came to a standstill. As per our estimates, we have faced losses of around Rs 65 billion. What also needs to be taken into consideration here is that it is not only the construction industry that suffered. The other industries that are directly linked with the construction sector also took a major hit like the cement industry and the iron and steel industry to name just a couple. It was also difficult for the labourers that we used to hire on a regular basis. Since there was no activity many workers faced a harrowing time.
The other aspect that we also need to be aware of is the time that we lost during the pandemic. Projects that were about to be completed were put on hold and those that had just started construction were also left in limbo. We also need to factor in the cost now of the amount that it will take for maintenance works of the projects that had already begun construction activities. As there were no workers many projects were left idle and these projects require maintenance work. Another aspect that also needs to be looked into is that the government extended the deadline of projects that had not been completed by six months on January 29. This decision was taken by the Cabinet on January 24. But the deadline was backdated. Since this timeframe is not sufficient there are around 1,500 projects that are lying idle. If the government had extended the deadline by a year from the date it announced the deadline extension plan then all the projects would be up and running at the moment. But only extending the deadline is not enough. The government should also disburse funds in a timely manner. If this is done then a majority of the projects will pick up the pace.
What do you feel about the current procurement policy? What changes would you like to see to the policy?
The Public Procurement Act has been introduced to have checks and balances in the amount that the government spends on various sectors. It is there so that government finances are not misutilised. However, it is a very tedious process to get the budget passed after fulfilling all the criteria set in the Act. In some cases, money needs to be disbursed immediately so the government needs to develop a mechanism whereby certain projects and processes are prioritised and the finances released in a quicker manner.
Moreover, the criteria are such that companies have to place very low bids to win the contract to any project. Most companies make bids to win the projects just to survive. This is not helping anyone actually. The government needs to revisit the policy and make necessary amendments. Also, the Building Act 2055 has classified construction companies into four categories. I feel that the number of categories needs to be expanded as per the current situation. And the competition for bids should be streamlined as per the category of the construction company. The bid capacity of the companies should also be reduced from seven times the project cost to four. Similarly, it would also be good if the government encouraged exploration of raw materials that are used for construction purposes and provided incentives when we utilise these resources.
We always hear about certain contractors not completing their work on time or delivering work that is of inferior quality. What do you have to say about that?
Yes, this is something that we have been hearing about since long and in every instance it is always the construction companies that are blamed. I wouldn’t deny the fact that there are a few projects that have not been delivered as promised by a few companies. However, that does not mean all construction companies are out to make a quick buck and deliver inferior work. There are a whole lot of issues that need to be looked into. Just blaming construction companies is not the solution – in this manner we will still be complaining about the same things for another couple of decades.
One thing that everybody needs to be aware of is that the government usually announces projects without doing any proper research. Any project needs to be studied thoroughly – from the design to the time that is required to complete it and also the necessary budget. The government also needs to be aware of the money that it needs to disburse annually for any project that it undertakes. For instance, if the cost of the project is Rs 20 billion and it needs to be finished in five years then providing only Rs one billion a year will not be enough. Construction materials have to be purchased and workers need to be provided their wages. So, proper calculations need to be made before any project is kicked off.
Anything you would like to add?
The Federation of Contractors’ Associations of Nepal was established with the sole aim of streamlining the construction industry of the country and ushering in good practices. I have also tried my best to give continuity to the values of our association. What I would like to see is more companies being opened up in the country. This will add more competition in the market and as we all know when there is competition it is the consumers who are going to benefit at the end of the day. The government should also categorise the construction companies according to their capacity. When this is done it will bring about a lot of clarity in the type of work that needs to be assigned to any particular company. Once the construction sector starts booming we will also be able to stop the migration of our youths for foreign employment. When there is work at home I am sure people would want to stay in their own country and work. This will also put an end to the social problems that have started surfacing due to the spouses going abroad for work.
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