SINGAPORE: Construction firms in Singapore are starting to feel the strain from labour shortages and supply chain disruptions caused by the outbreak of COVID-19, with some seeking deadline extensions for their projects.
Singapore had its first confirmed case of the novel coronavirus on Jan 23 and since then, this number has risen to 91 on Tuesday (Feb 25).
As part of measures to curb the spread of COVID-19 here, the Manpower Ministry said earlier this month that all work pass holders with travel history to China within the last 14 days will have to be approved by authorities before entering the country. The majority of the 30,000 work pass holders from China have not returned according to Manpower Minister Josephine Teo. Those who return will be placed on a 14-day leave of absence.
These new requirements, alongside a reduction in flights to and from China, have slowed down the return of Chinese workers, exacerbating an existing manpower crunch in the construction sector, industry players told CNA.
“Even before COVID-19, there’s already a shortage of workers as the industry, which was in a downturn previously, slowly recovers and is seeing more construction projects,” said Mr Kenneth Loo, executive director and chief operating officer of Straits Construction Singapore.
“These (new rules) have only aggravated the shortage.”
Over at Teambuild Construction Group, it has seen a “significant impact” as many of its workers with expertise in areas such as reinforced concrete works, are from China.
Adding to its manpower woes, there has been a “sharp rise” in the number of Bangladeshi and Indian workers requesting to return home, a company spokesperson told CNA.
Echoing that, Mr Loo said his firm has also seen a number of such requests following news that five Bangladesh workers tested positive for COVID-19 in recent weeks.
“The workers are very worried about catching the disease here,” he said.
Besides labour woes, industry players also have to contend with the issue of late deliveries of machinery and raw materials such as tiles and steel coils, as factories in China were shut for an extended period after Chinese New Year and have been slow to restart.
Nearly two thirds of those surveyed by the Singapore Contractors Association Limited (SCAL) said their supplies of materials and equipment have been “severely or very severely affected”. The poll done by the association last week involved 133 of its members.
Not just construction raw materials, companies are also facing a shortage of face masks, including the N95-type masks, which workers don as part of their protective gear during operations such as cutting and cement mixing, said SCAL’s president Ng Yek Meng.
The coronavirus outbreak has also caused work to slow down and 73 per cent of respondents indicated severe impact on their cash flow, the same survey showed.
CONCERNS ABOUT PROJECT DELAYS
Altogether, these have given rise to worries among industry players about possible missed deadlines.
Teambuild Construction Group, for instance, said it is "currently seeking all possible assistance" to request for extension of time (EOT) as the impact has been "substantial".
It is not alone. A Feb 18 report by Reuters said some local construction firms are seeking legal advice on invoking the force majeure clause in their building contracts. Force majeure refers to unexpected external circumstances that prevent a party from meeting contractual obligations.
Ms Spring Tan, partner at Withers KhattarWong, said the law firm has spoken to four clients with “preliminary inquiries, not specifically on the option of invoking force majeure but whether they can get EOT to complete their projects”.
These companies either employ Chinese workers or subcontractors, or have factories in China that have had to close. Unable to meet production and delivery deadlines, they are concerned, said Ms Tan.
“Our clients tell us that they are not feeling the full brunt of the impact at this moment as the situation is still evolving, and for now owners (and) developers are still understanding,” she added.
“However, construction firms are and should be exploring their options in case the situation worsens.”
Invoking force majeure clauses may be an option, but it remains an unknown “whether or not (it) will succeed as grounds for EOT under these circumstances”, Ms Tan told CNA.
Amid concerns about possible project delays due to COVID-19, the Building and Construction Authority (BCA) has informed contractors involved in public sector projects that they may submit claims for EOT under the contract provisions.
It has also advised government procuring entities to be prepared to evaluate such claims for EOT and has sought the support of the Real Estate Developers' Association of Singapore (REDAS) for private sector projects that are similarly affected, a BCA spokesperson said.
Separately, SCAL said it will be meeting REDAS to discuss this issue.
SECTOR’S GROWTH OUTLOOK
The near-term woes of builders in Singapore have also tossed up questions about the growth outlook of the industry, which has been named as one of the bright spots for the Singapore economy this year.
After three years in contraction, the construction sector returned to full-year growth of 2.8 per cent in 2019. Amid an overall dim outlook for 2020, policymakers are expecting it to continue the recovery with “steady growth” on the back of a strong rebound in construction demand.
Estimates from BCA expect between S$28 billion and S$33 billion worth of contracts to be awarded in 2020, with around 60 per cent being public sector projects.
Maybank Kim Eng economist Lee Ju Ye told CNA that she does not expect the bubbling worries brought about by COVID-19 to derail the sector’s recovery. For this year, she is penciling in growth of between 2 to 2.5 per cent.
But she cautioned that the sector could take a hit in 2021 on the back of newly announced tighter quotas on skilled foreign labour.
Last week, Deputy Prime Minister Heng Swee Keat announced in his Budget statement that the S-Pass sub-Dependency Ratio Ceiling (DRC) will be cut for the construction sector. This will be done in two steps: from 20 per cent to 18 per cent on Jan 1 next year, and to 15 per cent on Jan 1, 2023.
Ms Tan echoed these concerns: “There are already COVID-19-related manpower and material delays and now, coupled with these foreign manpower cuts, (our clients) are very concerned about completing current projects."
SCAL’s Mr Ng said the new foreign worker curbs add to the disappointment felt by some smaller construction firms about Budget 2020.
These smaller players, which will be the most vulnerable if the COVID-19 outbreak is dragged out, were hoping for some targeted help to tide through the labour crunch and supply disruptions but saw their hopes dashed.
“Next year’s reduction will certainly have a huge impact on us as more than half of the construction supervisory staff are S-pass holders,” said Mr Ng, adding that it remains a challenge to recruit locals who shun jobs from the industry.
"We just can’t find Singaporeans to fill these jobs at the work sites."
To help, the association said it will continue to work with firms to find solutions to attract, retain and retrain more locals with different skillsets to join the construction industry. It is also working with BCA to match mid-career professionals to the sector.
In a bid to aid companies in their manpower needs amid the COVID-19 outbreak, the Manpower Ministry on Tuesday announced that manufacturing and services sectors will soon be able to hire work permit holders who are already in Singapore. The temporary scheme will run for six months.