Singapore Construction Challenges and Opportunities

 

 

All construction has pitfalls – but Singapore construction seems to have a unique set that you need to overcome in order to leverage the most opportunity. Here are the most common challenges, and how you can get around them to mitigate risk and increase reward.

1. Singapore Construction Permits

To build anything in Singapore requires a fairly extensive engagement with bureaucracy.  There are various permits that you have to get in order to break ground on a new Singapore construction site.

What’s more, one of those permits is written permission from the Urban Redevelopment Authority (URA), which requires you to submit a survey of the land as well as a proposal for review and approval.

Fortunately, in line with its general attitude toward business friendliness, Singapore does make it as easy as it can. The application the URA can be submitted online through a dedicated computer system, which is quicker and easier than a paper application. Maybe that’s why it only takes about a month to process all permits.

There are also plenty of tools out there to help with the URA part of Singapore construction to further streamline this process.

2. Connecting Power Supply

Power supply is a pretty big part of any construction project – and Singapore construction is no exception. However, it can be challenging to hook up either your new construction or even your construction site to the city’s grid. It requires you to pay a connection fee and establish an account with the Singapore Power. This process can take 36 working days, which is about a month and a half if the existing site has ready access to power supply infrastructure.

3. Get All the Licenses that You Need

You’ll also need to make sure that you have all the licenses you need in order to start construction. If you hire local talent this is a lot easier because they’ll have taken care of their own licensing already. But if you’re determined to bring in part of or a whole team (for example, a team of engineers) you’ll need to make sure their paperwork is in order and compliant with all relevant government acts. Getting a local firm to help this process will make it a lot easier in the long run.

4. Change-Adverse Culture

Not all roadblocks are created by a government or a process. One of the biggest challenges facing the Singapore construction industry today is the changing culture in Singapore.

Generally, the construction industry is slow to adopt change and take on new risky behavior. That’s why it’s a favorite for prudent investors – it’s relatively risk-adverse when compared to other industries like tech and startups.

However, whether the Singapore construction industry likes it or not, there are changes afoot:

  • Access to workers is changing (more on that in a minute.)
  • Access to capital is changing as investors look for higher-risk, higher reward investment as the global economy recovers from the 2008 financial crisis.
  • New technology is changing how construction is completed. Robotics are long overdue to enter the construction industry, automation is long overdue to enter the construction industry, and 3D printing is long overdue to enter the construction industry. This is on top of other more run of the mill innovations like better telecommunications, fintech-led financing and crowd-investment strategies, and other advances made capable by tech advances in other industries.

However, this naturally conservative attitude in Singapore construction has stymied these changes. One challenge unique to Singapore is how to sell the value of these investments to local firms and institutions to drive their adaptation and ultimately, the efficiency of the Singapore construction industry.

5. Access to foreign workers

Singapore is a small, powerful developed country, and a result of its geolocation and prosperity is that a huge chunk of the construction labor market is foreign workers. Currently, the quota for a construction firm is 7 foreign workers can be hired for every 1 full-time local employee.

However, in recent years the Ministry of Manpower has imposed a higher levy on the foreign worker as well as other restrictions, like a rule that 10% of a workforce has to be higher skilled  (R1) workers before any more basic skilled workers can be hired.

The government is trying to drive hiring practices inward and build up Singapore’s natural reserve of personnel to improve their economic power.

The effect on the Singapore construction industry is clear though – access to workers is harder now, and firms need to work harder to find more productive ways to build.

6. Challenging worker recruitment at home

The whole point of raising foreign worker levies is to drive construction firms in Singapore to increase their hiring of local talent to build the value add productivity of the Singapore construction industry as a whole. However, the problem currently facing construction companies is a lack of local talent to hire. An aging population, greater competition from more lucrative professions, and a general waning interest in construction as a career have made young Singaporeans unwilling to enter the industry in the numbers that construction firms need to make up the fallout of foreign workers.

Despite all these challenges, there is still plenty of raw opportunity in the Singapore construction market.

The construction industry is doing better.

The Building and Construction Authority (BCA)’s annual report from 2015/2016 demonstrates a clear trend: the Singapore construction industry is working to becomes the most advanced in the world:

  • Required upskilling of foreign workers has led to the majority of firms maintain 10% of their workforce at R1.
  • CONQUAS® scores have improved by 9.8% since 2005
  • Worksite productivity improved 2.09% year on year in 2015

And with current reports indicating that the demand for construction will only continue to increase, an improved industry is arriving just in time.

What we can conclude is that while there are structural and cultural challenges, as well as worker supply ones, the actual demand driving the industry forward remains strong – and the industry is rising to meet that challenge more efficiently and effectively than ever before.

Wrap up

Singapore regularly ranks as one of the best places to do business and nowhere is that more obvious than in the construction industry. Despite the significant number of forms and processes to go through, the well-designed Singapore government makes it relatively painless and means you can break ground faster than in many other countries. Which, given the strong growth in the demand for construction materials, there is obviously an interest in doing.

Yes – there are challenges around worker supply and adversity to change. But with strong demand will come innovate solutions as businesses work to maximize their market share.

Got more questions about the Singapore construction industry? We’ve got answers. Get in touch and see if we can provide our expert guidance today!

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