CONSTRUCTION

Challenges for domestic construction industry

Dakshitha Thalgodapitiya

The construction industry everywhere faces problems and challenges. However, in developing countries, these difficulties and challenges are present alongside a general situation of socio-economic stress, chronic resource shortages, institutional weaknesses and a general inability to deal with the key issues. There is also evidence that the problems have become greater in extent and severity in recent years.

The main issues are construction industry development, globalization, culture and the environment. A research agenda is presented and the important role of researchers in the drive to improve the performance of the construction industry in the light of their resource constraints and administrative weaknesses, is outlined.

Construction industry development is a deliberate process to improve the capacity and effectiveness of the industry to meet the demand for building and civil engineering products, and to support sustained national economic and social development objectives. Construction industry development promotes increased value for money to industry clients as well as environmental responsibility in the delivery process and the viability and competitiveness of domestic construction enterprises.

Problems and requirements

The construction industry, by nature, has many special problems and requirements. The importance of taking measures to improve the performance of the construction industry has now been recognized in several countries at various levels of socio-economic development.

Dedicated agencies have been formed in many countries to administer the continuous improvement of the industry, although they have different objectives, responsibilities and levels of authority. In the UK, the Construction Industry Board is an industry initiative, whereas its counterpart institutions in developing countries are Government agencies. They include the Construction Industry Development Board of Malaysia, the Institute for Construction Training and Development of Sri Lanka and the National Construction Council of Tanzania. Singapore’s Building and Construction Authority is also a Government agency.

A regional initiative to coordinate efforts and pool resources where necessary must be provided to many of the institutions that are industry inspired, or involve the industry’s active participation. Such initiatives potentially have greater sustainability and chances of success because the main stakeholders and beneficiaries are directly included in the planning and implementation process.

Considering the nature of the industry’s needs and problems, and resource constraints, mere formation of an agency does not guarantee the success of construction industry development. An important point worth stressing is that construction industry development is a continuous process. A number of countries at different levels of development have recently formulated long-term plans for improving their construction industries.

The construction industry should be transformed from an industry which is “dirty, dangerous and demanding” to one which is “professional, productive and progressive”.

Desired outcomes of a construction industry development initiative are a professional, productive and progressive industry; a knowledge workforce; superior capabilities through synergistic partnerships; integrated process for high buildability; contributor to wealth through cost competitiveness; and construction expertise as an export industry.

Impact of globalization

The impact of globalization on the Construction Industry has occupied the headlines of popular major publications for several decades. There are sharply different arguments on the merits and otherwise of the process of globalization from the perspective of Sri Lanka. As far as we are concerned, globalization has become an inescapable fact.

Globalization facilitates provision of international finances for implementation of major infrastructure projects, particularly when local construction companies lack finances and sometimes expertise to participate in the sponsorship of privatized projects. Nevertheless, foreign direct investment in projects could lead to an increase in construction demand creating opportunities for domestic companies. Globalization should cause competition among overseas contractors hopefully lowering the Project Costs, but may result in curtailing opportunities for growth of domestic companies.

Even though it is argued that presence of a large number of international firms offers scope for transfer of technology, upgrading of the domestic industry and development of local companies, more often than not in actual fact very little technology transfers have taken place.

Projects which are large and complex are undertaken by foreign contractors but it is the responsibility of the State to use available construction works to support the growth and development of the indigenous contractors enabling eventual replacement of foreign contractors.

The objectives of foreign construction enterprises and host developing country Governments differ. In the long-term, the gap between local construction firms and their foreign counterparts in technology, finance and management know-how, could be filled through technology transfer, for example, via joint ventures among the two groups of firms.

However, several authors have mentioned the difficulties involved in technology transfer, including the tendency of foreign contractors to adopt strategies which do not support host countries’ efforts to develop their industries.

The foreign firms are not keen on effectively transferring their technology since they believe that it means they would be nurturing their future competitors. Both local and foreign firms will benefit if systematic efforts are made by the latter to develop the former.

Building of trust and a spirit of partnering in an industry characterized by mistrust, rivalries and adversarialism may remain an ideal.

The project procurement and administrative arrangements currently in use in developing countries have been inherited from Western countries which have a different history, culture, collective experience and breadth of construction expertise.

Importance of culture

Culture has become an important area of study in business organizations. It has been found that every organization has a culture which is determined by its history, size, corporate goals and objectives, technology of production, market, and operating environment.

In construction, where several organizations temporarily interact on each project, cultural issues come constantly to the fore. The ability to manage cultural issues, especially in multi-cultural situations as are encountered on large construction projects, is a determinant of project and corporate success.

Given the uniqueness of culture to particular groups of people, and its pervasive influence on societies and organizations, these studies confirm that the construction industry must differ in every country. Thus, it is necessary to devise practices, procedures and relationships which are suited to the culture of each country.

Universal solutions are not practical. In particular, efforts should be made to formulate procurement approaches which enable and facilitate the integration of the construction process in the context of the country concerned.

The issue of the environment has been topical, and has been a major subject of research and international attention.

There is a belief that countries do, or should, only pay attention to the environment and endeavour to protect it when they attain a high level of socio-economic development. However, the issue of preserving the environment should be of even greater interest to developing countries since they face severe environment-related problems.

Most of these countries have fragile environments, and are faced with high levels of land degradation, (erosion, aridity, desertification, drought, flooding, alkalinisation and salinisation), experience acute shortages of fresh water, and lose their forests at a very fast rate.

They also face rapid urbanization with its associated problems of air pollution and pressure on existing infrastructure such as waste management systems.

Another important issue in the context of developing countries is the volume of physical resources which will be required to meet the backlog of infrastructural and building needs which they must fulfill if they are to develop, as well as to raise the standard of living of their peoples. Meeting these key requirements of economies and basic needs of people will put severe pressure on the resources of the country as well as the globe.

These trends underline the critical importance of the sustainable management of resources in countries like Sri Lanka.

Environmental problems exist side-by-side with a lack of managerial experience, financial resources, and legal and administrative systems necessary to deal with the issue through public and formal education, formulation and enforcement of “command and control” measures (legislation and regulations), as well as the devising and implementation of “economic instruments” (incentives - grants, subsidies - and taxes).

Utilization of resources

Perhaps the most relevant of the adverse impacts to most of the people of these countries is the utilization of resources, since more of their people rely on natural resources at the basic level (such as the forests) for their livelihood. Also important are the health problems relating to air and water pollution, considering the rudimentary nature of the health- care systems.

Also worth considering is the loss of land when construction takes place on green-field sites, as it takes land away from other uses, such as agriculture, leading to the loss of livelihood of some of the people.

Many countries, mainly industrialized ones, have taken action to ensure that their construction industries adopt materials, techniques and practices which result in operations and products which have a lower environmental impact. The developing countries can derive useful lessons from these measures. They include:

* Government action - (legislation and regulations on environmental performance); requirement for licences and approvals; subsidies, tax incentives and grants; certification and labelling of products.

* Market forces - clients’ insistence on better environmental performance; other construction firms adopting or benefiting from, good environmental practices.

* Institutional initiatives - professional bodies offering advice and support services to members.

* Operational environment - action of pressure groups and informed users.

Reduced levels of demand

The construction industry is facing reduced levels of demand as a result of adjustment programs which invariably involve cuts in Governments’ capital investment. The challenge is that the construction industry should do well despite the severe constraints in its operating environment. Moreover, the construction industry must help the national economy to recover, and also contribute to the easing of social problems.

Ways must be found to take advantage of the special features of construction which offer unique opportunities. First, the construction industry should effectively play its role in the economy by realizing its potential to create jobs in all parts of the country as well as stimulating business activities in other sectors of the economy. New strategies are necessary to make this possible. Second, construction activities should lay the infrastructure for development.

With public funds under severe strain and chronically short, ways must be found to structure funding strategies. Investment approaches which broaden the base of ownership among the population and give the immediate community a stake in major development projects should be formulated.

The ICTAD established several decades ago has not yielded tangible results in terms of improvements in the performance of, and prospects for, the construction industry. First, the agency should formulate long-term plans for developing the industry.

These should be supported by comprehensive reviews of the state of the industry and its concerns and imperatives. Second, resources should be allocated to the tasks outlined, and effectively utilized. One of the most important resources is people, and in particular, the personnel of the agency.

Even more important is leadership. Third, as mentioned above, the construction industry should, preferably, have a role to play in the work of the agency in formulating and implementing its plans. Finally, the agency should be continuously relevant. This implies that its plans, policies, initiatives, procedures and communication channels should be continually reviewed and fine-tuned or radically restructured where necessary.

Corporate development

Corporate development is of crucial importance. The construction industry needs companies which take a long-term view, and are prepared to invest in human resources, equipment and research and development in order to improve their performance. However, construction enterprises in developing countries are known for their lack of knowledge, short-term orientation and lack of focus on construction.

They are also unable to employ qualified personnel, and/or unwilling to appoint them to positions of responsibility. Management development should be a key concern in construction firms.

There is a perception that globalization is a one-way flow of exports from the industrialized countries to developing ones.

However, two points should be made. First, the firms from industrialized countries are also active in each other’s markets, i.e., the ‘international construction market’ does not only lie within the developing countries.

Second, it must be remembered that in globalization, some of the exporting construction enterprises are from developing countries.

The implications of globalization for the construction industry require further study. First, the costs and benefits to the domestic construction industry should be studied.

These may differ from those for the national economy. Second, work is required on how the benefits of globalization can be maximized and the adverse effects minimized for the benefit of domestic firms. Third, actions which the industry itself can take also require to be studied.

The final issue needing further investigation is intra-industry diffusion of technologies and knowledge.

The subject here would be how the larger local contractors can use the relevant know-how acquired from their foreign counterparts or other sources, to lead the industry to upgrade.

Developing countries

Construction firms from developing countries will play an increasingly greater role in the global market in future. The way in which these companies can actively help to upgrade their national construction industry should also be studied.

Another issue is the possibility of cross-border strategic alliances among construction firms from developing countries, which will enable them to collaborate in modern construction business and technology development.

The subject of culture has rightly come to the fore in construction research.

So far, the work has focused on industrialized countries. It is necessary to reconsider the arrangements and procedures of the construction industries of developing countries, especially since the countries from which they are borrowed have already taken measures to review or replace them.

Effort is required to reflect the cultural attributes and values of individual developing countries in their construction practices and procedures. The existing ones are not only currently obsolete, but they are also inappropriate.

The construction industry of Sri Lanka lags behind other sectors in its response to problems of the environment.

This issue receives even less attention although it is of critical importance. Work on the environmental implications of construction activity should be undertaken as a matter of urgency. Considering the resource and expertise constraints we face in this area, the emphasis should be on prevention.

The actions which should be taken require investigation. Considering the weakness of the private sector, the role of the Government as a construction client would be paramount.

Construction companies and practitioners should be encouraged to continuously search for inputs and ways of working which will minimize the negative impact of construction activity on the environment.

Detailed case studies of good practice would also be useful. The possibility of preparing good-practice manuals suitable for use in various contexts could be explored. Local materials tend to be less energy-intensive, and some also possess some positive environmental features.

Characteristics of sustainable technologies

1. Low environmental impact

* very low or benign emissions to the environment in production, use or disposal

* no toxic releases, benefits environment indirectly through its efficiency

2. Resource efficiency

* efficient utilization of material resources, often using recycled material

* based on renewable resources and energy (or minimal use of non-renewable resources)

* efficient consumption of energy in production and use

* durable, reusable and/or recyclable

3. Economic advantages

* economically cost-effective compared to conventional products or services

* incorporate externalities in market price

* can be financed by the user through various financial saving streams

* improve productivity or competitiveness of industry and commerce

4. Social advantages

* enhance or maintain living standards or quality of life

* readily available and accessible by all classes and cultures

* consistent with themes of decentralization, individual control, democracy

Construction enterprises and practitioners in developing countries should be encouraged and assisted to become excellent.

The domestic construction industry will face major challenges in the future. Those which are often highlighted relate to the resource shortages within the industry itself. It is necessary for more work to be done on the issues of globalization, the environment, and the various aspects of culture as they relate to construction activity, construction enterprises and the construction industry.

The overarching issue of construction industry development should embrace all these issues. In other words, Sri Lanka should seek to develop a construction industry which is well-poised to benefit from globalization (rather than one which is a victim of this inevitable process where construction is concerned), enterprises and practitioners who are aware of, and actively seek to limit the negative environmental impact of their activities, and which effectively apply the local culture to facilitate their efforts towards achieving success on their projects.