T5, mega projects fuel optimism for Singapore’s civil engineering sector
Government agencies have also been awarding more contracts to local main contractors, says an industry player
[SINGAPORE] The five-year outlook for Singapore’s civil engineering sector is expected to be positive, buoyed by large-scale public infrastructure projects such as Changi Airport Terminal 5 (T5), the Cross Island Line, and the relocation of Paya Lebar Air Base.
Industry players said these projects, many of them multi-year in nature, offer significant opportunities for contractors with the right capabilities.
“The outlook for the civil engineering sector in Singapore for the next five years is good,” said Or Toh Wat, group managing director of transport infrastructure and civil engineering firm OKP Holdings.
Thomas Ng, managing director of civil engineering firm Hwa Seng Builder, agreed, saying that public infrastructure projects such as T5 and other civil works have given Singapore’s civil engineering sector a positive outlook.
In May, Hwa Seng was awarded a S$950 million contract for airside infrastructure works in T5.
Government agencies have also been awarding more contracts to local main contractors with the necessary track record and execution capabilities, said Or.
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Sue Tan, managing director of enterprise banking industries at OCBC, confirmed this, saying: “Our local civil engineering customers have emerged stronger from the challenges posed by Covid-19, with many being awarded projects of larger contract value recently, in recognition of their proven track record over the years.
“We are proud to have supported them during this period, and it is heartening to see their resilience and adaptability paying off.”
Limiting factors
Still, civil engineering firms – many of which are small and medium-sized enterprises (SMEs) – noted that such large-scale projects often demand expertise, financial resources and manpower, which smaller players may not have.
Eric Soh, chief executive officer of Samwoh Corporation, said the smaller players thus need to form joint ventures, either with local companies or overseas enterprises, after a careful risk assessment.
“It may not be a case of more projects being awarded to local civil engineering contractors, unless the projects are specific, such as (those for) cycling paths, roadside upgrading, utilities renewal or flyover works,” he said, pointing out that local contractors are capable of taking on these jobs.
“Also, price competition is here to stay, with more overseas enterprises competing with the local ones.”
Still, there remains an “abundance of opportunities” for local contractors as long as they price their bids competitively and continue to invest in people and technology, said Chan Hiang Kiat, chief executive officer of KTC Civil Engineering and Construction.
“I am sure the Singapore government values good local companies and supports their growth, as we are here to stay,” he said.
Foreign competition
Industry players said foreign firms continue to pose stiff competition, particularly in bidding for mega-projects.
A spokesperson from Huationg Global said foreign firms still “dominate” such projects on the strength of their technical expertise and financial resources.
To compete, local companies need to scale up and invest consistently in talent, up-to-date systems and equipment, said Hwa Seng’s Ng, though he noted that these upgrades come with additional costs.
Nonetheless, prospects for the sector remain upbeat.
The OCBC SME Index released on Wednesday (Jul 16) indicated that the building and construction industry returned to expansion in the second quarter, with a reading of 50.3, up from 49.5 in Q1.
A reading above 50 indicates an increase in business activity from the year before; a score below that means a contraction.
The sector’s recovery mirrored the broader trend in the overall index, which rose to 50.5 in Q2 from 49.9 in the previous quarter, marking a return to expansionary territory.
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