Speech by SMS Desmond Lee at the BCA-REDAS Built Environment and Property Prospects Seminar

Jan 6, 2017

Thank you for inviting me to the BCA-REDAS Built Environment and Property Prospects Seminar. Let me begin by wishing everyone a very Happy New Year. 

2016 was a tough year and specifically for the built environment sector, I suspect that many of us were happy to see the end of it. 

At around $26 billion in contracts, we saw $1 billion less building and civil engineering work than the year before. 

The private sector market bore the brunt of this, with a strong pipeline of public sector projects picking up the slack. But regardless, I am sure many firms are feeling the pressure. 

We certainly hope that 2017 will be a bit better. BCA estimates that some $28 to $35 billion worth of building and civil engineering contracts will be awarded this year. But the dichotomy continues of stronger public sector demand, and possibly weaker private sector demand. 

Private sector demand is expected to make up 30% of the overall construction demand. In comparison, public sector demand could amount for up to $20-24 billion. Major public sector projects include LTA’s Circle Line 6 and Phase 2 of PUB’s Deep Tunnel Sewerage System (DTSS). 

This trend looks set to continue, not only this year, but into 2018 and 2019 with an estimated construction demand of between $26 to $35 billion, supported by public sector projects for housing, estate upgrading, hospitals, and new MRT lines. 

In short, we know that our industry is facing challenges. But the Government is doing what we can to ensure that there is sufficient demand for construction work during this period. We do have many projects that we need to undertake, and this will help pick up the slack. 

Challenging conditions have a way of focusing our minds. This is a good time for our industry to upgrade and become more productive and competitive. 

This means investing in both training as well as innovation. This is not just about becoming efficient enough to survive tough times. The nature of business cycles means that the global economy will pick up at some point. This is also about getting ready to seize future opportunities. 

There are two specific areas that we might want to focus on. 

First, it is to seize opportunities domestically in our market in Singapore. Our companies will need to develop capabilities to Design for Manufacturing and Assembly (DfMA) as there will be more of these types of projects in the future. 

We should also look further afield at regional and even global opportunities. We want Singapore’s industry to be able to compete at these levels. This will open up markets for our companies. It will increase the scope for our companies to succeed. 

But as I have also said, the competition is also coming to us. It is coming to us with technologies, capabilities and certainly with DfMA capabilities. Doing so also creates opportunities for Singaporeans, especially younger Singaporeans who are coming out of school and are tech-savvy. This will be a good way to anchor them in our built environment sector through the use of technology – technology that they are familiar with and eager to embrace. 

Let me talk first about developing capabilities in DfMA. This is a game-changer to transform our built environment sector. 

Many of you are already very familiar with DfMA. There is a tendency, however, to associate the concept more with Prefabricated Prefinished Volumetric Construction (PPVC) or a sort of “lego-like” construction. 

But DfMA is much more than just PPVC. It includes Mass Engineered Timber (MET), use of structural steel, and advanced precast. 

All these technologies have benefits in common - less manpower, less on-site wet work, less noise and dust, faster construction times. In short, they are much more productive than the status quo. 

Our early DfMA adopters have had success. 

The Crowne Plaza Changi Airport Hotel Extension and NTU’s three new residential halls at North Hill were PPVC projects. Crowne Plaza achieved on-site manpower savings of 44% while NTU’s student halls reduced on-site manpower by 24%. NTU also completed their new sports hall using Mass Engineered Timber with significant time and manpower savings. 

Some of our private developers are also adopting PPVC for their condominium projects. We applaud and encourage you; we do appreciate you taking the lead. 

Our current DfMA adoption rate is about 10%, but we will continue to push for more. I know some of you have concerns. 

There is a cost premium. There are regulatory hurdles. Some of you might be unsure whether supply can cope with increased demand. 

These are all valid concerns and we hear you. We are working with you and with industry associations to address these. 

First, we will create sustained lead demand. For the public sector, this is being done through the public sector Productivity Gateway Framework. 

For the private sector, more Government Land Sales (GLS) sites will stipulate the adoption of DfMA technologies. Sustained demand should lead to reductions in cost premiums. As many firms mount that learning curve, we also believe that will have downward pressure on costs. 

Second, we have been working with regulatory agencies to streamline regulations and facilitate DfMA adoption. For example, we have a multi-agency Building Innovation Panel (BIP) where companies can seek quick regulatory clearances for their DfMA technologies. 

Third, we are building up our DfMA supply capabilities. We have set aside land for multi-storey Integrated Construction and Prefabrication Hubs, or ICPHs, to meet future demand for prefab and precast components. Some of our ICPHs will also become DfMA manufacturing facilities. 

We certainly want to help you on this journey because it is a collective journey. 

There are a series of advanced and basic DfMA training courses conducted by the BCA Academy. You can tap on the Construction Productivity and Capability Fund (CPCF) when you enroll your staff for these courses. We will work with our Institutes of Higher Learning to organize more courses to equip your companies and your colleagues with DfMA capabilities; we will also build a pipeline of DfMA-ready graduates for you. We hope more of you will join in this transformation journey and inherit it. 

The second point is about internationalisation. The reality is that there is a lot of work in the built environment sector in Singapore, but there is only so much we can build here. So, developing an external market, especially for our larger firms, will be crucial for the future. In fact, internationalisation was already one of our strategic thrusts under the Construction 21 Report back in 1999. 

We are committed to partner the industry in this journey as well. 

As you know, BCA and IE Singapore have been bringing companies abroad to explore market opportunities. More than 80 companies joined BCA for overseas business trips just in 2015 alone. 

There have been, and please pardon the pun, “concrete” outcomes to these visits. I understand that as of 2016, we have 37 contractors and 49 consultants involved in various projects overseas. 

In fact, Singapore contractors have clinched an average of $1.7billion in overseas projects over the last 3 years. 

Singapore companies indeed have a strong presence overseas. For example, CapitaLand is well-known for its Raffles City developments in China. Its serviced residence business, Ascott, has presence in more than 100 cities across 28 countries.

Ascendas-Singbridge and Sembcorp are synonymous with industrial park developments in China, India and Vietnam. Soil Build is one of the largest contractors in Myanmar. Evan Lim & Co has a significant presence in Dubai and is expanding in the Middle East. The Woh Hup and Lee Kim Tah joint venture (L&W Construction) in India is doing well. 

This is very encouraging because it shows that we have the expertise and talent to compete, both locally and abroad. We have expertise in masterplanning, green building and consultancy. We have experienced and effective contractors with skills in all types of projects. It shows that people value Singapore quality and performance. 

But compared to our domestic construction demand, this area has plenty of room to grow, especially given that there will be more demand in our region for quality homes, integrated infrastructure, and green buildings, as people in the region get more affluent. 

As I said before, we want to partner all of you on this journey. 

In this regard, I am happy to announce that we are forming a Built Environment cluster sub-committee under the Council for Skills, Innovation and Productivity (CSIP). Together with Mr Lim Ming Yan from CapitaLand, we will both co-chair the sub-committee. 

The aim is to develop Industry Transformation Maps (ITMs) for our sector. The ITM is a growth and competitiveness plan covering areas such as (i) productivity, (ii) jobs & skills, (iii) innovation, as well as (iv) trade & internationalisation.

Under the last pillar, there will be a taskforce that will look at measures to help our companies that wish to expand regionally and overseas. We understand that not all markets are as open or predictable as ours. There are also language and labour barriers. 

One particular line of feedback from BCA’s annual export survey is that some companies lack overseas business contacts. Others say there is a lack of market information and project leads. Others asked for financial support and payment guarantees when bidding for overseas projects. 

This committee will look at these ideas and study practical ways on how we might provide support for companies willing to expand regionally and abroad. 

We welcome your feedback as we develop all the four pillars of the ITMs. 

Let me stress that we are transforming this industry collectively. All of us – Government, trade associations, companies, training providers, and individuals – will have to work together. 

Indeed, we have been working over the last few years, pushing very hard last year on various initiatives like BIM and DfMA. We are encouraging firms to take up these courses, but we’re also working with the young – our young leaders in your firms across the whole value chain – to excite them, to energise them, to equip them and to bring them on board because I am sure they are ready to lead the charge into the future, where our built environment is transformed, is productive, is high-tech, and is competitive locally, regionally and abroad. 

So let us go into this year with a sense of optimism and a commitment to work together to chart a new chapter for our sector. 

Thank you and I wish you all a productive and informative seminar today.