Construction in Sri Lanka - Key Trends and Opportunities (H2 2021)

Construction activities in Sri Lanka were affected in the third quarter of 2021, amid a renewed wave of Coronavirus (COVID-19) cases and the subsequent imposition of a nation-wide lockdown to contain the spread. According to the Department of Census and Statistics (DCS), the construction industry’s value add fell by 6% year on year (YoY) in the third quarter, the first Y-o-Y contraction since Q4 2020. However, the industry expanded by 4.1% YoY in the first three quarters of 2021. As a result, the analyst now expects the Sri Lankan construction industry to expand by 3.8% in real terms in the year as a whole. The industry is expected to accelerate to an annual growth of 9.2% in 2022, supported by the expedition of government backed projects such as the New Kelani bridge, Central Expressway, Ruwanpura Expressway, elevated roads from Colombo to Athurugiriya, the elevated highway project for the Port city and construction works of the Financial City.

In November 2021, the Ministry of Finance presented its 2022 Budget to parliament. The budget involves an expenditure of LKR3.9 trillion (US$20.4 billion) in the Fiscal Year (FY) 2022 (1st January to 31st December 2022); this includes an investment of LKR931 billion (US$4.9 billion) on public investment - a 60% increase compared to the allocation of LKR582 billion (US$3.1 billion) in FY2021. The expenditure proposal includes an allocation of LKR42.1 billion (US$219.5 million) on rural development projects, LKR20 billion (US$104.4 million) each on the ‘Vari Saubhagya’ program and the construction of 100,000km of roads.

The industry is expected to grow at an annual average rate of 5.5% from 2023 to 2025, with support coming from government policies to promote manufacturing and exports. The Sri Lankan government has announced several tax benefits for the manufacturing and export segments including the introduction of tax concessions of up to 10 years for export-oriented industries and tax concessions of five years for domestic industrialists. In addition, Sri Lanka’s Board of Investment (BOI) is focusing on investments in priority sectors by implementing a new strategy under the ‘Reimagining FDI in Sri Lanka’ policy. This includes the development of special economic zones (SEZ), with pharmaceuticals emerging as a particularly strong focus area. In line with this policy, in November 2020, the government approved a plan to establish a pharmaceutical manufacturing zone on a 400-acre site in Hambantota, with plans to set up 40 pharmaceutical manufacturing plants in two phases.

The industry’s growth over the forecast period will also be supported by investments as part of the government’s ‘Vistas of Prosperity and Splendour’ plan (2020-2025). Some of the construction-related initiatives outlined in the plan include reducing the time taken for approval of any building to a maximum of three weeks, the establishing of a system through which all required permits can be obtained, accommodation for the payment of past loans (subject to grace period) that can be negotiated, setting up an advisory committee to help construction firms obtain the required consultancy assistance and ensuring the security of domestic small and medium sub-contracting firms.

This report provides detailed market analysis, information, and insights into the Sri Lankan construction industry, including:

• The Sri Lankan construction industry's growth prospects by market, project type and construction activity
• Critical insight into the impact of industry trends and issues, as well as an analysis of key risks and opportunities in the Sri Lankan construction industry
• Analysis of the mega-project pipeline, focusing on development stages and participants, in addition to listings of major projects in the pipeline.

Scope

This report provides a comprehensive analysis of the construction industry in Sri Lanka. It provides:

• Historical (2016-2020) and forecast (2021-2025) valuations of the construction industry in Sri Lanka, featuring details of key growth drivers.
• Segmentation by sector (commercial, industrial, infrastructure, energy and utilities, institutional and residential) and by sub-sector
• Analysis of the mega-project pipeline, including breakdowns by development stage across all sectors, and projected spending on projects in the existing pipeline.
• Listings of major projects, in addition to details of leading contractors and consultants

Reasons to Buy

• Identify and evaluate market opportunities using the analyst's standardized valuation and forecasting methodologies.
• Assess market growth potential at a micro-level with over 600 time-series data forecasts.
• Understand the latest industry and market trends.
• Formulate and validate strategy using the analyst's critical and actionable insight.
• Assess business risks, including cost, regulatory and competitive pressures.
• Evaluate competitive risk and success factors.