Sri Lanka’s Sanken eyes mega projects with foreign partners after 2019 budget
ECONOMYNEXT – Sri Lanka’s Sanken Construction (Pvt) Ltd said it is now eyeing an 18 billion rupee government office complex contract, after the 2019 budget forced foreign competitors to form joint ventures with local firms.
"After the latest budget, two to three Chinese companies have already contacted us saying they would like to do joint ventures," Sanken Group Managing Director Ranjith Gunatilleke said.
"This is for the new 18 billion rupee project in Battaramulla for government offices," he said.
Under the 2019 budget, foreign contractors for government projects have to form joint ventures with local firms, especially if funding came from domestic sources.
"That’s very good for local industry," Gunatilleke said. "These inquiries are coming most probably because of that."
The Chamber for Construction Industries has been lobbying the government heavily for the new policy over the past two years.
Blocking foreign companies entirely from bidding will push up costs for tax-payers, the budget deficit and national debt by reducing competition.
Gunatilleke said there is no level playing field for local companies to compete with foreign contractors employing foreign labour. Sri Lanka’s domestic contractors are also now using foreign labour.
Foreign workers are paid higher salaries but they are also more productive, according to industry players.
It is not unusual for some projects in Sri Lanka to be constructed solely using foreign labour.
"What happens is when any foreign people come, they don’t pay taxes or EPF/ETF (pension fund payments), so their overheads are less," Gunatilleke said.
"So what happens after four years, when the project comes to a certain level, the Inland Revenue Department gets around to them, but they’re gone."
Gunatilleke said Sanken has the know-how and experience to go for large projects, but is held back by finance, as it is currently developing many properties.
"Doing the project is not an issue, but finance is," he said.
"We have capabilities and in-house design experience, but we are a little lacking in financing these big, huge projects."
"For Sanken with all these developments, it’s hard."
He said if local banks are willing to finance, Sanken would even go for government projects without foreign partners.
Sri Lanka’s banks have seen higher levels of bad loans, making them more risk averse. (Colombo/Mar18/2019-SB)