Singapore Infrastructure Report Q2 2008

The Singapore construction industry comprises a large number of small and medium-sized contractors which compete with large companies that dominate the industry. New construction projects in the citystate, integrated resorts and the planned new transport infrastructure upgrades for instance, have helped the construction sector revive after a recession in the early 00's. This report forecasts that the industry is likely to grow at an average of 4.1% over the period 2008-2012. However, construction costs have also gone up around 40% over the last year on the back of rising raw material prices, and wage increases brought on by tight labour supply. In light of the shortage in contractors for projects, the government announced in November 2007 that it would postpone several public projects, worth approximately US$2bn.

A lot of projects, such as the building of the Mass Rapid Transport (MRT) system, have been undertaken by the government to increase the use of public transportation. A number of redevelopment schemes for residential apartments are also underway. Major infrastructure projects in Singapore include: the US$3.37bn second casino resort project at Sentosa; the US$2.3bn bullet train project linking Singapore and Malaysia; the 10-lane Marina Coastal Expressway, and the US$1.8bn Kallang-Paya Lebar Expressway project.

However, the trade-reliant economy is vulnerable to fluctuations in global demand as is demonstrated by the recent sub-prime crisis in the US. This may adversely impact infrastructural investments. Singapore is heavily dependent on overseas labour for the construction industry as compared to other sectors of the economy. High development charges for properties charged by the Urban Redevelopment Authority (URA) and sky-high property prices are likely to slow industry growth.

Despite this, BMI estimates real growth in Singapore's construction industry to be 8.1% in 2008. In the same year, the construction industry in Singapore is forecast to be valued at SGD8.11bn (US$5.4bn), contributing about 3.4% of gross domestic product (GDP).