Contractors yearn for revival of 1990s construction boom

BRUNEI was dubbed the Asian Dubai during the construction boom in the late 90s, when the industry had mega projects like the six-star Empire Hotel and Country Club and the lavish Jerudong recreational park.

During the time, the government was spending about $950 million annually on development projects, but reduced it sharply to about $550 million in 2000.

Since then, contractors in the sultanate have been waiting for big projects or the revival of the construction boom.

The construction sector currently has about 20 medium-sized and large contractors and a large number of small contracting companies.

According to the Oxford Business Group's (OBG) 2007 country report on Brunei, only six are considered to be "genuinely large companies" with a substantial track record in more complex work, such as large-scale infrastructure projects.

The larger companies have a choice of just two major clients — the government and Brunei Shell Petroleum (BSP) — as most work in the private sector is small in scale and more appropriate for smaller contractors.

Many of Brunei's construction companies, especially the smaller ones, rely on government contracts for the building of health and education facilities. The smaller contractors are placing high hopes on the ninth national development plan, which was due to come into effect by the end of last year, to provide their bread and butter.

The eighth national development plan, which covered 2000 to 2005, offered a large number of construction prospects, but most were on a modest scale.

It included eight new local health care centres, a hospital for women and children, and a number of hospital and laboratory repair jobs. In the education sector, there were 28 projects, including the construction of primary, secondary, vocational and religious schools, in addition to the expansion and upgrading of a number of existing schools and colleges.

One of the large projects started under the plan was the construction of a $4.8 million Muara passenger ferry terminal that opened for business in September last year, and is expected to be ready to handle cars this year. The new facility is now due to have a specialised cruise ship terminal.

While the good old days of the 1990s may be long gone, it seems that contractors will have to rely on the government's diversification programme, which may prove crucial for new added life to the sector. Key elements include the Sungai Liang Industrial Park, the Pulau Muara Besar Port and the expansion of the Brunei International Airport.

Another factor holding back the construction sector is the pace of government work. As stated in the OBG report, Brunei's annual development budget is about $900 million to $1 billion, but only about $300 million to $500 million of it is spent on average per year. The culprit, it seems, is the slow process of handling tenders as well as the present aim to maintain the government budget.

"In general, if a job is tendered and ends up costing more than the amount allocated for it in the government budget, the concerned government department carries out a cost-reduction exercise, and as a result, the end user receives a less-equipped facility than originally planned," the report stated.

In this regard it is important to highlight that the sultanate needs to speed up diversification plans, meaning investments away from oil and gas.

Foreign investment will only come in when investors are offered some incentives to bring in money. This will set the ball rolling as we will have to develop infrastructure according to the demand, which will certainly increase with new businesses opening up. Only when the diversification drive is stepped up can the construction industry return to the good old days.

The Brunei Times