Nandana Ekanayake : Interview
How do you see domestic demand for cement evolving in the next 24 months?
NANDANA EKANAYAKE: The building industry is experiencing moderate growth in what we call the “bag and bulk segments” – in other words, retail and business-to-business (B2B) sales. The growth in the retail sector is triggered primarily by agricultural income and the housing loans homebuilders can obtain from banks. The lifestyle of Sri Lankans is also changing: people have become more ambitious and seek bigger and better housing. As such, the need for cement has increased. However, demand in the bag segment has slowed down recently due to the prolonged drought, which has greatly impacted the agriculture sector, while demand in the bulk segment shows positive results due to the current strong performance in the industrial sector. Altogether we expect a 6-7% growth in demand over the next two years.
In particular, B2B is poised for growth. Developments that slowed down with the change of government in 2015 have now accelerated into action with key projects recommencing. This trend is not only seen in massive infrastructure developments, but also in the high-rise apartment complexes and large hotels that are changing the skyline, especially in Colombo. We can expect a change for the better as demand keeps pace with the evolving infrastructure developments.
In what way is the sector contributing to growth?
EKANAYAKE: Sri Lanka’s recent economic growth is primarily due to large-scale infrastructure development projects, foreign-exchange earnings coming from tourism and remittances from foreign employment. Additionally, export earnings from the regaining of the Generalised System of Preferences Plus concessions contribute to this growth momentum.
Projects such as Port City Colombo and Megapolis play a vital role as key growth drivers. Small- to-large scale segment-led construction will also continue to develop offsetting the slowdown of the individual house and building segment, which will be fuelled by the consumer shift towards vertical living.
How do you expect Sri Lanka’s projected growth trajectory to shape the construction industry?
EKANAYAKE: The principles which underpin a social market economy foster competition and efficiency. In addition, Sri Lanka is striving to become a knowledge-based economy. The result will be a highly competitive environment. The private sector will play a key role in achieving high productivity, innovation and enhancing quality, as well as creating new jobs.
With these market principles, economic competitiveness and social benefits in mind, we hope to ensure prosperity for present and future generations. Mobility up the socio-economic ladder allows people to achieve higher incomes and improve their living standards. Hopefully, this will ultimately increase construction demand in a variety of segments.
What road and housing projects will increase the industry’s value in the next 12 months?
EKANAYAKE: Sri Lanka has extensive plans in place to build over 3000 km of roads including hundreds of kilometres of flyovers and expressways. These projects include: Central Expressway, Port Access Elevated Highway, Colombo Metro, Outer Circular Highway and the extension of the Southern Expressway. These ambitious plans will result in increasing the value of the construction industry over 2017-18.
In the meantime there has been a significant wage increase of 1.5m state employees and this will result in higher spending power that will positively impact the construction industry. The increase in the number of apartment units already approved also implies a sharp rise in the demand for cement and concrete. Another key relevant point to mention is that the emerging shift from detached housing to apartments would naturally result in higher consumption of cement and concrete.
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