The sector witnessed a significant fall in growth in 2020

Thukten Zangpo 

Smooth facilitation of construction materials would boost the construction sector, according to the Construction Association of Bhutan (CAB).

CAB’s executive director, Tshering Younten, said that the construction materials, especially cement, were not available.

He said that the government could provide a one-time special advance of up to 20 percent on the remaining work to contractors who were awarded works before the pandemic without bank guarantee.

“If advances come with bank guarantee, 50 percent of the contractors would not be able to complete the projects,” Tshering Younten said.

Otherwise, he said that the procuring agencies can directly pay advances to suppliers.

The finance ministry notified on February 25 that contractors can avail 20 percent one-time special advance with an equivalent bank guarantee.

Tshering Younten said that the government should award new works based on the Bhutan Schedule of Rates’ (BSR) 2021 estimates as some procuring agencies were found not adhering to the new BSR.

“The labor cost of Nu 236 per day as per the old BSR is revised to Nu 456 now,” he said.

Tshering Younten also said the government should look into cost escalation since the cost escalation formula provided by the government was not realistic.

“The contractors have asked the government to carry out further studies on cost escalation for projects or provide them with 16 percent,” he said, adding that the 16 percent is National Statistics Bureau’s overall consumer price index (CPI) measured since 2019.

While the construction materials cost has gone up by 30 percent in actual ground, Tshering Younten said.

He also said that with no CPI for construction materials, Indian CPI is not relevant because of the Covid-19 protocols and transportation. “We have asked to add construction materials in the CPI basket.”

The contractors also asked the government to bear the quarantine expenses for the import of the workers and to do away with the liquidated damages rate.

Tshering Younten said that if about 50,000 Bhutanese youths are willing to work in the construction sector there would be excess workers in the market.

The sector witnessed a significant fall in growth, -20.6 percent in 2020 from -14.7 percent in the previous year. Construction activities depend largely on expatriate workers.

The construction industry contributed 9.5 percent to the country’s gross domestic product in 2020.