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Industry Trends & Developments

Market Overview

Singapore, a highly developed and successful free market economy, enjoys a remarkably open and corruption-free environment, stable prices and a per-capita GDP equal to that of France, Germany, Italy and the UK. The government hopes to establish a new growth path and will continue efforts to establish Singapore as South East Asia's financial and high-tech hub.

Singapore's Economy In 2005-2006

The Singaporean government is to focus on restructuring the economy. The government is expected to operate on a balanced budget in fiscal years (April-March) 2006-2007 and 2007-2008. Expansion in private consumption and investment is expected to drive real GDP growth at an average rate of 5.7% during 2006-2007. Jobs created in 2006 are estimated to have increased by around 10% to reach 125,000, the highest since the Asian financial crisis of 1997.

In 2005, Singapore reported an estimated trade surplus of US$36.4bn. The nation's exports totalled an estimated US$655.82bn, while imports stood at an estimated US$194.5bn. According to the Finance Minister Lee Hsien Loong, per-capita GDP in 2005 was US$30,228, with an unemployment rate of 2.5%. Total demand rose by 9.1% in 2005, moderating from the 18% recovery momentum in 2004. External demand moved up by 11% and provided much of the growth impetus. This was mainly from exports of IT and telecom products. Domestic household consumption demand growth was 2.6%, reflecting mainly higher public and private consumption on cars, medical care and rentals.

Singapore's Construction Sector In 2006

During Q206, the construction sector contracted by 0.3%, following a 0.8% drop in Q106. Quarter-on-quarter (q-o-q) annualised growth momentum (seasonally adjusted) went up to 25%. The value of all construction work done and certified for progress payment fell by 5.7% in Q106, while construction contracts awarded dropped 38% after a 27% drop in Q405.

According to industry experts, demand for construction services is estimated to be around US$16bn in 2006. The construction services industry of Singapore was worth US$11.3bn in 2005. BNP Paribas, a French company, asserted that construction demand in Singapore is likely to create approximately 6,000 jobs every quarter in the medium term. This consistent rise in demand is due to the improvement of economic conditions during the period 2001-2005.

In 2005, the construction sector accounted for 26.14% of GDP. According to Statistics Singapore, at the end of Q106, the number of private residential units under construction was 22,295, about 6.4% lower than that at the end of the previous quarter. Of the 22,554 uncompleted units with the pre-requisite conditions for sale, 12,277 units had been sold. A total of 1,873 uncompleted private residential units were launched for sale in Q405, compared with the 2,010 units launched in Q305.

Major residential projects launched in the quarter included: The Sail at Marina Bay (the remaining 430 units from a total of 1,111 units) at Marina Boulevard; The Sea View (the remaining 168 units from a total of 546 units) at Amber Road; Viz at Holland (165 units) at Queensway; The Cosmopolitan (the remaining 158 units from a total of 228 units) at Kim Seng Road; and Park Infinia at Wee Nam (109 units from a total of 486 units) at Lincoln Road.

A total of 2,530 private residential units were completed in Q405. Major residential projects completed in the quarter were Grandeur 8 (579 units) at Ang Mo Kio Central 3, Kerrisdale (481 units) at Sturdee Road and Ris Grandeur (453 units) at Elias Road.

The Singaporean construction sector is maturing with domestic firms displaying strong handle over urban planning, mass housing development, industrial park development, transportation network planning, and environmental management. However, management of process-engineering projects is an unexplored area. Nonetheless, Singaporean companies have opportunities to engage in complex engineering projects such as oil refineries, water treatment and desalination plants, notably in countries with demand for such niche expertise.

Major Companies

Major companies operating in this sector in Singapore include SembCorp Engineers & Constructors, Evan Lim, Jurong Engineering, CapitaLand and Lum Chang Building Contractors. SembCorp Engineers & Constructors is a wholly owned unit of SembCorp Industries, which functions as a design-and-build engineering and construction service provider. Evan Lim is one of Singapore's largest general building and civil engineering companies based on the number of total contracts awarded. Jurong Engineering is a Singapore-based contracting company that specialises in plant engineering and construction work. The company has operations in South East Asia, China, India, the Middle East and Africa. Lum Chang Building Contractors is the primary asset of the Singapore-based Lum Chang Holdings Group, which, in addition to construction, has activities in project management and investment dealing. Approximately 71% of the group's revenue is accounted for by construction. The group carries out operations in Singapore, Malaysia and Mauritius and on the back of recent projects in the UAE has registered to set up a construction company in Dubai.

Investment Initiatives

In January 2005, the BCA launched a Green Mark for Buildings Scheme as a bold initiative to move Singapore's building and construction industry towards environment-friendly buildings and help strengthen Singapore's position as a global city committed to balancing its development with care for the environment. The introduction of the Green Mark was timely in view of the growing global concern on sustainable development and increasing interest in green buildings. Green Mark provides a platform for the construction industry to demonstrate its commitment to an environment-friendly approach in developing and building Singapore's urban landscape. Benefits to developers and building owners involve savings in terms of lower operating costs with less water and energy being consumed.

The Next Generation National Infocomm Infrastructure (Next Gen NII) is Singapore's digital super-highway for super-connectivity. Next Gen NII helps entrench Singapore's Infocomm leadership, ahead of Asian competitors. Infocomm Development Authority of Singapore (IDA) announced the Next Gen National Broadband Network (NBN) Request-for-Concept (RFC) on March 23 2006. The RFC closed on June 15 2006, with 33 submissions received from domestic and international telecom companies. Request-for-Proposal (RFP) has been invited and these will be evaluated by end-2006. The NBN will be awarded to a private sector partner in the beginning of 2007. The appointed party is expected to complete at least 50% of the task within three years of contract assigning, and complete the project within five years.


Transport

Airport Construction and Related Works

Construction work is likely to begin in Q107 on the first phase of the Seletar Aerospace Park. Once completed, the US$60mn aerospace project would become Singapore's aerospace hub. The design of the aerospace park is to be completed by end-2006, and the first phase of construction is to be completed by 2009. The project is a being jointly handled by Singapore-based JTC Corp and the Economic Development Board. The project would employ 10,000 people and would contribute US$3.3bn annually to the Singaporean economy by 2018.

In January 2006, OKP Holdings (OKP), a leading home-grown infrastructure builder and civil engineering specialist, announced that its wholly owned subsidiary OKP (CNMI) Corporation (OKPCNMI) was awarded a US$8.6mn contract to build an airport runway at the Rota International Airport, located in the Commonwealth of the Northern Mariana Islands. The project is expected to be completed by January 10 2007. It involves the building of 1,000 feet of extension runway at Rota International Airport, turnaround at both ends of the runway and other related earth works.

The SGD1.5bn (US$882mn) Changi Airport project features the new terminal building as well as a new baggage handling facility, an automated people mover connecting the three terminals and 28 new aerobridge gates. Another terminal for low-cost carriers, the Budget Terminal, at Changi Airport was completed in December 2005, and became operational on March 26 2006. The Budget Terminal at Changi Airport has obtained a second customer in Cebu Pacific, a low-cost Philippine carrier. On August 31 2006, daily flights between Singapore and Manila were to resume after three years of suspension.

Terminal Three of Changi Airport has been completed successfully, with the terminal's interior fit-out inaugurated on May 30 2006. With the airport project completion scheduled for 2008, the airport's capacity is expected to increase to 64mn passengers. A full-service nine-storey, 350-room airport hotel is being planned next to Terminal Three, which would provide a range of facilities for Changi Airport's passengers.

Changi Airports International is to form a joint venture with Moscow-based Sheremetyevo International Airport to manage and operate a new passenger terminal in Moscow. This terminal is expected to handle 5mn passengers with expected annual revenues of SGD110mn (US$69.43mn).

Road Networks

Within the transport sector, the US$1bn Kallang-Paya Lebar Expressway, which will include around 9km of tunnel, is to be completed in 2007. The Land Transport Authority (LTA) has awarded the first of six major contracts for the Kallang-Paya Lebar Expressway to SembCorp Engineers & Constructors (SEC). The SGD235mn (US$138.2mn) project comprises the design and construction of a 1.51km tunnel linking the East Coast Parkway (ECP) and Nicholl Highway, an interchange within the ECP and ventilation facilities.

The Land Transport Authority is to install intelligent road studs (IRS) at road junctions, thus enhancing road safety. Further, modification of all 3,200 zebra crossings is expected, with LED technology, by Q307. This move is expected to help save SGD3mn (US$1.89mn) in maintenance and operational costs over a 15-year period.

The LTA has further awarded SGD257mn (US$151.2mn) contract to a joint venture between SEC and Daewoo Engineering and Construction to build a tunnel for the new Kallang-Paya Lebar Expressway (KPE). The contract involves designing and building a 1.64km section of a tunnel that will run from Nicholl Highway to the Pan-Island Expressway (PIE). It also includes constructing ventilation facilities and two interchanges at the PIE and Nicholl Highway. The section is part of a 9km tunnel, which will be the longest road tunnel in South East Asia. Construction work has commenced and is scheduled for completion in Q406.

In September 2005, the UK-based Balfour Beatty won a GBP6.2mn (US$27.3mn) contract to design and construct track on the Boon Lay extension of Singapore's mass rapid transit system. In a joint venture with Hong Kong engineering and construction company Gammon, more than 7,600m of track is to be laid on the 3.8km two-station line. Detailed design works are underway for the all-viaduct extension and are expected to be complete in 2009. The extension to be constructed on a viaduct, with the track work including UIC60 running rails with UIC60 guardrails on 10,000 numbers of concrete sleepers, together with a stainless steel/aluminium third rail DC power system.

Reconstruction work on the Nicoll Highway resumed, in August 2005, after months spent removing debris, stabilising and refilling the area, since the highway's collapse in April 2004. The LTA has opted to use a road-building technique usually adopted when poor soil conditions exist. Some 57 concrete piles will be bored 50m into the ground in the affected area. The rebuilt area would span 150m, including 100m of Nicoll Highway and the 50m of Merdeka Bridge that was cut off to prevent the rest of the road being affected by the collapse. In areas closer to buildings, piling equipment that oscillates rather than vibrates will be utilised, to minimise disturbance to the ground. Japan-based Nishimatsu and Lum Chang, the main contractors for the Nicoll Highway mass rapid transport (MRT) station, will undertake the US$3mn reconstruction, due to end in 2010.



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