Government taking calculated risk by deferring construction projects

Building government projects at a later time may cost more if prices of materials continue to rise. However, National Development Minister Mah Bow Tan said that is a calculated risk the government has to take.

To cool the market, the government is deferring a total of about S$4.7 billion worth of public sector construction projects to 2010 and beyond.

Construction is one of the hottest industries in Singapore right now. Strong demand has driven up costs by at least 20 per cent, said Mr Mah.

To moderate the market, Singapore recently decided to delay the building of non-essential government projects by about two years.

Mr Mah said: “We cannot tell the private sector ‘delay your projects or bring it forward’. What the government can do is to delay those projects that are not essential, that can be delayed, can be pushed back one or two years, to try and ease the pressure a little.”

But the government could incur higher costs when construction takes place in the future.

Mr Mah said: “Frankly, yes, that’s a risk we have to take. It may be that at the time, the costs may be even higher. But that’s a calculated risk we take. The cost of materials can be higher.

“Looking at the world situation, the building boom in China for the Olympics has eased, all the major projects have been done. But on the other hand, they may come out with new building projects.

“On the other hand, you never know, with a recession in the US, that may affect building construction demand. So all these factors are really very hard to predict. But we are taking a calculated risk.”

However, these delays will not affect improvements in public housing estates such as Yishun. The authorities recently announced a whole slew of upgrading projects for the town.

These include an apartment block integrated with a bus depot and a shopping complex; more spots in nearby parks for activities; a heritage park and a 7.5-kilometre cycling path.

Mr Mah said these projects by both the public and private sectors are likely to cost a few million dollars. They are all part of Singapore’s long-term islandwide upgrading for all public housing estates.

Most of the improvements for Yishun are expected to be completed in the next five years. After Yishun, it will be Clementi next.

Source : Channel NewsAsia – 26 Jul 2008

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