Home / Opinions / An insight into the construction industry of Bhutan: Part I

An insight into the construction industry of Bhutan: Part I

While the world prepares to extend the technological revolution and usher into the so called “Fourth Industrial Revolution”, embracing the use of a fusion of technologies including artificial intelligence to increase efficiency in the delivery of output, and alter entire systems of production and management, the global construction industry, however, has been relatively slow in adopting such technological disruptions. The construction industry in the US and the developed world remains relatively unchanged compared to other industries in 50 years, according to the World Economic Forum. And in other parts of the world, it still relies heavily on manual labour, mechanical technology and conventional operation and management procedures that seem to be prevalent ever since men laid brick and mortar to build houses. 

The Construction Industry of Bhutan is no different. Since establishing the Bhutan Engineering Service in 1961 and delving into modern construction methods in the first five year plan, the industry has slowly adopted professional approaches to construction- diversifying skill sets, employing use of efficient machinery and emulating the best contextual construction management practices relevant to Bhutan. However, like in any other developing country, the slow progress is not without impediments nor is it without fallacies, a fact that the first ever Annual Report of the Construction Development Board highlights. 

   

Economy

Despite the relative slow progress of the construction industry in Bhutan, compared to other countries in the region, its contribution to the GDP is significant. In 2017, it constituted 15.87% of the GDP contributing 0.99 percentage points to the GDP growth. In the prior year, the National Statistics Bureau has recorded a higher contribution percentage of 16.28. However, the gross value addition of the sector for the year was estimated at Nu. 24,280.44 million as compared to Nu. 26,126.36 million in 2017, implying, in spite of the slow down, that the construction sector remains one of the key contributing sectors of the Bhutanese economy. This contribution to the economy is further complemented by the construction industry’s potential to improve the livelihood of people employed by it.  

Employment

In 2016, construction jobs employed 2.56% of the labour force equivalent to 6,624 construction professionals in construction and consultant firms. The industry recruited about 50,776 construction workers in 2015, 87.7% of which were foreign workers. The trend of high dependence on foreign workers is reluctant to change due to the perception of construction work as difficult because of manual labour involved, substandard working conditions and dangerous due to weak enforcement of safety regulations and standards. And it will remain so without interventions in mechanization of construction processes, adopting innovative construction process like prefabrication and enhancing the safety standards. 

Current policy intervention in the bidding process of giving preferential score to bidders on commitment to employ national skilled labour and provide internships to vocational trainees has proved ineffective due to failure of construction firms to implement and failure of procuring agencies in regulation of such trendsetting initiatives. Even registration and classification of construction firms based on the minimum human resource and equipment is entwined with complexities due to the disparity in committed and available resources. Of 119 construction sites monitored by CDB in 2018, 60% failed to deploy their committed resources. 

Construction Firms’ Prospects

As Bhutan prepares to graduate the Least Developed Countries category, it is of vital importance to provide resilient functional public and private infrastructure in order to sustain its position and endure the effects of natural disasters and climate change. The development of construction firms, the integrity of their team and their commitment to professionalism will play a major role in achieving quality infrastructure. The construction sector expended 63% of total capital expenditure of Nu. 29.346 billion in the 2017-2018 financial year, making it a challenging but a lucrative sector for private enterprise, manufacturing and construction firms.

Contractors’ Prospective

As of September 2017, over a period of five years, M/S Rigsar Construction Private Limited executed works amounting to Nu.1,553 million (from CDB Database) averaging an annual turnover of Nu. 310.60 million. Similarly, M/S Rinson Construction Private Limited achieved an average annual turnover of Nu. 231.20 million. A consortium formed by such potential achievers, calculated to be of 10 such members, will be eligible for bidding in hydropower projects, thus allowing local firms to be part of mega projects that dominate the sector. Local firms, in consortiums, and in joint ventures with foreign firms will also be able to bid in international projects, enhancing prospects in bidding, and compensate on exposure to technical expertise.

Complacency hampers professionalism

The above prospects and potential cannot disregard impediments and shortfall in the system. Construction Development Board, in its stride to enhance professionalism in the construction industry is often blemished by intricacies of achieving targeted participants and results. 

Approximately, 300 to 350 new construction firms venture into the construction scene annually. To register these new aspirants and regulate renewals, induction courses designed to orient and augment project management, quantity surveying and quality control are provided, which see an overwhelming participation due to the sole criterion of citizenship being a requisite. Interestingly, some households were even recorded to hold more than four CDB certificates. 

The overwhelming participation, however, dwindled after undergoing the induction courses. In the financial year 2017-2018, only 76% of the 315 participants obtained CDB certificate. The drop is attributed to a lack of earnestness and conviction as most participants were observed to be only physically representing a firm to fulfill obligations for registration.

Apart from the induction courses, the similar complacency is also observed in registered construction companies. Annually, for the past five years, the number of construction firms increased at an average rate of 3.78%, and in 2018 it was recorded to be 4,125 construction companies for a population of 727,145, one of the highest in the Asia-Pacific region. In an attempt to segregate non-performance, non-bidding, nonrenewal and dormant registrations, Construction Development Board deregistered 1,405 construction companies by July 2018.

In the growing light of the construction industry and development of the construction firms, the Construction Association of Bhutan, established in 2000 to promote and develop representation of construction firms in issues at the national, regional and international level, is underrepresented due to challenges of obtaining memberships. The membership was seen only to rise when membership was made mandatory and declined when left on the discretion of the construction firms. 

Construction Process and Project Management

The system for planning, design, implementation and delivery of output in construction management has seen remarkable changes in the last two decades. From adoption of computer aided design to using accounting and project management software, and increasing adoption of mechanization has improved the efficiency of work output. Advancement in bidding process, including CDB’s online evaluation tool, has allowed the bidding process to be simpler and more transparent. Furthermore, the Ministry of Finance’s feats in developing an online procurement system will merge the possibility of construction works to be procured, evaluated and awarded online. These online systems will not only enhance accessibility, it will aid procuring agencies in regulation and data management. It will also limit the possibility of indulgence of firms and agencies in unethical practices and will attempt to rid current gripe in the construction process, foremost of which is the unreasonable tender quotes by participating bidders.

To be continued

Contributed by CDB

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