Tuesday, 24 May, 2022

Hike in Construction Material Prices

FBCCI seeks PM’s intervention to support contractors

  • Staff Correspondent
  • 17 January, 2022 12:00 AM
  • Print news
FBCCI seeks PM’s intervention to support contractors

Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) has sought permission to import rods for government projects to make the implementation faster, citing a potential disruption in the ongoing projects due to the recent spike in construction material cost.

In a letter to Prime Minister Sheikh Hasina, FBCCI has sought her intervention to save the struggling construction firms engaged in different project implementation.

FBCCI cited that over the last five to six months, in particular last one month, the prices of raw materials such as rod, cement, stone, bitumen, copper and aluminum have gone up by 20 percent to 25 percent.

The sharp increase in construction materials prices has an adverse effect on the construction industry, it claimed.

“At present, construction costs in Bangladesh have reached such a level that it has become almost impossible for contractors to complete the work of their ongoing and upcoming projects at the cost stipulated in the contract while maintaining proper standards,” the FBCCI letter reads.

If this situation continues, the country's construction sector will suffer irreparable losses and most of the local construction companies are likely to go bankrupt as they cannot compete with foreign contractors.

Not only that, 90-95 percent of banks and financial institutions which have financed the contractors for the projects could be severely affected by growing defaulted loans, the trade body warned.

The rod import should be specified by the project director and project’s purchase committee head will endorse according to project design and bill of quantity and LC can be opened only after FBCCI clearance, according to the FBCCI proposal.

At the same time, NBR taxes should be kept at a level so that the price of imported rods stay within Tk 60,000 per tonne.

It also recommended for charging duty on FoB price of imported ballast, saying that usually taxes are also imposed on transport cost which is two to three times higher than the material price.

For smooth implementation of projects, FBCCI also asked for upward adjustment of construction cost in case of any cost hike due to legal changes made by the government. It demanded the inclusion of price variation provisions in the projects.

Citing that project implementation is getting hampered by some project directors, managers, engineers and other officials’ inefficiency and negligence, it sought a strong warning from the head of the government to resolve the issue.

In addition, the FBCCI has made some short- and long-term recommendations to protect the interests of the country's construction sector and local construction companies.

As a long-term recommendation, FBCCI said the participation of foreign construction firms should be strongly discouraged in GoB funded projects and 7.5 domestic preference should be given to local contractors.

It also sought provision for a 10 percent mobilization advance for all types of foreign and locally funded projects, while adding provision with the projects to make keeping a local partner mandatory for the foreign consultancy firms.