I came across this article on the Channel New Asia website. “Government taking calculated risk by deferring construction projects”
I think the Government need not come out and talk about taking calculated risks in construction by deferring non-essential government projects. This risk is so mild that anyone can calculate with five fingers.
When you call something “non-essential”, that means we do not need it. Then why build?
Non-essential projects are planned for one main reason; That is, to keep a particular sector of the industry from collapsing. This can be seen in the massive infrastructural projects undertaken in the mid 80s and then later on in the late 90s when the construction industry was in the doldrums.
Waiting for an industry downturn to start on non-essential projects means they are likely to get a good deal. Companies are willing to settle for much less when the market is cool. This would include reducing margins drastically in order to land projects that can keep the company going.
Some even take projects at a loss in the hope that the project will keep their business running till an upswing is within sights. A lot did not get to see the light.
More contractors fighting for less job = Greater Bargaining Power = Greater Cost Savings
What risk? I say, nice game plan!
Deferring “non-essential” construction projects definitely has more upside than downside to it. Worst case scenario, don’t build lor.
FATA said,
August 25, 2008 @ 5:49 am
i think it all boils down the the cost of money. immediate advantage of delaying public funded non essential projects are
1) lowering the cost of construction to prevent an unsustainable over heating
2) allow for funds to be channeled to other more worthy cause like funding Com care projects…or even to build more rental flats should the need arise
lastly, as the government funds is from taxpayer, by building projects in lower cost means we can spread the tax dollar much better.
i think the deferment would be good in the short period, however this may come with the cost of social progress should we procrastinate too long in getting back (like building new schools, civic centers, universities and research facilities.