Lim Hng Kiang has urged developers and contractors not to price in expectations of increases in costs into their tenders for projects.

Trade and Industry Minister Lim Hng Kiang has urged developers and contractors not to price in expectations of increases in costs into their tenders for projects.

Speaking to reporters on the sideline of a groundbreaking ceremony on Friday, he said that the government would continue to manage the increase in cost of steel and other materials and try to mitigate the impact of higher costs.

He said: “The construction industry contributes about 4 percent of our GDP, and the construction cost itself is a very small part of the GDP, so the impact would not be that significant. But nevertheless, we don’t want to have a situation of it being built into expectations and contractors padding their tenders with very high expectations of continued cost escalation.

“This is something that we want to avoid, so Ministry of National Development is in constant dialogue with the Singapore Contractors Association to explain to them the situation, to make sure there isn’t this situation, that they don’t create a self-fulfilling prophecy. And they don’t have expectations built into their tender process. We must have a realistic view of the situation and know the measures that the different parties are taking to mitigate it.”

Mr Lim also touched on the need to make investing in hotel developments attractive.

He cited the increase in hotel rates, adding that these will continue to go up at a measured pace, and developers can factor this into their calculations.

Mr Lim said: “They can calculate the returns. We hope they will tender sensibly for the land price and then be in a position to build the supply that we need. If you look at the basic numbers, if we are practically doubling the number of tourist arrivals, simple common sense would say that you also practically double the number of rooms.” - CNA/ch

Source : Channel NewsAsia - 31 Aug 2007