There is stiff competition in the construction business in Nepal

Rabi Singh was appointed as President of Federation of Contractors’ Association of Nepal (FCAN) on September 2018. He believes that the construction industry has an important role to play in achieving the national mission of ‘Prosperous Nepal, Happy Nepalis’.
Dibesh Dangol of B360 caught up with Rabi Singh to talk about the current situation of Nepali construction businesses and contractors, the role government can play in helping Nepali contractors reach international standards and the importance of attending international construction shows. Excerpts:

What is the current situation of Nepali construction businesses and contractors?

Nepali construction businesses and contractors are very much excited because now there is a stable government which we hope can lead our country to much-needed development and prosperity. The government has taken the initiative to make Nepal a developed country from least-developed country which is good news for construction businesses as it will firstly benefit us. But, apart from creating the excitement, the majority government which has already finished a year in power hasn’t been able to implement relevant development policies such as revising the Public Procurement Act due to which construction businesses and contractors are getting de-motivated. According to the current Public Procurement Act, the lowest bidder gets the contract due to which there is an unhealthy competition in the market. The revision of the Public Procurement Act is much needed in which the bid capacity of the contractor as well as the project should be announced. We have been in talks with the government regarding this for more than 20 years now and although during several meetings the government has told us it will be done, nothing has been implemented. Such policies will create transparency between the contractors and the government. This should be also be done because if a contractor has the capacity of undertaking a project of just one billion rupees and they take multiple projects of a similar amount, which is beyond their capacity, they aren’t able to finish the projects on time and results in low quality work.
The main problem lies in government regulation. If the government meets provisions of Initial Environment Examination, Right of Way for houses and forest areas, and submission of budget on time to the construction company, we are capable of finishing projects on time while delivering on quality. The construction businesses are also facing problems due to lack of coordination between the central, provincial and local governments. Although the projects are being passed to provincial or local governments by the central government, there have been many cases where the necessary documents aren’t submitted to the provincial or local government by the central government due to which many ongoing projects have not yet started or are in limbo. Due to such scenarios, the entire construction business and contractors are being portrayed as frauds by the public and media without knowing or researching the entire situation.
In the past, due to inadequate budget or mismanagement of cash flow, many projects came to standstill. But now, there is a stable government, and the governments whether central, federal or local shouldn’t dwell on minor issues and instead coordinate with each other and the contractors with ease resulting in better outcomes.

There have been complaints from contractors about not getting payments, especially on government projects. Is this true? How does FCAN resolve such problems?

Yes, it is true that while doing government projects, the contractors haven’t been receiving payments on time. Even though such problems exist while working with government, there are many contractors still interested and engaged in government projects. There are two ways to work in government projects; the first is via joint venture in which many small construction companies come together for projects under Rs. 10 million, and another is project up to Rs. 1 billion in which the government has given priority to domestic contractors. In projects under Rs. 1 crore, the joint venture companies doesn’t need to keep any asset deposit due to which corruption is rampant. The companies say that they will be doing the work with the help of manual labour which will create job opportunities in a particular area, but they use machines lowering the cost of doing business to one third. For projects up to Rs. 1 billion, although domestic contractors are encouraged, when the project is passed, it is done through syndicate and cartel which is also a form of corruption. So there is corruption in this sector.
When we proposed the idea of revising Public Procurement Act and bid capacity, contractors who are taking contracts illegally and don’t have the capacity to bid for high projects opposed it.
I don’t know if it is true but I have heard that in the past month a bill regarding the introduction of bidding capacity was put forward and was passed in the cabinet but till now no such thing has been implemented. I am not aware of the contents of the bill and it wasn’t even discussed with FCAN by the government.

As the president of FCAN, how do you view the capabilities of Nepali contractors? What should they be doing to upgrade to international standards?

‘Nepali le chance payo vane garcha’ meaning Nepalis can do anything if given a chance. Nepali contractors are very much capable of doing any type of quality construction works just the same as international contractors. There are many Nepali contractors who have been involved in the construction of metro trains in Dubai, roads in the USA, and various construction services in Cambodia and other countries. So, there is no doubt in my mind that Nepali contractors aren’t capable.
Also in terms of labour manpower, we have many Nepali people working in Middle East countries who have gained experiences of how to build various types of structures. If these people can be brought back to Nepal, given proper wages, and made key participants in the development of the country, the development process can accelerate. Right now, the majority of such manpower is going abroad due to lack of opportunities and also due to the society’s mindset about such work.
The government should start planning on providing necessary training and extending their full support on developing the domestic construction companies and labour manpower as they do in other countries.

How competitive is the construction business in Nepal?

Construction and infrastructure development is the chief indicator of development in a country. If construction and infrastructure development are flourishing, it means that the country is developing.
There is stiff competition happening in the construction business in Nepal, but there is plenty of room for more people to enter the business. The competition happening currently is very unhealthy due to outdated Public Procurement Act and lack of proper policies regarding the bidding procedures but it can be resolved easily by the government if it wants to.