I had a great meal in an ethnic Indian restaurant recently and was pleasantly surprised to discover that the cook was an overseas Chinese!

The construction industry, like the food and beverage business, shows considerable partiality to foreign workers. The most common reason – lower labour costs. Thus, the construction industry is filled with foreign workers running the gamut from India, Sri Lanka, China, Thailand, Indonesia, Philippines and even Myanmar.

Things however look set to change with the 2010 budget announcement including a call to increase local productivity as foreign workers now comprise almost a third of the total workforce. This has led to government moves to reduce dependence on foreign workers by hikes in the foreign worker levy and reducing the “man-year” entitlement which directly restricts the number of foreign workers on a site.

This is clearly designed to encourage businesses to restructure and upgrade their operations through innovation and training of their local workers.

Productivity is expected to rise, but so are construction costs, possibly by as much as 6 per cent when these restrictions to foreign labour kick in next year.

Comparing the Singapore increase with construction costs in key Asian cities, prices are generally expected to rise with economic recovery and the increase in building needs. The Singapore Building and Construction Authority statistics for 2nd quarter 2010 showed standard high rise office building costs of US$1,910/m2 in Hong Kong, US$760/m2 in Beijing, US$832/m2 in Shanghai, US$1,835/m2 in Singapore.

In perspective, Beijing and Shanghai are some of the cheapest cities to build but prices for these cities could rise 3 per cent this year and Hong Kong could register the biggest percentage increase in costs.

Rising levels of construction (and construction costs) are likely to herald more rather than less disputes.

A recent conference organised by the Singapore International Arbitration Centre discussed the development of business in India and the availability of arbitration. The booming Indian economy, set to hit 8 per cent growth this year, has created tremendous business opportunities for investors. As Singapore’s law minister Mr K. Shanmugam who spoke at the conference noted, the best-laid investment plans can turn awry and more are increasingly looking at arbitration in lieu of court proceedings to settle disputes.

Singapore is already the top Indian destination for investments abroad by Indian companies between 2008 and 2009 and more than 4,000 Indian firms operate here today. Singapore’s attractiveness as an arbitration hub for Indian companies is also reflected in SIAC’s announcement that it handled arbitration cases from India involving $173 million for 2010 to date, up from disputes involving $156 million for the whole of 2009.

Investors in the major countries in the region seek a neutral venue for arbitration and Singapore presents a easily accessible, neutral and effective arbitration venue.

Having world class facilities helps as well as Singapore then becomes the ideal venue for firms that might need help if their investments hit trouble. As Sir Vivian Ramsey QC observed on Friday last week at the SIAC-SCL Conference on “Construction Disputes Asia” in Singapore, arbitration in Singapore has the support of the government as seen with the building of a “state-of-the-art” arbitration centre at Maxwell Chambers.

At the same time, India has recognised the need to institutionalise its arbitral process and is now seeking to revamp the Indian Arbitration and Conciliation Act. Generally, the proposed changes reflect a shift towards institutional arbitration in lieu of the prevalent practice of ad hoc arbitration in India.

These amendments also underline a determined effort to reduce the role of Courts by severely limiting the scope of the public policy exception.

One unusual and interesting proposal is the introduction of a deemed arbitration clause for commercial contracts worth 50 million rupees (about £7 million at today’s rates) or more unless the parties agree otherwise. In such cases where parties fail to refer the dispute to an approved arbitral institution, the Indian High Court is then empowered to authorize the appointment of an approved arbitral tribunal within 30 days of a reference made by a party.

The proposals are very much at an early stage in the form of a Consultation Paper. It will be interesting to see what progress it makes in the coming months.

Mohan R Pillay
Partner & Joint Head of Office
Pinsent Masons MPillay LLP
Chartered Arbitrator
Adj. Assoc. Prof., Faculty of Law, Nat. Univ. of Singapore
Visiting Professor, Centre of Construction Law, King’s College London
16 Collyer Quay #22-02
Singapore 049318
E: mohan.pillay@pinsentmasons.com

image_pdfimage_print

3 comments

  1. Date: 10 & 11 November 2010
    Venue: Holiday Inn Orchard City Centre, Singapore

    Singapore’s construction industry has always been a promising area for development. Improvements and innovation have made this industry a very attractive market for investors. Many organizations were given an opportunity and were led to success in this industry. But in the broad industry of construction, comes a greater challenge for all players. Miscommunication and misleading information can make or break every business strategy, especially in this vulnerable time of economic crisis. And nothing can protect your business deals more than a reliable and efficient construction contracts.

    Handling and governing your contract can be critical and complex most of the time. Thus, Laures Solutions came out with this event that can help you protect your business more by building your skills in managing and administering your construction contracts by giving you actual case studies from real companies experiencing the same kind of dilemma. Harnessing your ability to deal with discrepancies and disputes and highlighting trends in the modern day’s construction contracts.

    Key Features:

    More updates in the Singapore construction laws
    More effective ways of drafting and managing different stages of construction contracts
    More negotiation and tendering techniques
    More comprehensive discussions on different types of construction contracts – how it varies, where is it applicable and what suits your business deals the most
    More efficient ways of managing claims and disputes

  2. Hi,
    i have seen your blog through googling . your blog gives to us very good knowledge about construction . This is very informative blog. i really like this blog. This blog is very important for construction companies.

    Thank you,

Leave a Reply

Your email address will not be published. Required fields are marked *