Construction industry to grow 3.3% in 2019-2028 amidst transport megaproject boom

Projects in the pipeline include the Thomson-East Coast Line, Changi Terminal 5, and the new Tuas Mega Port.

A construction boom in Singapore spurred by megaprojects in the transport sector could boost the industry's growth by an average of 3.3% from 2019 to 2028, according to Fitch Solutions. The Thomson East-Coast Line is just one of the megaprojects that are expected to drive Singapore’s construction sector for the decade, with projects across all sub-sectors in the pipeline.

Other rail megaprojects also provide investment opportunities for construction firms, such as the planned 21.5km North-South Corridor expressway that will be the largest road project in Singapore in the next decade. Amidst the government’s efforts to promote a long-term, car-lite society, Fitch Solutions projected a steady increase in Singapore’s vehicle fleet from 830,000 in 2017 to 900,000 in 2028 which reflects an increased reliance on vehicle transportation.

The $8b expressway will encompass a series of viaducts, at-grade roads, and tunnels that will connect residential and industrial estates in the north to the Central Business District in the south.

The firm added that Singapore’s active R&D for self-driving vehicle technology and infrastructure could spur technology upgrades in road infrastructure in order to handle autonomous vehicles. Cycling infrastructure could also accelerate over the next decade as the government aims to transform the country into a cycling-friendly city.

Singapore's booming aviation industry is also expected to add to the demand for construction services. Singapore’s Changi Airport Terminal 5 could boost the capacity of the airport by 50 million passengers and cost around $10b, Fitch Solutions said. Works relating to land reclamation and the construction of a third runway are currently underway and construction of the new terminal and the associated infrastructure is scheduled to begin from 2020.

Meanwhile, the growth of Singapore’s port construction industry could also be spearheaded by the construction of Singapore’s new Tuas Mega Port, for which the government has plans to incorporate innovations and new technologies to cater to the growing economic activity in the Asia-Pacific and the increasing competition for port services in the region. When completed, the port will have a capacity of 65 million twenty-foot equivalent units (TEUs), more than double the capacity that passed through the country in 2017.

Increased competition from overseas
However, more Singaporean construction firms could find themselves going head-to-head against companies from China, South Korea, and Japan as the industry receives more investments for transport megaprojects.

A profile review of the contract winners for Singapore’s Thomson-East Coast Line revealed that ten companies are from China, nine are from South Korea, and seven are from Japan. Companies such as Japan’s Penta-Ocean Construction, China’s Sinohydro, and South Korea’s Ssangyong Engineering & Construction have been awarded contracts for construction of various segments of the line. Twelve Singaporean firms, however, still dominated the mix.

Singapore Thomson-East Coast Line – Nationality of companies winning construction contracts

As with the two upcoming metro lines to be built over the next decade, a similar competitive landscape in which opportunities will be given to local Singaporean companies, as well as foreign construction companies, is to be expected, said Fitch Solutions.

The contracts for the North-South Corridor Expressway have also been awarded to various companies such as China Railway First Group, GS Engineering & Construction, as well as local company Lum Chang. Construction is scheduled to begin in 2019.

“Following the announcement of this project, we expect future road projects in the next decade to be smaller scale, focusing on the maintenance or upgrade of existing road infrastructure,” Fitch Solutions said.

The competition between local and overseas firms for building contracts does not end at Singapore’s railway sector, as demand for construction services from the airport and maritime industries is expected to be strong as well.

Contracts relating to engineering consultancy services for Changi Airport Terminal 5 have been awarded to Arup, Mott MacDonald and Surbana Jurong Consultants in April 2018. “In addition, provisions have been made for the extension of the Thomson-East Coast and Cross Island Lines to connect to the new terminal, and we expect detailed plans regarding these rail projects to be announced in a few years’ time,” Fitch Solutions noted.

Singapore – Market share of transport projects (completed/under construction) by company nationality

The project for the New Tuas Mega Port is not exempt from competition. The $1.46b contract for Phase II of the project has been awarded to a consortium comprising of Penta-Ocean, Hyundai Engineering & Construction, and Boskalis International, whilst Phase III and IV are still in the planning stage.

Fitch Solutions concluded that foreign companies have roles in more than 50% of completed projects and projects currently under construction, highlighting the strong presence of foreign companies in the country. “Going forward, we expect this trend to persist and foreign companies will continue to play an important role in Singapore’s construction sector,” it added.