The global pandemic bought on by the novel coronavirus has slammed the overseas operations of Japanese general contractors.
Orders of large projects often undertaken in emerging countries have been dwindling, and the implementation of measures to prevent infections from spreading at construction sites has led to significant cost increases.
If further delays occur in bringing infections under control, construction companies will likely face unforeseen complexities to their operations.
According to the Overseas Construction Association of Japan, Inc., an industry association of general contractors, the April to August value of overseas construction orders received by Japanese construction companies and their affiliates plummeted by 40% compared to the same period last year.
The drop was largely due to the pandemic-driven global slowdown of economic activities.
"Compared to projects in Japan, overseas orders are slow to proceed," said Shimizu Corp. Chairman Yoichi Miyamoto.
The additional cost spent on construction sites is also a source of growing concern.
The Singapore government has demanded workers be provided with lodgings prepared with anti-infection measures, leaving the general contractors no option but to rent hotels or build new accommodations. Companies are also required to reduce staff at construction sites to avoid creating crowded environments. If a construction period is pushed back as a result, it will incur extra costs, which will hurt the firms.
In March, Sumitomo Mitsui Construction Co. was forced to suspend its railway construction project in the Philippines when about 20 Japanese employees involved in the work had to return to Japan to avoid infections.
Negotiations between the general contractors and the order-placing emerging-countries' governments will likely be rough going over who will bear the prolonged construction period and the interruption of work costs. In many cases global pandemics were not envisioned when contracts were signed.
The pandemic is also affecting equipment installation in buildings.
Toshiba Corp. is experiencing delays in exports of elevators and commercial air conditioners, mainly because of the increased difficulties when dispatching engineers from Japan to overseas locations to perform final quality checks on equipment.
The Land, Infrastructure, Transport and Tourism Ministry has jurisdiction over the general contracting industry. In 2019, minister and vice-minister-level trips overseas were held to promote Japanese construction firms on over 30 occasions. However, this fiscal year, due to the pandemic, none have been held.
The ministry's budget request for next fiscal year includes the cost of commissioning work to local consultants in emerging countries to conduct demand survey on infrastructure development. Also included in the request is the opening of consultation services for small and midsize general contractors to strengthen support and increase the odds of wining bids on construction projects.
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