Total factor productivity in the Sri Lanka building construction industry

Abstract

This research study uses the Tornqvist Index method to estimate the Total Factor Productivity Growth (TFPG) of the Sri Lanka building construction industry from 1995 - 2001. At the beginning of the study the aim was to estimate the total factor productivity growth and its trends for the entire Sri Lanka construction industry. However this was changed and the study was confined to building sector due to limited availability of data and incompleteness of the available data. Sri Lanka construction industry has received mixed blessings from the government and policy makers towards its development. Most stake holders in the construction industry feel that the government has given insufficient attention to protect and develop Sri Lankan contractors making the construction industry suffer from quality, capacity and productivity Issues. Several attempts have been made to measure site level and enterprise level productivity in the construction industry but there had been no significant attempt to measure TFPG in the construction industry, mainly due to complexities of such studies and lack of recorded information. Despite the absence of such TFPG studies in Sri Lanka, such assessments in different sectors and for the overall economy are very popular in other countries in Asia such as Japan, Singapore, Hong Kong, and Thailand. The results of the study indicate that TFPG has a positive trend from 1995 to 1997 and recorded the maximum TFPG in 1997. However, there is a drastic drop in TFPG (from +0.803 to - 0.682) in the building construction in 1998 and 1999 due to very high labour and capital input compared to 1997. Since year 2000 TFPG in the building construction industry had been revolving around zero. Study also concludes that there has to be significant improvement in national data collection in order to have more reliable indications of TFPG trends in the building industry and to have any indication of TFPG trends in the overall ec.ostruction industry.