Advocata Q26 A
Aug 24, 2023

The Impact of Anti-Competitive Practices in Sri Lanka's Construction Industry on Affordable Housing

Can policy changes addressing competition in the construction industry help provide safe and affordable housing choices for urban low income populations in Sri Lanka?

By Templeton Staff with Advocata Institute

Affordable housing options for low-income groups in South Asia are scarce. With funding from Templeton World Charity Foundation, a team at Advocata Institute, for a project directed by economist Dr. Malathy Knight, is in the process of documenting anti-competitive practices in the construction industry and how they may be impacting this situation.

Advocata Institute is an independent policy think tank based in Colombo, Sri Lanka. They conduct research, provide commentary, and hold events to promote sound policy ideas compatible with a free society in Sri Lanka. For this Grantee Spotlight, we asked the team at Advocata to describe the project, in a brief Q+A session.

From your research, can you tell us a little about what the construction industry is like in Sri Lanka?

Advocata Institute: The construction industry in Sri Lanka is characterized by an oligopolistic market structure, although we are still in the process of determining if there is collusion between these market players. Anti-competitive practices in the construction industry in Sri Lanka include corruption and cronyism, which affect public policy in a way that benefits one enterprise at the expense of another. This leads to the urban poor facing restricted choices as well as high prices, making housing unaffordable.

There is a gap in cross-country research documenting anti-competitive practices in the construction industry on urban housing for the poor. 

Why is affordable housing such a pressing issue, and what is the state of its availability in South Asia?

Advocata Institute: Housing is a key part of the UN's Sustainable Development Goals (SDGs) and is a basic fundamental human right. However, in parts of South Asia, certain low income groups cannot afford decent housing, and are forced to live in small, cramped quarters or slums. In addition to their basic rights going unfulfilled, there are a host of other issues caused when people don’t have access to safe and affordable housing. Decent housing ties into a lot of other needs like access to clean water and sanitation, ensuring health and wellbeing, and allowing people to devote more time and energy into taking on activities that encourage upward mobility.

What are some of the aspects of this issue your team is researching?

Advocata Institute: Our regional study looks at the impact of anti-competitive practices in the construction industry on the affordability of housing for the poor across South Asia, specifically, Sri Lanka, India, Bangladesh and Pakistan. The three main research questions that we hope to answer at the end of this study relate to the specific types of anti-competitive industry practices in the construction industry, the extent to which these practices impact affordable housing for the poor, and how market-based solutions and stronger competition policy legislation can be used to address these problems.

How do you envision your team's research translating into practical tools?

Advocata Institute: During the course of our research, we’ve conducted several key informant interviews with those within the construction industry, as well as those who are knowledgeable in the area of competition and anti-competitive practices in Sri Lanka. We’ve also worked closely with our regional partners, allowing for a significant exchange of ideas and knowledge sharing. Since this area is not very-well studied in the region, we hope the insights that we gain in the process could be used as the basis for further research in the area. We hope our findings will raise awareness of the issues low-income communities face in accessing affordable housing. A key output of this study is a regional database and literature repository that would be a valuable resource for further research in this area.

What is an insight or learning you found that might affect future study around this issue?

Advocata Institute: As we progress in our study we are constantly finding new avenues to explore. One interesting thing we learned is how cronyism can affect a country’s tariff policy. This could be useful for someone who wishes to examine how firms influence public policy in ways that could be anti-competitive.  Another area for further study is determining the affordability of housing for different income deciles and how public policy can address this issue.

Dr. Malathy Knight is Research Associate at Verité Research.

Dr. Roshan Perera is a Senior Research Fellow at at Advocata Institute.