LAHORE – Lahore Chamber of Commerce and Industry (LCCI) has stressed the need to develop a National Construction Sector Development Strategy and removal of regulatory hurdles and complexities to harness the true potential of the construction sector in the country.
Global Perspective: In recently conducted research, LCCI has pointed out that the construction industry is a big global industry worth $7.5 trillion, which employ over 100 million people and contribute 13.5 percent to the world GDP in 2009. It indicates that the global construction sector consumes almost 50 percent of world resources and more than 40 percent of the global energy.
The sector has established as a major source of exports earnings for many economies, as apart from services many global construction companies trade in multi-billion dollar equipment and technology products.
Domestic Scenario: The research indicates that in Pakistan, construction industry is mainly dominated by the housing sector and is in early stage of development in international perspective. The research indicates that economic growth in the country is greatly dependent on the health of construction sector, which has highly diverse linkages with over 40 industries and other sectors of the economy.
However, it point outs that owing to lack of geographic diversification and globalisation of local players the sector lacks growth. It finds out that in Pakistan per capita cement consumption stands at 72 kilograms, while the world average is 262 kilograms per capita.
Highlighting the key issues in the construction sector, the research indicates that there is strong relationship between the construction sector and growth of the country, but the sector is badly hurt owing to mismatch between economic growth strategies. It underlines that the housing sub-sector grew by only 1.3 percent between March 2008 to March 2009, this is the major segment of the construction sector in the country.
It also reveals that supply chain fragmentation in various construction segments, ranging from designing, contracting and sub-contracting lack integration, which is a major constraint blocking competitive development of the sector. In addition, regulatory and policy bottlenecks are the major hurdles in the way of competitiveness, compliance, time and cost. Property registration, planning approvals and evaluation procedures are pathetic.
Tax policy for the sector is also not in line with its true role in economy, which results in presumptive taxes and the sector lacks documentation, research underlines. The study also asserts that standards and quality control in the construction sector are very low, owing to low or no technical evaluation of private contractors and sub-contractors involved in construction activities.
On the other hand, in public sector construction projects, connivance between evaluating officials and contractors and sub-contractors is a major headache, but a number of quality control requirements have been introduced, including Quality Promotion Outline, issued by the Prime Minister to construction and service quality.
It points out that outdated by-laws and building codes are another major challenge for the housing sub-sector. The sector’s growth is constrained by unnecessary layers of complex and cumbersome approval and verifications, which promotes non-transparency and give rise to corrupt practices. In addition, increasing inflationary pressures and the high cost of land and construction materials is another challenge, the investigation states.
The research also demonstrates that the recent cut in the Public Sector Development Programme (PSDP) amounting Rs 548 billion and low public infrastructure spending is of vital importance to the survival of Pakistani construction industry. It underlines that there is a serious deficit of skilled and well motivated workforce in the construction sector, including engineers, technicians, and supervisors. A large number of qualified construction workers leave every year.
It suggests that the government should take professional’s association and trade bodies, including All Pakistan Contractors Association and Association of Builders and Developers into confidence while developing a national strategy for the development of the sector. It underlines that there is a dire need to review the regulatory framework, transparency in the government’s contract awarding procedures and rationalisation of property registration fees.
It points out that most construction workers are not certified, which make quality assurance virtually impossible. The quality of work in the construction sector could only be improved by investing in training and human resource development.
