Published on Thursday, 29 August 2013 20:09 [ businessmirror.com.ph ]
Written by Janica Monick Riego
THE importance of the construction
sector on the country’s economy cannot be understated, especially for
developing countries like the Philippines. Its strong performance urbanizes an
area, making it more economically productive and efficient. It brings in
investments, generates jobs, foreign-exchange remittances, and enhances the
growth of other industries.
The development of essential
infrastructure, considered a sign of economic progress, will not materialize
without the efforts of the construction sector. Through the sector, there is an
expected improvement of labor productivity, reduction of cost of goods and
services, and expansion of local and global market opportunities.
The impact of the construction sector
to the country’s economy was made evident in the first quarter of 2013, when
Philippine gross domestic product (GDP) growth surpassed expectations and
reached 7.8 percent. The National Statistical Coordination Board (NSCB) cited
the construction sector as one of the key contributors to the
better-than-expected economic performance of the country.
The sector was regarded as the
strongest performer during the period, registering a staggering 32.5-percent
growth from the previous quarter’s 18.4 percent. It contributed a total of P175
billion to GDP in January to March. Construction’s strong performance and that
of manufacturing made the industry sector the main driver of the country’s economy in the first quarter.
According to the Philippine
Constructors Association’s (PCA) Country Report for the first quarter of 2013,
the construction sector provided the largest contribution to industry growth,
next to manufacturing.
Regarded as the “mother of all
industries,” the construction sector is allied with other industries. It covers
a very broad range--from small-scale residential structures to large-scale
industrial facilities, roads, bridges, seaports and steel structures, among
many others. It also affects the growth of industries such as tourism, mining,
and business-process outsourcing (BPO).
However, unlike other industries,
construction-driven GDP growth does not have any effect on inflation rate
because construction is not a component of inflation computation. This allowed
the country to enjoy a low-inflation environment despite the strong GDP growth
in the first quarter.
According to the PCA, the construction
sector is likely to grow 8 percent for the rest of 2013. The sector will be
driven by the roll out of public- and private-sector projects.
Government spending on infrastructure,
for one, increased by 35 percent in the first five months of 2013. In January
to May, public spending for infrastructure projects reached P104.6 billion,
compared to P77.2 billion last year.
The Department of Budget and
Management said the government has also increased its spending on other capital
outlays, which is largely attributed to the sizable current and prior years’
payables due to contractors of infrastructure projects and suppliers of
equipment.
The increase in spending for
infrastructure projects pushed the government’s total disbursements to P751.2
billion at the end of May 2013, a 12.4-percent increase from the total
disbursements recorded in the same period last year.
Among the significant allocation this
year is a dedicated budget for tourism infrastructure pegged at P12 billion
this year and P17 billion next year. The money will be used for road
constructions to link tourist destinations to major highways. This is to
improve the travel experience of tourists in the Philippines.
To further drive up the country's
economy, the government plans to increase infrastructure spending in 2014. For
2014, the government is targeting to spend P213.5 billion for the development,
construction and rehabilitation of the country’s national roads and bridges.
The figure is 40 percent higher than the allocation this year.
The expected implementation of
large-scale public-private partnership projects is also expected to prop up GDP
and also boost the performance of the construction sector.
“Increasing activities in these growth
drivers would result in more civil construction works such as office buildings,
roads and bridges, facilities for utilities, and the like,” the PCA said.
“Moreover, it is expected that public
construction will continue to boost the sector in the next three years as the
Department of Public Works and Highways rally will be sustained to garner more
than P600-billion capital outlays by the end of 2016,” it added.
However, foreign businessmen had warned
that the delay in launching other infrastructure projects could slow growth.
Projects that have been put on hold are the Automated Fare Collection System
for Metro Rail Transit and Light Rail Transit —a P1.72-billion deal to design
and operate a smart card system for the elevated railway lines—and the
P17.5-billion Mactan-Cebu International Airport deal.
Aside from a target of increased
government spending, private projects are also seen to sustain the sector's
growth.
The PCA said that demands and investments
in building developments, such as housing and industrial, will continue to rise
and further boost the construction sector's expansion.
Private construction projects has
reached 24,400 in the first quarter of 2013, 71.7 percent of which were residential-type,
12.4 percent were non-residential, and the remaining 15.8 percent were
additions, alterations and repair of existing structures. Around 26 percent of
total number of projects was undertaken in Region 4A (Calabarzon).
The PCA said in its country report
that the second quarter of 2013 appears to be better than the first considering
the inflation rate; robust consumer spending; and the sustained increase in the
government's investment and spending on key infrastructure projects.
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