Construction industry: Stakeholders reject govt’s growth claims

Industry grew by 6.46% against last year’s negative growth of 7.09%.

KARACHI:

Builders and developers have reacted with scepticism to the recently released Economic Survey of Pakistan that claims the construction industry grew by 6.46% during the outgoing fiscal year.

Talking to The Express Tribune, Association of Builders and Developers (ABAD) Vice Chairman M Arif Siddik rejected the growth figure, saying it was ‘unconvincing.’

“The growth figure doesn’t correspond with ground realities, especially if we take into account swelling input costs, poor law and order, and lack of housing finance in the country,” he said.

According to the Economic Survey, the construction sector grew by 6.46% in the financial year 2012 as opposed to the previous year’s negative growth of 7.09%.

“I don’t know how they came up with a positive growth rate. We don’t see any investment in the construction industry. The share of construction in the gross domestic product (GDP) of the country has consistently been stagnant,” Siddik said.

In 1999-00, the share of construction in GDP was 2.5%. After increasing to 2.6% in 2009-10, it decreased to 2.15% in the outgoing fiscal year, according to the provisional data provided in the most recent Economic Survey.

Siddik offered no comment when asked if he believed the figure was deliberately fudged. He added that office-bearers of Abad would meet early next week to prepare a detailed post-budget response on behalf of the country’s builders and developers.

Office-bearers of Abad consistently held press conferences in the past year complaining about the slow growth in the construction industry. For example, in a press conference on April 14, Abad Chairman Mohsin Shiekhani said the price of a 50-kilogramme bag of cement went up to Rs435 from Rs365, an increase of 20%, in the preceding six months.

Similarly, in another press briefing held on December 15, 2011, the Abad representatives protested the imposition of sales tax on the construction industry, saying the Sindh Revenue Board was authorised to levy it on the services sector only.

According to Abad South Region Chairman Saleem Kassim Patel, one of the likely reasons for the reported expansion in the construction sector is increased remittances in 2011-12, which resulted in investments in real estate. “As far as Karachi is concerned, construction activities increased in the last six months because of an improvement in law and order after Ramazan,” he said.

However, Patel added that the true indicator of growth in the construction sector was its share in the country’s GDP. “The construction industry should have a share of at least 5% in GDP. Only then will we be able to say confidently that the construction industry is thriving.”

Talking to The Express Tribune, noted economist Dr Kaiser Bengali said the growth rate of 6.46% in contrast with the last year’s negative growth rate of 7.09% was far from satisfactory.

Explaining that the construction industry did not regain in 2011-12 what it had lost in the preceding year, Bengali said the recently released positive growth rate was actually smaller than the negative growth rate of 2010-11.

Published in The Express Tribune, June 3^rd, 2012.