Construction slowdown

The Construction Industry Authority of the Philippines, through their officer-in-charge Engr. Sonia Valdeavilla, reports a drop in growth in construction of 8.2 percent in 2008, mainly due to a drop in public construction activities and a decline in public works capital outlays. Till tax revenues increase, they expect this to continue.

In 2007, the industry saw a drop of 23.1 percent even when private construction activities reached a robust P73.7 billion in residential and non-residential construction.

Looks like the finger is again pointing to the anemic performance of public construction throughout the country.

The depreciation of the peso tends to drive prices upwards, and the banks continue to be cautious about lending. We are now inching once again towards the P50 mark, a fact that particularly delights one other sector, the exporters. As for the banks, the continued credit squeeze, despite what we read in the papers, pervades. A generally heightened risk aversion is common among all the markets, particularly the Asian currency markets. Incidentally, though lending rates declined, banks passed on some of the reduction in policy rates to the borrowers. Anyway, with both strong factors going against them, the construction industry is certainly in a lull right now.

Curiously, in spite of the peso depreciation, construction materials have not really gone up significantly. This is perhaps due to the slackened demand which, in economics, tends to drag down the prices, just to move the inventory. Last year, cement prices were at an all-time high, with a bag costing around P216.95. Now a bag sells for P192.98. Most other materials are stable, with the exception of steel bars, the price of which continues to be prohibitive.

Our local contractors cry out that the market is shrinking badly. This is aggravated by the fact that foreign contractors have successfully penetrated the market, and since these foreign companies are generally better financed, they have a big edge over our locals. One Chinese contractor they cited is coming in with full backing, supported even by their own government, and our local contractors can only whine and whimper on the side.

There must be something that can be done to prevent this. This is tantamount to rape in our own land! If we can’t protect our own boys, who will?

Because the local market is shrinking, and with the big boys cornering the shrunken market, contractors are now looking for projects abroad. The Construction Industry Authority sent a mission to Guam last month to explore the construction market there amidst reports that the 3rd   Military Naval Forces will be relocating to Guam. This contingent is the one currently stationed in Okinawa, and with the planned move to Guam, expect full-blown construction activities at the new military site. Housing facilities will be put up, along with schools for the dependents of the military staff, a large hospital, commissaries, etc. Maybe our local boys can have a piece of the pie, if the big boys have not gotten there ahead of us with their big bucks. –Ray Butch Gamboa, Philippine Star