The public construction industry
According to the Institute for Development and Econometric Analysis, Inc. latest Industry Trends, the construction industry is made up of two subsectors, namely, public and private construction. Public construction is composed of all construction operated by the government and government corporations. Meanwhile, private construction considers activities handled by non-government entities. In 2013, Philippine Constructors Association, Inc. President Augusto Manalo shared that the public construction makes up 45 percent of the overall industry expenditure, with the remaining percentage accounted for by the private sector.
Public construction growth is driven by demand from its linked sectors such as tourism, business process outsourcing, and remittances. Through the surge in tourist arrivals, BPO investors, and money remittances, the country calls for bigger spending on infrastructures that includes roads, airport, and other public buildings. Public construction industry can bank on the aforementioned sectors, Yolanda rehabilitation program, and local economy’s expansion to boost public construction activities in the medium term.
Per IDEA, one of the key drivers of growth for public construction sector is the BPO industry. The said sector’s bullish performance is expected to benefit the expansion of office buildings, both private and public, in the country. There has been a rise in purchasing power among the domestic population, owing to solid growth in the BPO industry. This results, as well, to surge in retail activity, contributing to the expansion of the retail trade sector.
Another vital source of growth for the public construction industry is the tourism sector. In 2013, the tourist arrivals hit 4.68 million. Although lower than the 5-million target, the increase is still an improvement from the previous year’s 4.2 million arrivals. Visitor growth rate is at 11.4 percent in 2013.
This translates to higher occupancy rates and greater demand for hotels and restaurants. In order to sustain this growth, the government also has to improve access to tourist areas. This means that additional roads, expressways and toll ways, and airports have to be built. Data from the Public-Private Partnership Center shows that there are 2 road projects under the Department of Public Works and Highway that has been awarded to private contractors, as of 18 August 2014. There is also an airport being built in Cebu province.
Remittances also figures into the public construction sector growth. Expenditures from migrant workers usually boost housing demand in the country. It also creates employment opportunities for low-income people working in construction and, as well as, open new business opportunities for merchants selling building supplies.
There is a pipeline of Public Private Partnership projects which the present Administration is currently developing. Seven of the identified projects are already awarded and are undergoing construction. Together, they sum up to PHP62.6 billion or roughly 0.5percent of the 2013 GDP. As more PPP projects get rolled out, more opportunities arise for both public and private construction according to the researchers of IDEA.
- Latest
