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Seriousness of construction industry’s growth in Pakistan

Pakistan’s construction industry has always been of economic and social significance to the country. However, the share of construction industry in Pakistan’s economy is not as big as we see in other countries, whereas we see a lot of demand for new houses, apartments, and many other related structures in Pakistan. Present federal government has promised to construct 5 million new houses in its five years term, out of which almost 2 years have gone, which means 5 million houses in next 3 years. Besides others, one of the attractive features of construction industry these days is government commitment to construct 5 million new houses which gives hope to the people associated with the construction industry.

Globally, construction industry is regarded as one of the largest fragmented industry. The construction industry is also a prime source of employment generation offering job opportunities to millions of unskilled, semi-skilled and skilled work force.

The housing and construction sector in Pakistan can play an important role in developing aggregate economy and reducing unemployment. It provides substantial employment opportunities as it contributes through a higher multiplier effect with a host of beneficial forward and backward linkage in the economy. The sector through linkages affects about 40 building material industries, support investment and growth climate and helps reduce poverty by generating income opportunities for poor household. It provides jobs to over 6 percent of the total employed labor force or to over 3 million persons. Unfortunately the construction sector is also one of the most neglected sectors in Pakistan. Even with the opportunity for growth the challenges are also extensive.

The government has decided to provide special tax relief and incentives to businesses/industries related to construction sector and support low-cost housing projects such as Naya Pakistan Housing Project (NPHP). Tax authorities are also working on simplifying fixed tax scheme for developers and builders, offering a 90 percent reduction in tax for low-cost housing schemes, particularly the Naya Pakistan Housing Authority (NPHA).

Signing of the China-Pakistan Economic Corridor (CPEC) agreement and improvement in the country’s security situation has been the key to giving boost to not only the construction industry, but Pakistan’s image abroad. This sector can be an important recipient of foreign direct investment (FDI). Locally, investment can also boost by government policies such as reduction in duties and taxes on building materials like steel, construction machinery and equipment and computerization of land ownership records.

The construction industry is an important sector of the economy and has multiple backward and forward linkages with other sectors. This industry contributes significantly to socio-economic development and employment. Pakistan is a developing country that has a potential of relatively strong growth in construction activities. Today, construction is the second largest sector in Pakistan’s economy after agriculture. Roughly 30-35 percent of employment is directly or indirectly affiliated with the construction sector. In order to capture the potential of construction sector in Pakistan, the Government of Pakistan is planning extensive infrastructure expansion programs. All of these programs will have the potential to lead the local Industry to establish scale, status and international recognition.

 

Till 1971, there were very few private developers/constructors in Pakistan thereafter local developers started developing housing schemes especially state owned big corporations (WPADA, KDA, LDA etc.). During 90s and especially in the first decade of 2000, we see private sector very active in construction activities. After nationalization, federal government also allocated massive funds to Housing Building Finance Corporation (HBFC), a number of entrepreneurs, industrialists, businessmen, importers, consultants, etc, also entered in the construction industry. Some of them had experience in building construction while others had neither enough managerial capability nor sufficient technical knowledge. When the construction industry got a boost, the builders and developers gathered to form associations such as Association of Builders and Developers (ABAD) with the objectives of improving the state of the industry as well as to provide a platform to showcase and address pertinent issues.

Construction activities and its output is an integral part of a country’s national economy and industrial development. The construction industry is often seen as a driver of economic growth especially in developing countries. The industry can mobilize and effectively utilize local human and material resources in the development and maintenance of housing and infrastructure to promote local employment and improve economic efficiency. The construction industry on the economy occur at all levels and in virtually all aspects of life. This implies that construction has a strong linkage with many economic activities and whatever happens to the industry will directly and indirectly influence other industries and ultimately, the wealth of a country. Hence, the construction industry is regarded as an essential and highly visible contributor to the process of growth.

Construction industry is also highly labor intensive sector and a strong growth in this sector generates a variety of jobs. Pakistan now offers a growing market for the construction industry. In coming years, we see more dams and other projects to be announced for the feasibility and construction. Construction of mega projects such as dams has been announced. Other projects like motor ways and several other infrastructure projects are in progress.

There is a tremendous need for application of professional construction project management, tools, skills and techniques, which cannot be achieved unless efforts are not extended toward educating the industry, regulatory bodies and owners as well as improving and strengthening the construction industry practices. Successful implementation of construction project management in Pakistan construction industry can be achieved through hands-on leadership, upfront preparation and continuous maintenance with a sensible plan.

Major obstacles to improving the performance of Pakistani construction industry were found to be lack of expertise/resources in construction project management and its applied areas. A rigid attitude and behavior toward quality, safety and risk management can bring a lot of improvement in the construction sector. A lot of R&D is going on in the construction industry worldwide, where Pakistan should also adopt new techniques in this sector. A change in the views and attitude through awareness programs can bring a prominent and distinctive change in the project management status in Pakistan not only among stakeholders/owners but also in the entire construction industry. Considering the significance of the construction sector, it is necessary to identify the major issues affecting the efficiency of the sector and take corrective action for increase in economic growth and development of Pakistan.

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