Construction industry’s performance worst in 37 years

[Naveed Yaseen]

KARACHI: The construction industry recorded a decline of 10.8 percent in FY09—the largest fall in 37 years, said the State Bank of Pakistan’s annual report for 2008-09 released on Thursday. Construction industry constitutes around 2.4 percent of GDP. The drag by construction sector to the growth of GDP and industry in FY09 was significant at (-) 0.3 and (-) 1.0 percentage points respectively. Construction industry in FY09 had to put up with sharp increase in building material prices during the first eight months of the current year, significant cut in disbursement of PSDP funds and dearth of financing facilities which caused the construction activities to shrink significantly. Not surprisingly, almost all other indicators of construction growth also paint a gloomy picture. The weakening construction activity is a source of disquiet especially from the perspective of employment generation among unskilled labor force and ultimately for poverty alleviation. Almost 3.3 million people were employed in construction sector in FY08 and the number for rural areas (2.2 million) is twice that of urban areas (1.1 million). Moreover, construction sector is also strongly associated with the growth in a number of manufacturing industries including cement, metals, glass, paints, etc. However, there are some hopes of a recovery in construction activities in FY10 keeping in view the decline in building material prices. The expectation of this recovery is further supported by higher PSDP allocations in the FY10 budget, expected initiation of power projects and reconstruction activity in Swat, as well as the impact of the recent easing of monetary policy. A performance indicator of the construction industry was domestic cement dispatches, which fell from 22.4 million tonnes in FY08 to 19.4 million tonnes in FY09. Iron and steel production declined from 8.238 million tonnes in FY08 to 5.975 million tonnes in FY09. Import of iron and steel dropped from 2.22 million tonnes to 2.04 million tonnes. Foreign direct investment in this sector took a deep plunge, going down from $193.2 million to $130.4 million. mushfiq ahmad

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