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Construction industry has bottomed: Insiders
The construction industry had a very tough time last year but insiders say the decline in building activity may be over.
Nguyen Luong Thinh of the Ho Chi Minh City-based Binh Minh Construction Company said 2008 was the most challenging year in the last two decades for the industry.
The economic problems last year had a huge impact on the industry as well as the construction material and real estate sectors, he said.
“The sudden downturn came as a shock to all construction firms, which just one year ago had so much work to do and enjoyed an average annual growth rate of 30 percent.”
The rise in borrowing costs, salaries and construction material prices in the first half was a burden that many firms found too heavy, he said.
As prices rocketed, materials alone accounted for as much as 70 percent of the total construction cost. Many building contractors said they had to accept losses because investors refused to pay more after signing contracts.
Le Thanh Cong, Deputy Chairman of the HCMC Construction Association, said 40 percent of more than 2,000 construction firms in the city are small-sized and most of them had to stop working last year or do contract work for small projects.
But construction firms said they are optimistic about the industry’s prospects this year.
Huynh Phu Kiet, Chairman of Toan Thinh Phat Architecture Investment Construction Company, said the economy is expected to recover next year, with the construction industry likely to see a recovery earlier.
The scenario for the industry would become bright again in the third quarter this year, Kiet said, noting that his company signed construction contracts worth VND300 billion (US$16.85 million) in the first quarter.
Construction firms also said the industry would benefit greatly from the government’s stimulus package, especially a VND8 trillion ($450 million) program to build low-income housing around the country.
Construction value expanded 6.9 percent in the first quarter, a “surprise on the upside,” according to a note last month from Vietnam Property Fund Ltd.
With construction activity gaining momentum, the construction material market also started to pick up.
Ha Tien 1 Cement Joint Stock Company, which has a 30 percent market share in HCMC and the southeastern provinces, said sales in April recovered to more than 7,000 tons a day after months of slowdown. The sales recovery has allowed the cement manufacturer to run its plants at full capacity again.
Pham Chi Cuong, Chairman of the Vietnam Steel Association, said steel consumption last month returned to the normal level of more than 360,000 tons. Last year, the monthly consumption dropped to as low as 110,000 tons.
Despite good prospects for the construction industry this year, Le Viet Hai, Chairman of the Hoa Binh Construction and Real Estate Corporation, warned that construction firms should not be too optimistic when making plans for the year.
The industry still depends on how well the economy fares and it would be affected if high inflation returns or if investors cannot find enough funds for their projects later this year, Hai said.
Cong said even if the industry recovers as expected, the opportunities would not be available for all businesses, with small contractors affected the most by the harsh competition.
thanhnien, tbktsg
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