Construction work on rise

Business Asia, July 5, 1999

The construction sector in South East Asia is showing the first signs of recovery in two years on the back of regional economic growth.

Increased government expenditure on construction and an upsurge in the global electronics industry is driving the revival, a trade publication has found.

In its latest edition, the BCI Asia Construction Monitor said the sector was guardedly optimistic about its prospects for 1999.

This follows almost two years of devastation during which the construction industry suffered scores of company closures, property price collapses and nonperforming property loans.

The construction sector became symbolic of the region's crisis because of its excesses and widespread corruption.

"South-East Asia's construction sector has swung from being the glamour figure of the mid-1990s to the problem child of the late 1990s," said BCI Asia director Mr Brian Wawn.

BCI said improving economic forecasts for the Philippines, Malaysia, Thailand and Singapore would have positive effects on construction.

"Indonesia remains impossible to read, with much depending on whether it can carve out a stable political structure following this year's June parliamentary elections and the November presidential elections," it said.

Governments have been increasing expenditure on construction, with BCI saying the moves, if implemented effectively, would stimulate activity in the housing, education, health, transport and power sectors.

"For example, in its 1999 budget Malaysia expects to increase expenditure on transport, education, health and housing by 19 per cent," it said.

"The Singapore government has increased development expenditure substantially in recent years to a projected S$13.9 billion (US$8 billion) in 1999."

Other major government projects on the drawing board include:

* The US$370 million redevelopment of the Bilibid compound in Manila;

* a new US$660 million bridge between Singapore and Malaysia to replace the existing causeway;

* a US$800 million railway line and port in South Sumatra, Indonesia;

* a US$60 million civil defence complex in Singapore; and

* a US$400 million, 304-megawatt power plant in Batangas province in the Philippines.

BCI also said a 15 per cent growth forecast for the global electronics industry in 1999 would benefit the region.

It's not all good news, however, with BCI warning that Asian banks' nonperforming loans needed to be reduced before lending for property development increases.

"Furthermore, whatever happens there will be a serious over-supply in the large-scale hotel, office and retail sectors for some time to come," it said.

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