Building boom on horizon

Business Asia, August 30, 1999

Suppliers in box seat to cash in

Double-digit growth has been forecast for the construction sectors in six major Asian nations in 2001, signalling boom prospects for Australian building sector suppliers.

A BIS Shrapnel study of building and construction in the Asia-Pacific region for 1998 to 2001 predicts that all but one of 10 national building industries will be positive in 2001. Six nations should experience double-figure growth.

Survey author Adeline Wong said 1999 and 2000 would see the bottom of the trough in several economies.

However, she warned that much of the growth in the region would be from relatively low bases.

"Construction industries in the Philippines and Hong Kong will be fairly strong as early as next year and by 2001 big improvements will kick in," Wong said.

"We would see significant opportunities for Australian suppliers of building materials over the next decade and those companies which have maintained their contacts in Asia will begin to reap the benefits."

The study covered China, Vietnam, Hong Kong, Indonesia, Singapore, South Korea, Malaysia, Thailand, the Philippines and Taiwan.

In China, overbuilding in the country's four main cities has resulted in a slower growth forecast for the commercial property market until 2001.

However, BIS Shrapnel predicted enormous opportunities in the housing construction sector as authorities work towards turning its socialist housing system into a commercial one.

Vietnam's residential sector should underpin a strong construction phase over the next decade, driven by foreign investment and increasing home ownership.

A recovery of 8 per cent is forecast for Hong Kong's building industry in 2000. That growth should jump to 39 per cent in 2001 on the back of infrastructure construction driven by increased government spending.

The report suggests Indonesia's construction sector will be one of the last industries to recover in that country -- held back by constraints in government spending, declining housing demand, excess supply and lack of credit and cash flow.

Indonesia's infrastructure growth in the short term will be generated by projects funded by aid agencies, foreign governments and foreign investors.

Residential building activity in Singapore increased by 49 per cent to a record high of US$11.2 billion in 1997, but fell by an almost similar margin in 1998 as unsold private housing stock dragged down the market. The sector is forecast to decline by 6 per cent in 1999 before stabilising in 2000 and improving strongly in 2001.

In South Korea, residential building is expected to register a modest recovery in 2001, while civil engineering will increase strongly in 2000 and 20001 through airport, railway and harbour developments.

All sectors of Malaysia's economy except construction are expected to improve in 2000, although residential building will likely stage a 7 per cent recovery in 2001, the report said.

BIS Shrapnel forecasts Thailand's property market will require five years to absorb existing stock and the recovery in building will lag behind economic recovery. The next building boom will not occur until the second half of the decade, the study predicts.

In the Philippines, recovery will take hold this year and gain momentum in 2000 and 2001, with residential building to be boosted by increased government spending on mass housing.

Taiwan's total building completions will surge by 13 per cent in 1999, non-residential building will increase moderately over the next three years and infrastructure will rise significantly over the next five to 10 years, the report said.

* Full BIS Shrapnel findings, page 4.

ON THE UP AND UP

ASIAN BUILDING AND CONSTRUCTION INDUSTRY GROWTH FORECASTS

COUNTRY            1999     2000     2001

China                 7        4        2
Hong Kong           -21        8       39
Indonesia           -48       22       22
Malaysia            -14       -5        7
Philippines           4       16       17
Singapore           -19       -1        6
South Korea          -6        4       12
Taiwan               13      -13     -0.4
Thailand             -3        9       10
Vietnam              -8        8

Source: BIS Shrapnel study, "Building and Construction in the Asia--Pacific Region 1998-2001"3