Asian building pulls out of crisis slump - Brief Article

Business Asia, August, 2001

THE WORST IS BEHIND Asia's construction industry, with a new BIS Shrapnel study finding growth is expected to ramp up within the next decade.

The study, Building and Construction Industries in Asia 2000-2003, looked at the building industries in nine key Asian markets. The study predicts that for most countries, the slump of recent years is close to finishing, with booms expected in the next few years in South Korea and Malaysia.

While the rest of Asia's economies are expected to fare better, the study suggests that growth in building and construction will not match the pre-crisis highs of 1997 for quite some time.

In China, the drive to develop the country's Western regions will see construction growth rise at less than 10 per cent between 2001-2003. This is down from the moderate growth rates of 11 to 12 per cent 1997, and considerably below pre-crisis levels.

While China's construction industry is expected to grow modestly, Indonesia's is forecast to remain subdued for most of 2001. The BIS Shrapnel study predicts activity will pick up in 2002, particularly in the sectors of civil engineering, construction, retail and industrial building. 2003 will be an even better year, with growth forecast for all sectors.

Malaysia's construction growth is tipped to be modest over the next two to three years thanks to a high level of unsold properties, high vacancy rates for offices and shops, and slower economic growth.

The study's authors were optimistic about future prospects for the Philippines construction sector, predicting that the recovery would gain momentum as the country's economic growth approached five per cent annually.

In Taiwan, the construction industry is forecast to decline in 2001 before picking up slightly in 2002.

Thailand's construction sector was one of the hardest hit after the Asian financial crisis, and the situation is not expected to improve greatly in the short term.

The BIS Shrapnel study says overall construction activity is forecast to recover only modestly in 2001, due mostly to a bounce back in civil engineering and residential and non-residential building activity.

Singapore continues to be one of Asia's growth leaders in building, with a strong upturn expected in 2002/2003 across all sectors.

Construction demand rose by an exceptional 45 per cent in 2000, fuelled by a strong civil engineering sector. The study expects growth levels to fall back to normal levels in 2001.

Another of Asia's leading lights is South Korea, where the construction sector has recovered by around 14 per cent from its downturn in 1998. Strong residential construction orders received in 1999, along with new government building measures and a strengthening economy, has helped fuel the turnaround.

In Hong Kong, the residential market continues to be slow while the civil engineering construction sector has maintained steady growth.

Overall activity is expected to dip by 15 per cent in 2001, but rebounds in civil engineering and the building sector generally should see increases in overall construction activity in 2002/2003.