Construction industry continues to suffer
Monday, 9 March 2009
The construction sector, especially, the house building in the private sector has seen a phenomenal growth until 2006. However, during the last two years its growth stalled. The reasons for the plunge in the building sector can be attributed mostly to the sky-rocketing price of construction materials in the international market as well as the general fall in the overall confidence in business at home. The lack of business confidence, however, can be traced to the drives launched by the immediate past caretaker government against corruption and other forms of social evil. As a result, business in general became shy of investment and the construction sector was no exception from it.
But since the recession in the US economy became pronounced in the second half of 2008, it was accompanied by a general fall in demand in the international market. The market for construction materials was not also immune from this overarching economic downtrend. As a result, along with other goods and services, the prices of construction materials have also gone for a free fall. Perhaps, this general fall in the price index in the developed countries could be an opportunity for the business in Bangladesh, particularly in those engaged in the constructor sector. Unfortunately, as of now, the actual trend appears to be quite the opposite. A look at the recent rise in the prices of Mild Steel (MS) rods in the local market is a telltale sign of that strange twist in the Bangladesh's construction market.
A recent report carried by this paper says that over the past few weeks, the prices of different grades of MS rod have shot up by Tk 7,000 per tonne. Why is this sudden jump in the prices of this particular category of construction materials? Looking at the international market, one cannot see any plausible ground for such development. However, owners of the re-rolling mills who use ship scraps as raw material to produce MS rod point at the ship breakers for this upward trend in the price of this basic construction material. But the ship breakers, on the other hand, have blamed the short supply of both labourers and oxygen gas for this state of affairs. It is worthwhile to note that oxygen is necessary for the blowtorches used to break ships. They have further informed that the price of scrap ships have also soared in the international market.
However, so far as the availability of labour in the domestic market or that of scrap ships in the international market is concerned, it hardly provides strong arguments for any raise in the prices of ship scraps. So, an escalation in the prices of ship scraps stands in sharp contrast with the factors in the domestic and the international arenas on which those are blamed. But their logicality apart, the knock-on effect of the hike of ship scrap prices has already hit the construction sector hard. The development has seriously dampened the spirit of those engaged in the building sector, especially, housing.
The construction industry contributes nearly 10 per cent of the Gross Domestic Product (GDP) to the economy and engages hundreds of thousands of people in its activities. This sector saw 8.0-9.0 per cent growth until 2006. Sadly though, it had just started to liven up again in the new year, when it has hit yet this snag. It will be a loss of big opportunity, if the construction sector of Bangladesh fails to take the advantage of the recession-driven drop in the prices of basic raw materials for the building industry in the international market. To stop that from happening, it is important that all concerned in the industry behave in a reasonable manner in the overall interest of the sector and may not, under any circumstances, raise the price of the building materials without rhyme or reason.
But since the recession in the US economy became pronounced in the second half of 2008, it was accompanied by a general fall in demand in the international market. The market for construction materials was not also immune from this overarching economic downtrend. As a result, along with other goods and services, the prices of construction materials have also gone for a free fall. Perhaps, this general fall in the price index in the developed countries could be an opportunity for the business in Bangladesh, particularly in those engaged in the constructor sector. Unfortunately, as of now, the actual trend appears to be quite the opposite. A look at the recent rise in the prices of Mild Steel (MS) rods in the local market is a telltale sign of that strange twist in the Bangladesh's construction market.
A recent report carried by this paper says that over the past few weeks, the prices of different grades of MS rod have shot up by Tk 7,000 per tonne. Why is this sudden jump in the prices of this particular category of construction materials? Looking at the international market, one cannot see any plausible ground for such development. However, owners of the re-rolling mills who use ship scraps as raw material to produce MS rod point at the ship breakers for this upward trend in the price of this basic construction material. But the ship breakers, on the other hand, have blamed the short supply of both labourers and oxygen gas for this state of affairs. It is worthwhile to note that oxygen is necessary for the blowtorches used to break ships. They have further informed that the price of scrap ships have also soared in the international market.
However, so far as the availability of labour in the domestic market or that of scrap ships in the international market is concerned, it hardly provides strong arguments for any raise in the prices of ship scraps. So, an escalation in the prices of ship scraps stands in sharp contrast with the factors in the domestic and the international arenas on which those are blamed. But their logicality apart, the knock-on effect of the hike of ship scrap prices has already hit the construction sector hard. The development has seriously dampened the spirit of those engaged in the building sector, especially, housing.
The construction industry contributes nearly 10 per cent of the Gross Domestic Product (GDP) to the economy and engages hundreds of thousands of people in its activities. This sector saw 8.0-9.0 per cent growth until 2006. Sadly though, it had just started to liven up again in the new year, when it has hit yet this snag. It will be a loss of big opportunity, if the construction sector of Bangladesh fails to take the advantage of the recession-driven drop in the prices of basic raw materials for the building industry in the international market. To stop that from happening, it is important that all concerned in the industry behave in a reasonable manner in the overall interest of the sector and may not, under any circumstances, raise the price of the building materials without rhyme or reason.