Construction sector unlikely to grow

The construction industry will be flat and slow in the next two years with business leaders keeping a conservative projection on the growth of the Northern Marianas economy due to current financial situations in the mainland US and in Asia.

Business analysts pointed out that unless financing problems and certain government policies are threshed out, and concrete efforts are mapped out, the construction sector is not likely to show any significant signs of growth.

Contractors have been complaining about the apparently unfriendly business climate in the CNMI, resulting in the closure of several construction companies. This has been aggravated by the slowdown of the tourism sector.

Apart from financing problems and delayed payments, problems on the prompt issuance of construction permits and certain government policies have impacted numerous construction projects in the past.

The Contractors Association has been inactive for the last four months due to terribly slow business environment. Small-scale construction companies had silently closed shop while bigger ones like Dick Pacific have stopped operating local offices.

Last year, Northern Marianas saw Basic Construction along Beach Road fold up while Block Microl has pulled out some of its workers and is now undergoing a reorganization.

Efrain F. Camacho, president of EFC Engineers and Architects shared the same view of the construction industry in the CNMI. He said there has been a dramatic slowdown in the sector for the last four years.

He is not very optimistic about a possible turnaround, not even a modest growth, of the industry within the year.

In fact, Mr. Camacho said construction business won’t be able to pull off in the next two years, adding that the industry will continuously experience a slow recovery from the four-year slump.

By the year 2003, the industry is anticipated to witness some construction activities but these will not be enough to claim a significant turnaround.

“There are projects from the government side but the government doesn’t have money on hand to pay the companies on time, this is the reason why some projects have been delayed,” Mr. Camacho disclosed.

He said EFC is currently handling several government projects although some of them were delayed because of financial setbacks on the government side.

Though some companies has packed things and moved back to Guam or to the mainland US, several firms have persistently stayed on and participate in government and private infrastructure projects from time to time.

“There is nothing on the horizon, no significant project to develop in the next few weeks, what the government has to do is to amend some policies and make this island a healthy environment for business,” he stressed.

Industry insiders said there might be a slight chance for the construction sector to move up by the end of this year depending on the availability of funds for several government projects.

They are hoping these government projects would be able to save the sector from its deepest slump in recent years after the construction sector suffered a record blow falling beyond the $20 million-mark by end-December 1999 after contributing almost $100 million in total funds circulating around the CNMI economy three years ago.

Officials attribute the decline to the staggering number of new investors in the CNMI and the approach taken by existing businesses which have decided to forego expansion due to weakening consumer confidence amid the recession.

Construction activities on the island amounted to only $18.5 million, which translate to 361 building permits approved by the Department of Public Works’ Safety Code Division in 1999.

Of this, $5 million were earmarked for commercial construction activities while the remaining $13.5 million were primarily used to finance home or residential improvements.

In 1998, the industry pumped $48.3 million into the CNMI economy for 587 construction activities, majority of which were also concentrated in the residential sector.

The construction sector started spiraling downward in 1997 when total amount of activities fell to $65.2 million from the previous year’s $90.4 million, when erection of commercial structures outnumber activities in the residential sector.

The construction industry started dipping since then, until it reached a record-low of $18.5 million last year, from the year-ago’s $48.3 million, according to statistics obtained from the public works department.