Construction projects stagnant, investors incur loss, worker lose jobs

The difficulties in accessing capital has caused thousands of construction projects to become stagnant. As a result, construction materials remain unsalable; project developers incur losses, while workers become jobless.

A vicious circle now can be seen on the market: despite the low demand, construction materials still keep rising in prices due to the increasing input costs, which has made real estate developers hesitant to implement projects.

Prices up, demand down

Binh, a well-known private construction contractor in Van Quan new urban area, complained that he has not got any orders since the beginning of the year, even though the construction season began one month ago.

In previous years, he always got enough orders to ensure stable jobs for him and tens of workers for the whole year, though the construction works were just small, worth hundreds of millions of dong. The number of orders was so big that right after finishing a construction work, he has to start another immediately.

However, things are quite different now. As Binh has not gotten any orders, he has to lay off many workers, though he fears that he will not be able to find such skilled workers in the future, when he gets orders.

Not only small contractors, but big contractors are also facing the lack of jobs. Many construction projects have been delayed or postponed due to the lack of capital, which has made contractors become half dead.

The Ministry of Transport has decided to postpone 70 big projects capitalized at 1400 billion dong, as a part of the program to cut down public investments to help curb inflation. As a result, many construction companies under the ministry have to lay off workers, while construction material producers cannot sell products, even in the construction season.

In principle, when the demand is low, construction material producers need to slash sale prices to stimulate the demand. However, in reality, producers have been rushing to raise the sale prices. Hien, the owner of a construction material sales agent on Nguyen Khuyen street of Ha Dong district, said that the Bim Son brand cement has increased by 400,000 dong per ton in price in comparison with that before Tet. The brick prices have increased by 500 dong. The steel price has also increased, though with slighter increases.

What to do?

The construction material prices have been increasing steadily, while banks have closed their doors to real estate developers; therefore, many state budget funded projects and private construction works cannot be implemented. A lot of individuals planned to build houses this year, but they have to delay the plan, hoping the prices would go down in some days.

According to the Vietnam Steel Association VSA, the production capacity of the member companies is at 900,000 tons per year, while the consumption level is just a half of that.

The Vietnam Cement Association has also reported that in the first two months of the year, only 6.2 million tons of products was sold, lower than the 7 million ton level sold at the same period of the last year. The low demand on the market has made it difficult for producers to sell products, especially the ones with the capacity of 100,000 tons a year.

When asked why producers do not lower sale prices to boost sales, they said that if they do this, they will incur losses, because the turnover will not be high enough to cover the input costs which have been increasing dramatically.

Meanwhile, if selling at high prices, producers can avoid losses, even though the sales go slowly. Many producers have to scale down the production, but this cannot save them, because they still have to pay wages and other regular expenses. Therefore, they still have not found a way out in the current circumstances.- Lao dong

Tags: Vietnam Construction, Vietnam construction sector