Download Антикризисти мерки в строителният секто

State of the
Construction Industry
in Bulgaria
Anti-crisis Measures
General overview
Construction takes an important place in EU economy --- 7% of the GDP
and 6% of the employed belong to the construction industry. Стопанската
конюнктура в строителството през януари – юни 2008 г.
The business tendency for the period January – June 2008 remains
positive. The forecast of the BCC is for a future growth of the construction
sector with 8-10% in the next 5 years.
The revenues of construction companies for 2007 are 7098 bln.€, /the
data are for current prices/ which is an increase of 15.5 % with
comparative prices compared to 2006 / 5527 bln. € /.
Construction production for the first three quarters of 2008 of 2008 has
increased by 12.9 % compared to the same period in 2007. The
Bulgarian economy has comparatively high economic growth of 6.8%
annually. According to the economists the third quarter of 2008 will be the
last one with high economic growth.
General overview -- construction
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Construction: The managers evaluate the construction sector among the
branches with significant negative tendencies in its business development.
The comparative index “business climate in construction” has decreased by
6.8 points in November and this is the lowest level after December 2005.
This reduction is due to the moderate evaluations of business leaders
regarding the current business situation in the enterprises and the worse
expectations for the next six months (the balancing index of expectations
falls under a level that is 9.1 points lower than its long-term average).
Similar tendency of neutral and negative expectations is apparent regarding
the construction activity and the decrease of employment in the sector. The
last business questionnaire record an increase in the number of clients with
late payments and lack of security concerning production.
Construction production, mln. BGN
Preliminary data from the National Statistical Institute
I – III Quarter
2007
2008
current
current
2007
2008
comparativ
e
comparativ
e
Total
Mln. BGN
8 694
10 885
5 658
6 306
Housing
construction
Mln. BGN
5 663
7 256
3 690
4 209
Engineering
Construction
Mln. BGN
2 931
3 629
1 968
2 097
Construction Production
I-III Q. 2007-2008, mln.€
*Preliminary data NSI (National Statistical
Institute)
Expenses for acquisition of fixed assets
I – III Q 2007-2008, mln.€
* Preliminary data NSI
GDP
*
preliminary data
-** forecast
Construction permits issued for new
buildings
Data from the NSI
2007
Total
QI
2008
Total
QI+
QII
Q II
QI
Q II
Growth 2007/2008
Total
QI+QII
QI
Q II
Q III
Overall
buildings
18 224
4 049
4 660
8 709
3 505
4 335
7 840
-544
-325
-551
Residenti
al
buildings
11 171
2 442
2 735
5 177
2 267
2 694
4 961
- 175
- 41
-366
Residenc
es
64 185
14 101
12 641
26 742
11 437
11 899
23 336
-2 664
-742
-4 860
448
104
85
189
78
108
186
-26
23
12
6 605
1 503
1 840
3 343
1 160
1 533
2 693
-343
-307
-197
Administr
ative
buildings
Other
buildings
Foreign investment in construction, mln.€
* Preliminary data Bulgarian Central
Bank
Direct investment in the country –
geographic structure
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Realities and problems in construction
The world financial crisis concerns the construction industry in Bulgaria and
has the following effects:
Rigorous development of the sector in the past 6-7 years, which
encompasses not only the construction activity itself /housing, hotels,
resorts, roads, etc./ bud also the productions related with construction
/woodwork, hardware products, production and supply of construction
materials, etc./ as well as the activities directly connected to the sector
/transportation services, real estate market, financial services, crediting,
etc./
The particularly high growth rates of construction and assembly works in the
past few years, which have reached 15% and more, and are significantly
higher than the average growth rates for the country. The production growth
continues also in the first half of 2008 .
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Availability of a significant volume of construction production that is higher
than the consumer purchasing demand.
Drawback of some external investors, due to the inability to perform their
investment intentions for fast profits from the sale of real estate.
Two large construction sites of Western investors, that have just started in
Sofia, were frozen and the investors are trying to sell them (although still in
vain). Some other projects that were at the point of negotiations with
contractors were also brought to a halt. The investors in apartments and
residential areas delay their payments towards the constructors.
The number of issued permits for new buildings in the first half of 2008 has
decreased significantly in comparison to the same period in 2007
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The direct foreign investments for the period January –
September 2008 amount to 27859,2 mln. EUR,
compared to 23557,9 mln. EUR for the same period in
2007.
The analysis of the Bulgarian Construction Chamber
shows that the decrease in foreign investment will lead
to a decrease in the volume of construction and
assembly works in the housing sector for 2008-2009 by
2-2,5 bln. BGN.
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The interest rates for credits for the purchase of real estates and
construction financing have increased /which tendency might continue/.
The requirements for granting credits have changed by increasing the
participation of the creditor in the overall value of the real estate. The
methods for determining the value of the deposit have changed
/decreased/.
The rates of increase in the prices of housings have decreased. For the last
financial quarter the increase is only 3-4%. The prices are expected to
decrease by 10% in 2009. This will bear a reflection on some construction
entrepreneurs.
Higher requirements of the investors and consumers of ready construction
products towards the quality of construction.
Despite the decrease in the number of unregistered construction companies
after the entry into force of the Law for the Central Professional Register of
Construction Companies, there are still some small unregistered firms that
lack qualified personnel and technology. They cannot meet the higher
quality demands and cause distortion in the construction market.
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If the challenge in 2008 was the lack of capacities and human
resources, the challenge in 2009 is expected to be in making
precise estimations.
The delayed payments for construction and assembly works places
contractors in the position of co-investor. The investment activities
require a different type of behavior and mindset, which are not
typical for construction companies.
Particularly worrying is the forecasted 6-month delay of payments
from the EU programs /also PHARE and ISPA Programs/. The issue
with granting temporary credits for 6 months is also not settled,
which forces Municipalities and construction companies to credit
their own activities under these programs.
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There is a very dangerous tendency of granting big public
procurement projects and EU projects to companies outside the EU,
which have subsidies for the export of construction activity abroad.
This forces Bulgarian companies to fight against external state
protectionism.
The foreign companies outside the EU that use state subsidies
mostly work with unregistered labor force. There are a few
construction sites in Bulgaria with illegally staying workers. This
labor force is placed in working conditions that do not respect the
regulations of the European and Bulgarian Laws.
Foreign companies outside the EU, using state protectionism participate in
public procurement on dumping prices. Later on they use legal approaches
to increase the prices. This situation causes losses both the state and the
companies /national income is out flowing/.
The forthcoming negative tendencies could be compensated by:
•
Increase of the public government investment in the field of infrastructure
projects;
•
Execution of the operative programs from the EU Funds;
•
Realization of foreign and internal investment in the field of power
engineering.
•
Increase in public investment in the Municipalities /the Underground in
Sofia/, the city infrastructure, water and sewage systems, street
reconstruction, etc.
•
Increase in private investment in the retrofitting of buildings /in view of
energy efficiency/, establishment of small and medium enterprises.
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The analysis shows that if the work in these directions is well
organized, it will create a balance between the dropdown of the
negative processes and the abovementioned opportunities. The
question with the change of qualification of the labor force remains.
The process of redirecting the workers towards the finishing
construction works will be difficult.
BCC proposal for anti-crisis measures complementing the ones proposed
by the Bulgarian Chamber of Commerce, the Bulgarian Trade and
Industry Chamber, the Confederation of Employers and Industrialists
in Bulgaria:
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The construction industry needs appropriate competitive environment, clear
rules for action and accountability, rapid payment system for the works
done, simplified procedures for the resolution of conflicts. Clear
responsibilities and rules for the entire process of public procurement are
needed from the tender announcement to the payment for the completed
projects. The Law for the Public Procurement in Bulgaria has to be adapted
and amended in the first place.
The state institutions, industry associations and employers organizations
should adopt plans for the rapid absorption of EU funds – from the idea,
through the project proposals, competitions, implementation and the end
product.
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The deadlines should be shortened and the rhythmic payments towards
construction companies from the state budget should be guaranteed.
The Ministry of Labor and Social Policy, the employers organizations, the
Bulgarian Construction Chamber and the Trade Unions should
strengthen the measures against the grey economy.
The Ministry of Regional Development and Public Works should give
interpretation of the Law for the Bulgarian Construction Chamber in
relation to the participation of subcontractors in construction projects. The
Directorate for National Construction Control and the BCC should
conduct the monitoring on this issue.
The government should adopt measures in public procurement that stop
the participation of companies outside the EU, which use direct and
indirect subsidies from public resources in any form whatsoever that lead
to the distortion of competition.
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The inflow of non-regulated labor force in Bulgaria should be stopped.
The EU Directives and the Bulgarian employment Code should be abided
by.
The best practices of EU Member States against the dumping prices in
tendering procedures should be adopted.
The government and the Bulgarian Central Bank should conduct active
export policy of construction services to third countries.
The BCC and the companies should work in the direction of maintaining
or increasing /not decreasing/ the wages in construction through efficient
use of labor resources.
A law on Public Private Partnerships similar to the one in Germany
should be prepared for adoption.
BCC should organize the establishment of a voluntary social fund in
construction, using the experience of some advanced European
countries. This fund shall support the small and medium enterprises in
crisis situations.
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The salaries of civil servants in the field of EU
Operative Programs should be increased and should
correspond to the effect of their work.
The Ministry of Regional Development and Public
Works should adopt a normative act regarding the
regulation and quality of sanitizing of the existing
buildings in Bulgaria in view of better energy savings.