Builders endure 35% more cost
The “other” costs of doing business in the domestic construction industry reached a high of 35 percent, which refers to “facilitation” expenses.
Ronilo M. Balbieran, president of think tank REID Foundation and Infrastructure Team Leader for USAID DELIVER Project, said in a presentation at the 4th Philippine Construction Industry Congress, the industry endures between 15-35 percent on “other cost in doing business.”
“Something has to pay for the 1535 percent cost of doing business,” said Balbieran.
In contrast, he said, companies would claim for a low net income margin of 8-15 percent only.
“We have to eliminate the black box. It could be a long way but it is our hope,” he said.
Isidro A. Consunji, chairman of Philippine Overseas Construction Board and chairman of DMCI Holdings, the country’s leading construction and engineering firm, said the study may be referring only to certain government projects only, but it is not an industry-wide practice.
But Consunji said there is not really a concrete data on that bur just stories. He could be that knowleadgeable also as his company does not undertake many government projects, except for its participation in the LRT 2 extension.
Trade and Industry Secretary Ramon Lopez said the 15-35 percent other cost of doing business in the industry can be eliminated with the implementation of action plans under the Philippines Construction Industry Roadmap 20202030.
Digitalization would be one way to minimize the cost and fine tuning some controls, he said.
In his keynote speech at the Congress, Lopez said the passage of Republic Act (RA) No. 11032—or the Ease of Doing Business and Efficient Government Service Delivery Act of 2018, or EODB Law—as well as the establishment of the AntiRed Tape Authority (ARTA) will address the matter of corruption. Through the EODB Law, local government units have been streamlining their processes and setting up Business One-Stop Shops (BOSS), which include securing construction permits.
In fact, in the World Bank Doing Business 2020 Report, the Philippines was cited for its improvement in the indicator for dealing with construction permits, from 68.58 to 70.00. This as the Philippines’ EODB score increased from 57.68 to 62.8, which translated to 29 notches in our rank from 124th to 95th place among 190 economies.
“We are confident that with the Roadmap and the Action Plans, we will attain our goal of a more modern and globally competitive Philippine construction industry,” he said.
Without the Roadmap, industry growth is predicted to go only as high as 86% in the next 11 years, or an average of 8% per year. Cumulative total value of the industry is estimated to be ₱43T by 2030.
With the full adoption and implementation of the Roadmap, the forward momentum provided by “Build, Build, Build” will be maintained with the sustained long-term strategic outlook amounting to a cumulative ₱130 trillion within 2020-2030.