Construction Sector Woes and Economic Recovery

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Construction Sector Woes and Economic Recovery

Over the past nine months, construction contractors have not been able to work as per their contract agreements with the government due to the severe disturbances created by the Covid-19 pandemic. Despite the disruptions, many contractors have attempted to give continuity to the construction of physical infrastructures they have undertaken. However, delay in payments from the government has discouraged them.

Almost all sectors of the Nepali economy have been affected by the global health emergency. Business and job losses have been enormous,and construction is among the hardest-hit sectors. According to recent estimates published by International Labor Organization (ILO) and Asian Development Bank (ADB), about 22 percent of workers in the Nepali construction sector are likely to lose their jobs which might create an acute shortage of labourers affecting the progress of under-construction and soon-to-be started projects that carry high importance for the country’s economic development. In such a situation, managing the workforce will become financially burdensome, ultimately leading to further delays in completing projects and an increase in the cost.  

It would not be wise for the government to ignore the problems created by the delay in payments to contractors. It should be understood that at a time when economic revival has become a job of paramount importance, failure to encourage entrepreneurs will hamper the efforts needed to take the country’s economy out of the slump.

Development works targeted for the current fiscal year will be affected if the payments of the projects that have been completed and handed over to the local and provincial governments by the contractors and the projects handed over to the federal government by local and provincial governments are delayed. In Nepal, construction works gathers pace and new contracts are awarded after the end of the main festive season. But the delay in payments of past dues is likely to stall the progress.

Earlier, the government had extended the contract period by six months to provide relief to contractors as they were unable to carry on with the development of projects because of the lockdown and prohibitory orders issued by the government to curb the possible spread of coronavirus. But even the restrictive measures failed to check the transmission of the pathogen. With the spread of the virus increasing significantly after the lifting of restrictions, it seems unlikely that the projects targeted for the current fiscal year will be completed even by the extended deadline. Therefore, it will be appropriate for the government to extend the deadline by evaluating the progress of the projects.

The construction sector plays an important role in the development of a country, but it is the honesty of the contractors that matters the most. Past experiences show that unprofessional behaviour and dishonesty among contractors have caused problems in the sector which is mired in several malpractices such as failure to complete the work within the stipulated timeframe, reluctance in the execution of projects even after getting mobilisation amount, poor quality of construction, among others. This has tarnished the image of the entire construction sector. However, contractors alone should not be blamed for the problems. The government itself has acknowledged weaknesses in the contract awarding process and has made some improvements in this respect. Nevertheless, legal loopholes still exist through which malpractices continue.

Both the government and contractors need to show a fair amount of business honesty in order to resolve the problems in the construction sector; the government needs to address the proper demands of the contractors while it also shouldn’t hesitate to take action against those found violating the rules and regulations.

Madan Lamsal
[email protected]

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