Addressing delays in construction

Earlier this week, an annual report released by the World Bank showed a 14-place drop in the Philippines’ rankings for 2018.

Based on the latest World Bank report entitled, “Doing Business 2018: Reforming to Create Jobs”, the Philippines slipped to the 113th spot from 99th last year, as the country fell in nine out of 10 indicators used to measure the different aspects of regulations and their impact on businesses.

A total of 190 economies were assessed in the 2018 ease of doing business report, which was topped by New Zealand, followed by Singapore, Denmark, Korea, and Hong Kong.

Permits, registrations

Notable though that two of the indicators in which the Philippines recorded a drop in rankings were (1) dealing with construction permits, which pertained to “procedures, time and cost to complete all formalities to build a warehouse and the quality control and safety mechanisms in the construction permitting system” and (2) registering property, which meanwhile covered “procedures, time and cost to transfer a property and the quality of the land administration system.”

The Philippines ranked 101st in dealing with construction permits and 114th in registering property. In the two indicators, the country saw a drop of 16 places and two spots, respectively.

According to the World Bank report, securing construction permits in the Philippines will entail 23 procedures, take 122 days (equivalent to roughly four months), and cost at least 2.6 percent of the warehouse value.

Registering property meanwhile meant that you have to go through nine procedures that may take 35 days to complete, the cost of approximately 4.3 percent of your property value.

Hampering growth

These two indicators, too, have been hampering a more robust growth of the Philippine real estate industry.

Since last year, consultancy firms and industry stakeholders have been reporting that there were considerable construction delays not only due to the lack of adequately-skilled workers, but also because of delays in the issuance of the necessary permits and licenses. One developer even reported that its profit decline can be attributed to such delays.

The World Bank, too, also noted the significance of these indicators as it said: “the construction sector is a critical indicator of the health of an economy. An abundance of stalled construction projects is a visible sign of economic hardship, while a booming construction industry is indicative of economic growth.”

“Although various obstacles remain—including the fragmented nature of the construction industry and its hesitancy to adapt to technological change—governments around the world are focused on implementing reforms that reduce the time and cost to obtain permission to build,” it added.

Addressing challenges

The World Bank further underscored the importance of addressing delays in construction and obstacles to registering property as it pointed out the unparalleled expansion of cities in recent decades.

It noted that the urban population of developing economies is projected to double by 2030, while the area covered by cities could triple.

“In tandem with this trend, the construction industry is forecast to grow by more than 70 percent, reaching $15 trillion by 2025. With the population of cities rising around the world, municipal authorities are struggling to keep up with increased demand for their services. In developing economies, in particular, building departments operating under tight budgets and resource constraints are finding it increasingly difficult to enforce building codes, ensure that quality standards are met and adhere to efficient service delivery processing times,” the World Bank said.

The Philippine government, for its part, recognizes the need to address such challenges to further improve the ease of doing business in the country.

According to a statement released by the National Competitiveness Council, one of the projects that the government will undertake include the issuance of a joint memorandum circular between the Department of Interior and Local Government (DILG), Department of Trade and Industry (DTI), Department of Information and Communications Technology (DICT), Department of Public Works and Highways (DPWH), and NCC.

The said memorandum was for “streamlining the process for construction permits is being finalized and will be ready for signing before the end of the year. Once implemented, this will improve the Philippines’ score in the ‘Dealing with Construction Permits’ indicator. Implementation will take place first in Quezon City.”