Economy driver runs into trouble

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April 22, 2016 18:42

In early 2013, the construction industry was considered one of the economy’s main drivers. In late 2013, it became clear that construction plans would not be implemented: the entire industry was shaken by scandals and became the main generator of problem debts in the economy. The construction industry needs to be reformed, but high corruption levels may hamper any positive changes.

In early 2013, when industrial production had been reduced, hopes were high that the construction industry would become one of the main economy’s drivers. In January – October 2013 the value added of construction increased by 5.4% over the same period in 2012 and allowed to increase GDP by only 0.3 pp from 1.1 pp GDP growth.

In January – October 2013 the construction plan was implemented only by 64.3% of the annual plan. Quality of the commissioned housing received considerable criticism. Statistical data falsifications have resulted in several criminal cases. Today 19 criminal cases are pending against various construction companies. The largest housing construction company has virtually suspended its activities due to non-payments by contractors. Cement plants, mining companies are also experiencing payment problems due to insufficient funding within government construction programmes.

The construction industry is suffering from non-transparent price-formation schemes, and from overly complicated administrative procedures. Meanwhile, improved transparency of the construction industry is at odds with the interests of corrupt officials, who do not want to lose a very profitable ‘income’ source. As a result, all efforts aimed at improving the situation in the construction industry could be in vain.

Thus, the construction industry has failed to become the economy’s driver and to help it out of the crisis. Some improvements in the construction industry are due to the desire to prevent social tensions, but on a larger scale, the ruling group is not interested in substantial changes and will continue to sabotage all possible steps to improve transparency in construction.

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