Question

Construction industry is considered as mother of all industries. It is industry of many industries. It is labor intensive and has the lowest capital cost for job creation. Pakistan is 6th largest country in terms of population with high rate of migration from rural to urban centers. According to one estimate about one-half of the households in urban area do not have their own house. There is therefore a great untapped potential for construction industry in the country The government in an effort to fulfill its promise of providing houses and creating employment opportunities has recently declared construction as an industry. It has offered several incentives to builders besides giving amnesty on investment that is the source of income will not be asked from the buyers and investors in the industry.
Required:
a-   Explain in brief the volume and value scope of construction industry in Pakistan.
b-   While explaining the economic importance highlight the socio-economic role of construction industry.
c-   Do you think that the package announced for construction industry is effective enough to boost the in industry? If yes/No, explain why?

Answer 1

Q. a-   Explain in brief the volume and value scope of construction industry in Pakistan.

Ans.- There exists a very huge opportunity for the builders, construction companies, and investors in the Pakistani construction industry. The credit for the presence of this huge opportunity in the construction industry can be attributed to a lot of enabling factors. Some of these factors can be listed as follows-

· There is a huge surge in migration by the middle class people in Pakistan from rural areas to urban areas. The people who move from rural places to urban places want to settle there but often find lack of affordable residential places in urban areas. This target market can be tapped by constructing affordable housing arenas.

· As per various studies, half of the Pakistani urban population don’t own a house. This opportunity can be harnessed by developing affordable housing.

· BMI research has estimated that the Pakistani construction industry will grow by more than 9% throughout the 2016-25.

· The signing of the CPEC agreement with China will led to surge in tourism industry so constructing necessary physical infrastructure will pay high ROI.

· The government has proposed a lot of enabling policies for the construction industry as the Pakistani government has recognised the importance of this construction industry in the development of the country and in the growth of other allied industries.

· The government has lowered taxes on the materials needed for construction activities so this can be tapped to construct affordable houses and earn tremendous profit.

· There is a less competition in this industry from local as well as foreign players.

Q. b-   While explaining the economic importance, highlight the socio-economic role of construction industry.

Ans.- The economic importance, as well as the socio-economic role of the construction industry, can be highlighted by citing the following facts/figure-

· The construction industry has a significant share of gross capital formation. As per one report, it alone has a 40%-60% share.

· As per a few pieces of research, almost 60 industries are directly and/or indirectly linked to the construction industry. It means the development of the construction industry will help these industries to grow as well. All of these will increase economic activities in Pakistan.

· The construction industry alone contributes 2.7% to Pakistan’s GDP.

· The construction industry is a very labor-intensive industry so growth in this sector will help a lot in the employment generation in the country.

· It is the backbone of any economy as it reduces the distance between the remote areas and link town and cities with the small villages by building roads. This makes transportation easy which helps in enhancing economic activities in the country.

· It helps in providing basic social infrastructures like schools, colleges, hospitals, water reticulation, etc. to the general public which is very crucial for their well-being and development.

c-   Do you think that the package announced for the construction industry is effective enough to boost the in the industry? If yes/no, explain why?

Ans.- Yes, I do think that the package announced by the Pakistani government for the construction industry will help to boost the industry. The reasons behind my proposition are the major provisions of the scheme announce for the construction sector which can be listed as follows-

· A Construction Industry Development Board has been established which will be responsible to plan and execute the developmental schemes for this industry. This board solely made for the construction industry was much awaited. It will immensely help to develop this specific industry.

· The investment made in new construction activities will not come under the scrutiny of authorities to declare the source of income. It will help to bring the black money into the economy. It, to some extent, will help to eliminate the issue of black money and develop this sector.

· A simple per square foot tax is introduced. It will help to eliminate the unnecessary harassment of builders from the hand of tax authorities. Consequently, it will help to develop this industry.

· The period of Capital Gain Tax has also been reduced. This will also boost the morale of builders and encourage them to re-invest in this sector.

· The provision of PKR30bn will immensely boost the construction industry and will help to increase in all the allied sectors.

So after analyzing all the major provisions of this scheme, it can be said that beyond doubt this scheme, if executed/implemented in its true spirit, has the potential to revolutionize the construction and other allied sectors.

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