VietNamNet Bridge – The difficulties in
accessing capital has caused thousands of construction projects to become
stagnant. As a result, construction materials remain unsalable; project
developers incur losses, while workers become jobless.

A vicious
circle now can be seen on the market: despite the low demand, construction
materials still keep rising in prices due to the increasing input costs, which
has made real estate developers hesitant to implement projects.

Prices up, demand down

Binh, a
well-known private construction contractor in Van Quan new urban area,
complained that he has not got any orders since the beginning of the year, even
though the construction season began one month ago.

In previous
years, he always got enough orders to ensure stable jobs for him and tens of
workers for the whole year, though the construction works were just small,
worth hundreds of millions of dong. The number of orders was so big that right
after finishing a construction work, he has to start another immediately.

However,
things are quite different now. As Binh has not gotten any orders, he has to
lay off many workers, though he fears that he will not be able to find such skilled
workers in the future, when he gets orders.

Not only
small contractors, but big contractors are also facing the lack of jobs. Many
construction projects have been delayed or postponed due to the lack of
capital, which has made contractors become half dead.

The
Ministry of Transport has decided to postpone 70 big projects capitalized at
1400 billion dong, as a part of the program to cut down public investments to
help curb inflation. As a result, many construction companies under the
ministry have to lay off workers, while construction material producers cannot
sell products, even in the construction season.

In
principle, when the demand is low, construction material producers need to
slash sale prices to stimulate the demand. However, in reality, producers have
been rushing to raise the sale prices. Hien, the owner of a construction
material sales agent on Nguyen
Khuyen street of Ha Dong district, said that the
Bim Son brand cement has increased by 400,000 dong per ton in price in
comparison with that before Tet. The brick prices have increased by 500 dong.
The steel price has also increased, though with slighter increases.

What to do?

The
construction material prices have been increasing steadily, while banks have
closed their doors to real estate developers; therefore, many state budget
funded projects and private construction works cannot be implemented. A lot of
individuals planned to build houses this year, but they have to delay the plan,
hoping the prices would go down in some days.

According
to the Vietnam Steel Association VSA, the production capacity of the member
companies is at 900,000 tons per year, while the consumption level is just a
half of that.

The Vietnam
Cement Association has also reported that in the first two months of the year,
only 6.2 million tons of products was sold, lower than the 7 million ton level
sold at the same period of the last year. The low demand on the market has made
it difficult for producers to sell products, especially the ones with the
capacity of 100,000 tons a year.

When asked
why producers do not lower sale prices to boost sales, they said that if they
do this, they will incur losses, because the turnover will not be high enough
to cover the input costs which have been increasing dramatically.

Meanwhile,
if selling at high prices, producers can avoid losses, even though the sales go
slowly. Many producers have to scale down the production, but this cannot save
them, because they still have to pay wages and other regular expenses.
Therefore, they still have not found a way out in the current circumstances.

Source: Lao dong