Industry Details

12:00 AM, December 29, 2019 / LAST MODIFIED: 04:38 AM, December 29, 2019

2019: A good year for construction sector

Bangladesh’s construction industry passed a relatively good year in 2019 riding on increased development activities and mega projects buoyed by a stable economy and rising government expenditure, sector people said.

SM Khorshed Alam, president of the Bangladesh Association of Construction Industry (BACI), said development activities are taking place across the country. A lot of development work in the civil engineering and infrastructure sectors are ongoing. Ten mega projects are under construction.

“From this point of view, it can be said that 2019 has been the most important year for the construction sector of Bangladesh,” he told The Daily Star recently.

He said major construction companies in Bangladesh are running at full capacity. Besides, many foreign companies are working in the country.

Alamgir Shamsul Alamin, president of the Real Estate & Housing Association of Bangladesh (REHAB), said 2018 was the election year, and in the last one year confidence of the people has been restored.

“2018 was a dull year and 2019 has been better. Political stability is very important for this sector,” he said.

The price of construction materials was more or less stable throughout the year, he said.

The construction sector is playing an increasingly strong role in the economy amid continued urbanisation and an array of large infrastructure projects undertaken by the government.

Construction grew by 9.6 percent, supported by public infrastructure spending as well as private investment in housing, according to the World Bank’s Development Update published in October.

Industries serving the domestic market, such as steel and cement, expanded, benefiting from demand for construction materials due to the mega projects.

Md Alamgir Kabir, president of the Bangladesh Cement Manufacturers Association (BCMA), however, said the year 2019 for the cement industry was not as glorious as it was expected in the beginning.

“The industry faces strong headwinds with new tax measures, overcapacity, increase in raw material prices, excessive rains that hinder construction activities, dwindling local demand and negligible export to the neighbouring country.”

The manufacturers intended to achieve growth of 10-12 percent in 2019, but the year might end with growth of about 6 percent over 2018, said Kabir, also the vice-chairman of Crown Cement Group.

“Relatively lower demand prevailed throughout 2019 except a few days during peak seasons.”

SK Masadul Alam Masud, a former chairman of the Bangladesh Auto Re-Rolling and Steel Mills Association, said 2019 has been mixed for the steel sector.

“We are part of the global economy because of globalisation. The whole world is going through some sort of economic slowdown. From that perspective, we are doing well.”

Masud said demand has not picked up as expected.

He said given the pace of development work, the consumption of steel should accelerate and the industry is gearing up to meet the demand.

If the government plans are executed as per schedule, then steel consumption should go past the current installed capacity of 70 lakh tonnes from the current consumption of 55 lakh tonnes.

The tax measures taken in the budget and the increase in the exchange rate would gradually affect the sector.

“We don’t know by how much the price of the USD against the taka would go up. We are a hugely import-dependent country, so if the US dollar becomes expensive it would hurt the prices of commodities and raw materials of the industries,” said Masud.

The demand and supply of bricks are growing at 3 to 5 percent per year, which is satisfactory, said Mohammad Azad Hossain, an official of the Bangladesh Brick Manufacturing Owners’ Association, recently. Brick is the main building material for the construction industry.

Kabir said the cement industry has been facing a good number of challenges since the beginning of 2019. The market has already been oversaturated and yet the big players are on an expansion spree.

It is predicted that the existing overcapacity may further deteriorate with the implementation of expansion projects by large players in the next two to three years.

“The competition was so acute it eventually turned into a price war situation among large players. Sometimes, it was difficult to pass on the increased production costs to customers due to huge competition.”

The sector, however, received a shot in the arm on December 19, when the National Board of Revenue cut the advance income tax (AIT) on the imports of cement raw materials by two percentage points to 3 percent from 5 percent for the sake of the local manufacturers.

“Although this reduction reflects that the government has realised what the problem of the sector is, 3 percent AIT is still a burden to the manufacturers and, in fact, it requires a full waiver of tax,” Kabir said.

Alamin said the government took many positive steps towards the sector.

One of them is raising the borrowing limit for the borrowers. Previously, a customer could borrow from banks a maximum of Tk 1.20 crore in home loans. The sector has got a shot in the arm after the central bank raised the ceiling on home loans by banks to Tk 2 crore.

The government is also going to cut the registration cost for apartments in line with the finance minister’s announcement while unveiling the budget in July, Alamin said. “We hope it would come down to a single digit.”

Apart from the amount paid as the price of a flat, a customer has to spend at least an additional 16 to 17 percent of it as registration cost, which keeps prospective buyers at bay.

The budget has also allowed people to invest their undisclosed money in the sector. The government has also made available low-cost home loans for public sector employees.

“These are positive signs for the real estate sector,” the REHAB chief said.

Alamin said there is a countrywide requirement for 2 million units. This requirement is for the people whose buying capacity is Tk 30 lakh to Tk 50 lakh.

“But unfortunately we are not being able to bring products for this group of customers because of higher land prices. If the Rajdhani Unnayan Kartripakkha and others who have land forge joint ventures with us, we will be able to introduce products for this group of customers.”

There should be long-term financing for this group of buyers because buying property at one-off payment is not viable for buyers anywhere in the world, he said.

Kabir of the BCMA said it is aspired that the construction sector will grow further riding on Bangladesh’s dense population, enhancing life expectancy rate, rapid construction of economic zones, sizeable investments in socioeconomic development of mainly common people, booming agriculture, and a thriving garment sector.

Bangladesh is investing heavily in infrastructure development, especially in power generation, highways, bridges, buildings and telecom.

 “If implementation of these large infrastructure projects takes place as per plan, the cement sector will grow substantially,” he said.

BACI’s Alam said some of the projects are at their end phase, some of the projects are mid-way and some of the projects would take a few more years to complete, so the momentum would continue into 2020 and beyond.

“The momentum will not slow down in 2020 – rather it would be accelerated because the government has unveiled a huge development budget.”

“2020 will be even more promising,” said Alamin, also the managing director of Shamsul Alamin Real Estate Ltd.

Construction sector to witness double digit growth April 16, 2018

Construction sector of the country is set to post double digit growth in the current fiscal year, FY18.
Provisional estimation of the Bangladesh Bureau of Statistics (BBS) showed that the sector is set to post 10.11 per cent growth in FY18, which was 8.77 per cent in the previous fiscal year.
The sector’s share in the Gross Domestic Product (GDP) is also estimated to increase to 7.53 per cent in the current fiscal, which was 7.36 per cent in FY17.
The value of the economic activities of the sector is estimated at Tk 737.17 billion for FY18.
Meanwhile, the latest labour force survey showed that some 3.43 million workers are now employed in this sector.
Construction sector is one of the 15 major sectors that contribute to the GDP.
It is also placed under the broader industry sector of the economy.

Local construction firms grow from strength to strength
MODIFIED: 01:28 AM, September 30, 2018
Local contractors in Bangladesh are increasingly coming of age as they show strengths in terms of timely-delivery of projects as well as playing a major part in mega-tasks implemented by foreign firms, according to industry professionals.
“We are more self-sufficient than in the past. We are able to carry out critical tasks now,” says Mainuddin Monem, deputy managing director of Abdul Monem Limited, the country's leading construction firm. He says Bangladesh is more advanced than many countries in the region in the construction sector.
Ghulam M Alomgir, founder and chairman of Max Group, another top construction firm, echoes the same. He says there is no need to depend on foreign firms to implement small- to medium-sized construction projects such as roads and bridges.
The construction sector is playing an increasingly strong role in the economy amid continued urbanisation and an array of large infrastructure projects undertaken by the government. It is one of the 15 major sectors that contribute to the gross domestic product (GDP).
The sector posted 9.92% growth in 2017-18, up from 8.77% in the year 2017, according to the state-run Bangladesh Bureau of Statistics (BBS). The sector's share to the GDP increased to 7.50% in the last fiscal year, which was 7.36 percent in 2016-17. The value of the economic activities in the sector was Tk 73,595 crore in the last fiscal year.
Some 3.43 million workers are now employed in the sector.
There are about 4,000 construction firms in the country, according to the Bangladesh Association of Construction Industry (BACI), a platform of contractors and engineers. Of them, 100 construction companies have the capacity to execute projects even in a foreign country, says BACI President Munir Uddin Ahmed.
But they are not currently looking for opportunities abroad as there are lots of opportunities at home amid an immense surge in demand for infrastructures such as bridges, roads, houses and factories, and this is unlikely to change in the near term.
Alomgir says, in line with the fast-growing economy of the last 15 years, the country's capacity has grown so much that apart from projects such as the Padma Multipurpose Bridge, Bangladesh's contractors are skilled enough to implement small- and medium-sized bridge projects. He says most of the projects being implemented by foreign contractors are being delayed to a great extent—sometime seven years are being taken in place of three. On the other hand, projects that are being executed by local companies are not subject to such long delays.
Max Group has completed the engineering, procurement and construction of combined cycle power plants, for the first time in Bangladesh.
Russian state-run firm Atomstroyexport, the contractor of Rooppur Nuclear Power Plant, has recently awarded the work of completing the critical civil and erection works of the main turbine hall building of the plant to Bangladeshi company Max Infrastructure Ltd, a concern of Max Group.
“This is a matter of pride for Bangladesh,” Alomgir says.
In this scenario, contractors say that the government should protect local contractors.
“Countries that grow strongly protect local contractors through domestic preference,” says Alomgir.
 “The country doesn't lose if it gives domestic preference because jobs are created, technologies are brought in and profits remain in the country.”
Monem says the government has given a thrust on infrastructure development under a very good master plan. A lot of work is being done. At the same time, a lot of work has to be done.
“Prospects for the construction sector are very bright.”
The testimony of Monem Construction could be found in various infrastructure development projects such as the four-lane Dhaka-Chittagong highway, access road to Bangabandhu Bridge over the Jamuna river and Osmani International Airport in Sylhet.
It has constructed the approach road of the Padma Bridge and is currently involved in six major projects such as the Dhaka Metro Project and the Padma Approach Extension.  
Monem says Bangladesh will have to increase its strength in terms of project design. The country should also engage non-resident Bangladeshis who have talents and expertise in the area. 
There is a lot of investment in the construction sector and it will go up further if the government works strategically, he says. 
Ahmed of the BACI says that in the past when foreign firms used to build large bridges and infrastructure projects in Bangladesh, they would bring equipment from outside of the country. But most of the equipment now being used in the projects being implemented by foreign firms are being supplied by local firms, he says.
Ahmed's company Star Delta Engineers Ltd worked in the export processing zones and is also working in the Metro Rail Project and the Padma Bridge Project.
Local firms are contributing significantly to the mega-projects now being implemented, says Kamruzzaman Kamal, director for marketing at Pran-RFL Group, which owns Property Development Ltd, one of the oldest construction firms in the country.
The physical work is largely being done by local firms, labour, engineers, and technology under the supervision of foreign firms, he says. 
Property Development Ltd was involved in the Dhaka-Mawa road project and the Cox's Bazar to Bandarban road project.
“There will be huge activity in the construction sector for the next five years,” says Kamal.

Creating Smart Cities

Bangladesh is on the path to be a middle-income country by 2021 which is well articulated in the government's development plans for the next few years. Urbanisation has a huge potential to contribute to this vision, as it is projected that more than half of the country's population will live in cities by 2050. While this is a huge opportunity, this could also be a potential challenge in terms of access to basic services, environmental degradation and pitiable living conditions. But it seems like Bangladesh is ready to grab the opportunity, a glimpse of which was visible at the Smart City Week organised by UNDP and the Access to Information (a2i) at the Prime Minister's Office, along with other urban stakeholders, from November 29 to December 5, 2017.

As an urban reform enthusiast from India, who had the opportunity to participate in this event, I felt this was a great initiative that attempted to construct a roadmap to co-create smart cities in Bangladesh. While this is an ambitious task, from my own experience with the government of India's Smart City Mission, it is a much-needed one.

The Smart City Week brought together a diverse group of stakeholders in the urban space—policymakers, city leaders, planners, authorities, communities and students. I was part of this diversity and represented IPE Global, which is an international development consultancy with its roots in India. While I shared some of our experiences of working in multiple and challenging Indian cities as part of the government's Smart City Mission, there was a realisation that many of the innovations that are tried and tested in our homeground can be dovetailed into the Bangladesh context.
One of the most attractive aspects of this Smart City Week was for people to participate, to develop a homegrown vision towards a Bangladeshi Smart City. This is important to emphasise as creating solutions that are suited to a particular social, political and economic context is critical. Moreover, a city can only be smart if it addresses the challenges of its slum-dwellers and I think this could be a common ground for India and Bangladesh to learn and share experiences with each other.

The other point of learning for the two countries could also be the use of technology to build inclusive cities that look after the poor and vulnerable. To me, this is the top line that defines a “smart city,” its ability to look after those who are at the bottom of the pyramid.

An integrated planning approach could support in addressing the needs of the poor in our cities. IPE Global has used this integrated approach for our work; an example will be from the State of Madhya Pradesh which is in Central India. One of the major components of this approach included creating an integrated cluster based approach to solid waste management. This resulted in significant reduction in transaction costs of solid waste management. Another integrated approach was to build and develop comprehensive water supply and sanitation system. Thirdly, integrated urban service centres were envisioned.

These centres would provide real-time data on multiple services while addressing citizen complaints and grievances in record time and with significantly reduced transaction costs. This ensured better coordination among various urban agencies like municipalities, development authorities and departments like police, transport and planning.

Cities are the centre of economic growth, innovation and empowerment. They are key to achieving the Sustainable Development Goal (SDG) agenda 2030. It is, therefore, encouraging to see Bangladesh gearing up to take on this challenge. It is the responsibility of the development community in Bangladesh to support the government in making our cities sustainable and truly smart. Learning from best practices from around the globe would be a logical start.

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