Construction Woes

The head of Jordan’s contractors association says his members are starting to suffer due to a downturn in their sector.

By Dina Al Wakeel

According to the Department of Statistics, the number of building licenses issued during the first five months of 2015 was down almost 20 percent on the same period last year.

Wael R Toukan, the president of the Jordanian Construction Contractors Association, said a general economic slump, increased competition, and a dearth of major public sector projects have all led to increased unemployment among the association’s 2,450 members.

How bad has the slowdown been in Jordan’s construction sector?

The volume of business is in billions but the Jordanian contractor only gets 10 percent of all work. We get peanuts compared to the volume of the projects. Competition is fierce and the market is not moving; what’s expensive remains expensive. Our financial obligations are constantly on the rise.

What are some of the most prominent challenges that your members face?

Last year, we paid a flat percentage of our income in tax: 1.4 percent. Today under the new Income Tax Law, this percentage has increased to 2.5 percent. This is definitely unfair. It is true this is a sector that helps keep the economic wheel spinning, but it doesn’t mean we are making money. Many of the contractors have made losses, particularly during the past few years due to the increased competition and the slowdown in business. In the public sector, the number of projects has declined tremendously, probably to 10 percent of what they used to be.

Today we are asking the Prime Minister to pay bills due since last November. We are owed roughly more than JD40 million. In the private sector, we have a problem as it seeks the services of unregistered contractors. Eight million square meters of built-up area was created in 2014. If work was properly distributed, then all the contractors would have found jobs. But this didn’t happen. The work mostly went to non-registered contractors and non-Jordanians like Egyptian workers.

But don’t some of these problems stem from a surfeit of engineers competing for jobs in the sector?

Students either want to study medicine, anything related to medicine, or engineering. This is a culture. In the past, we had vocational training but unfortunately slowly these centers transformed into universities. I don’t understand why. I doubt that the quality of engineers today is the same. Today there are 120,000 engineers. The local market will not be in need of more engineers for years, but the good thing is that we are exporting to the Gulf states. Universities should carry out studies to figure out what’s needed in the job market, some years there is more demand for civil engineering, other years there’s a need for something else. We need to guide the students from the very beginning. This is not only in engineering, but [should be applied] in the different faculties and sectors.

Do you think the price of real estate in Jordan is fair at the moment?

Compared to the countries in the region, our prices are suitable. Steel is down but cement isn’t and labor isn’t. All the basic materials are not becoming cheaper, so I doubt that the price of apartments will go down.

What type of projects are most in demand?

There is a lot of demand for residential buildings. Most of the apartments are sold to people from the Gulf, that’s why we need to improve the end product to keep attracting investment in this sector. I have warned that some people have instead been heading to Turkey, Cyprus, and Greece to buy property. The buyer always looks for cheaper prices, even if the difference is a few hundred dinars. The trend is now moving more towards renewable energy projects. But most of the volume goes to foreigners. Thirty percent of the work should go to local contractors according to the law, but the engineering expertise is mostly imported.

You said that you wanted to improve the end product, what are some of the issues that you think need to be addressed in the construction processes?

There are issues and we are currently holding a workshop to better organize the construction market. We have many laws and regulations but they are not activated. I wouldn’t say there is cheating but there is a laxity in standards. We are now aiming to strengthen the construction standards. During each construction process, the services of classified contractors should be sought, the process should be supervised by an engineer, and they all should follow existing procedures. At the end of the day what matters are the customer, the economy, and encouraging investment in this country. We want products that abide by regulations and are built according to Jordanian building codes. We have daily trips by inspection committees with GAM to detect violations, but violators don’t get punished. The market is a bit loose, today the problem is many people only think of how they can make money.

How do you foresee the future of the sector?

We are trying to amend some of the laws and regulations that we feel don’t serve the sector and the government is cooperating with us to make this happen. It’s a promising sector in a stable country. We should find ways to export the sector, and our experienced contractors, to neighboring countries. We already do that but to a small extent. With our engineers, technology, and contractors, we should expand.