Contractors are looking forward to public investment

Promoting the public investment in key national infrastructure projects and large-scale industrial constructions is the policy that construction enterprises expect to create more jobs and help businesses escape from rising difficulties.

Opportunities for construction contractors

According to many experts, businesses in the construction industry have been struggling with the downturn of the real estate market since 2019, until 2020, the Covid-19 pandemic struck causing rising difficulties. 

Talking to the Vietnam Public Procurement Review, Mr. Le Viet Hai - Chairman of Hoa Binh Construction Group Joint Stock Company said that construction enterprises are facing significant challenges before the impact of the pandemic. “Inactivated tourism with unpredicted recovery, no one has planned to launch a tourism real estate project, a huge segment of the construction industry has stalled. Another major segment is residential real estate, many companies have difficulty in collecting money from customers during the past. Decreased income, unemployment, accumulated savings, many people will have difficulty in buying a home. The difficulty of the real estate market is also our difficulty - those who do construction" - Mr. Hai said.

However, according to Mr.Hai, promoting public investment or promoting Vietnam's advantages in industrial investment and attracting FDI will be the salvage of the construction industry in the coming time.

“The impulse of public investment is a very good opportunity, is an appropriate policy to recover the economy, create jobs for employees, including the construction industry. When the economy grows well, many laborers leave the construction industry because it is too hard, but when they are unemployed, many people will immediately move to construction because of the simple job” - Mr. Hai said.

Agreeing with Mr. Hai’s opinion, Mr. Nguyen Quoc Hiep, Chairman of Vietnam Association of Construction Contractors (VACC) said that, “Many domestic contractors said that they would cooperate and ask VACC to connect so that they could execute a huge bidding package together. In general, contractors are very interested in and expect this opportunity. We are still waiting for specific instructions”.

Assessing the business situation of the current construction contractors, Mr. Hiep said, even large enterprises such as Coteccons, Vinaconex, Phuc Hung ...have decreased revenue and profit. “Basically, the whole construction industry is in a difficult situation, the source of the work is also competitive. When the Government promotes public investment, the source of work will be better” – Mr. Hiep said.

How to prepare to seize the new opportunity?

Mr. Dao Hong Duong, Director of Analysis of Petrovietnam Securities Incorporated (PSI) said that the construction industry will have a strong differentiation in the future. Civil construction enterprises may depend on the recovery of liquidity and capital flows into the real estate market, while some companies that build foundations and infrastructure may have great advantages from public investment activities of government.

According to the Socio-Economic development strategy (2011-2020), the construction industry is an economic sector with an important strategic role in Vietnam’s development. However, according to the statistics of the Institute for Urban Studies and Infrastructure Development (IUS), from mid-2018 up to now, the growth rate of construction and infrastructure have dropped dramatically with an increase of growth in 2018-2019 has only reached 9,2 – 9,5%.

To deal with a difficult situation, many construction enterprises have applied different strategies. They are also more responsive in grasping the situation and taking advantage of opportunities.

Mr. Le Viet Hai said that, Hoa Binh Construction Group Joint Stock Company has carefully prepared and accumulated experiences in executing infrastructure projects to take advantage of opportunities from motivating public investment. The gesture of acquiring 479 Joint Stock Company was considered by Mr. Hai as a “springboard” to penetrate deep into the field of infrastructure.

In addition to investing in a company which is specialized in the field of infrastructure, Hoa Binh also has recruited director who comes from a leading transportation construction corporation in Vietnam. Enterprises are still continuing to expand the market, participating in bidding for many projects, especially infrastructure construction projects. The total currently bidding value of Hoa Binh is over VND 26.000 billion. “The preparation in the past helps us to forestall opportunities for infrastructure construction. Hoa Binh is not only a general contractor but also an investor of many important projects”.

Despite expecting of opportunities, Mr. Nguyen Quoc Hiep did not forget to share his concerns in approaching public investment projects. “Overall, opportunities have increased but also many difficulties need to be solved. The most apprehensive of contractors is disbursement. Outstanding debts are the biggest fear”, Mr. Hiep analyzed.

Mr. Hiep said that, to alleviate “the fear” of outstanding debts, the Association had proposed that contractors must be paid in order to be accepted. In addition, enterprises must be facilitated in order to approach the information. From the business side must be more dynamic and active in seizing opportunities.

Mr. Le Viet Hai also shared that, when they were taking over 479 Joint Stock Company, enterprises were “stunned” with pending charges-off debts of construction for many years. Mr. Hai said that it is necessary to clear the outstanding debts away and creating capital for businesses to help public investment projects mobilize the best construction sources. “Project management must be coherent, payment and settlement are ensured. Clearance must be clear, entirely bidding should be organized online, ensuring transparency and fairness”, Mr. Hai suggested.

Moreover, construction companies often take the short-term loans. The impact of the pandemic has also made many businesses are temporarily losing their liquidity. To save enterprises, the State Bank of Vietnam should have policies to support and change some provisions in short-term loans, debt extension for contractors.

Some construction enterprises in market are also contriving to catch opportunities from infrastructure resources. 2020 as well as the next 5-year period, two of the five key businesses of FECON Joint Stock Company are infrastructure construction, industrial construction and climate change prevention.

Considering the market, Mr. Dao Hong Duong, Director of Analysis of Petrovietnam Securities Incorporated (PSI) said that the construction industry will have strong differentiation in the future. Civil construction enterprises may depend on the recovery of liquidity and capital flows into the real estate market, while some companies that have built foundations and infrastructure may have great advantages from Government’s public investment activities.