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Construction Companies in Vietnam:  A Plummeted Growth Rate in 2020

Construction Companies in Vietnam: A Plummeted Growth Rate in 2020

Friday 23, 04 2021
Vietnam Report JSC has recently published the list of top 10 reputable companies in the construction and building materials industry in 2021. They also pointed out two major causes that limited the growth of the construction industry in its “maturing” stage.

Over the past years, construction companies in Vietnam have gradually asserted their position in the fields of building materials, construction engineering, architecture and construction planning, and urban development. Vietnam construction companies are also gradually replacing foreign ones.

However, while in a “maturing” phase, the construction industry encountered two major obstructions: The halt of the real estate market – the main supply source for the industry in 2019, and the 2020 COVID-19 pandemic. Due to these reasons, the achievements acquired by construction companies in Vietnam were greatly impacted.

Construction companies and a declined growth rate

As reported by the General Statistics Office, in 2020 the construction industry has only grown by 6.76%, a significant decrease compared to the growth rate in the period between 2015 and 2019. The construction industry contributes 0.5 percentage points to the general growth rate of Vietnam’s total economic value added.

Construction companies and a declined growth rate

In 2020, the difficulties mainly come from instability due to the COVID-19 epidemic. In particular, fluctuations in prices of raw materials for production continue to be one of the top difficulties for 66.7% of construction companies and 71.4% of building materials businesses. In addition, the factors of natural disasters and weather significantly affect the operation of 58.3% of construction enterprises. Moreover, the periods of social distancing caused by the epidemic also affect the workforce and the employees' psychology, making the situation even more difficult. Besides, several remaining issues from the previous period, such as the decrease in the number of approved projects, the administrative procedures, the lack of capital, etc., also obstructed the development of the construction industry.

Opportunities for the construction market in 2021

"COVID-19 has changed the way the world works, and, in turn, has made a significant impact on the construction sector - the largest sector in the global economy with 13% of world GDP," said experts. The most notable changes in the construction industry are:

Opportunities for the construction market in 2021

  • The involvement of investors in construction progress, which led to higher requirements on project size and distribution.
  • The increase of customers' interest in smart building.
  • The expectation for sustainability in the construction industry.
  • The skilled labor became scarce and expensive.
  • The rules and regulations in construction will change.

A changing market, along with the advance of technologies, will create a change in the activities of the construction industry. Vietnam, being one of the top 16 most successful emerging economies in 2020, can surely expect a better economic picture in 2021. About 31% of construction and building materials enterprises surveyed by Vietnam Reports predicted that their business situations would be better in the first six months of 2021. Up to around 47% of enterprises are forecasted to grow over the next twelve months. Notably, about 15% of surveyed businesses believed that there will be a surge in certain segments in the next six months.

The statements above from the surveyed companies are quite inevitable facts. According to experts, there will soon be a fierce race between construction and building materials companies to compensate for the loss caused by one year of pandemic. The prime motivation for these companies will be the livelihood of their businesses. Additionally, the Government has taken positive actions in resolving problems in administrative procedures that cause a market slowdown in the 2019-2020 period. Finally, the pandemic is being well controlled generally over the world with the implementation of vaccines. With these three elements factored in, construction companies in Vietnam can expect improvement in 2021.

 

Compiled by VietnamCredit

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