Catanduanes State University

College of Engineering
Virac, Catanduanes

THE EVOLUTION OF THE CONSTRUCTION INDUSTRY IN THE

PHILIPPINES AND HOW IT IS CONSTANTLY CHANGING

In Partial Fulfillment of the Requirements in

CE 22
CE Educational Tour

Submitted by:

RACHEL MAE P. GABRONINO

BSCE-5A

Submiited to:

ENGR. MICHAEL M. TRABALLO

Professor

May 5, 2020
 ABSTRACT

This study provides a general overview about the situation and changes in construction

industry in the Philippines over the years. Statistical data were presented and discussed in this

study. Economic contribution, value and employment data and information based on facts and

references were presented. Data are gathered through the internet and articles with selected

references to make sure that information presented are has basis.

The construction industry has seen more rapid-fire changes than in any period in history,

including both the industrial revolution and the post-war era. The goal of the construction

industry is to be a key driver towards the design and building of structures with globally

competitive quality for nation-building. It serves many sectors of the economy — government,

ownership dwellings, banking, real estate, food, communication. When the construction

industry achieves modernization, it will aid the deficiencies of these sectors. The industry

continues to provide services that help not only in building of structures and facilities, but also

that of the nation.

 CHAPTER 1

INTRODUCTION

Construction is foundational to an economy. Construction crews erect new homes,

offices, industrial plants, and retail locations in addition to many other kinds of projects. These

projects affect every industry, and so many people depend upon a successful build. Despite this,

there are clear modern challenges in the construction industry that impact construction workers

and hinder project progress. Read on to learn what these difficulties are and how the industry can

address them.

The construction industry produces a wide range of products, and the enterprises are

equally diverse. However, the vast majority of enterprises involved in on-site construction are

small and local. Despite globalization and the existence of an international construction industry,

the majority of construction activity is still undertaken by local firms. There is a tendency among

enterprises in construction (as in other industries) to outsource the supply of goods and services

required in the production process. Building materials, plant and equipment are generally

purchased or hired from other enterprises. Specialized services are supplied by subcontractors,

and labor by labor agents. Design and engineering services are also provided by separate

professional entities.

There have been technological changes in the industry, notably the increasing use of

environment-friendly technologies. There is a need for skills training for workers and managerial

training for enterprises to adapt to such changes. The decentralization of government activities
related to construction bring new demands for local authorities, involved on a large amount of

construction activities through direct administration and/or contracting private enterprises.

Following, there is a need to build the capacity of local authorities regarding labor issues in

construction.

The construction industry generates jobs for large numbers of people. Labor conditions

vary widely throughout the world. The Sectoral Policies Department (SECTOR) has undertaken

research on emerging labour issues in the construction industry, facilitated social dialogue

among the ILO’s tripartite constituents, provided technical advice, and developed practical tools,

policy recommendations, and training modules used by the headquarters and field offices.

A lack of quality labor is perhaps the most acute challenge in the construction industry.

When real estate and other jobs dried up in the 2008 recession, thousands of trained and able

men and women left the construction industry to secure a new source of income. Many of these

people, equipped with years of training and aptitude, did not return. In the following decade or

so, the labor vacuum costs construction crews more in training for new hires, but the low supply

of workers remains a sustained issue.

Also, the construction industry struggles to drastically improve safety concerns and

suffers from communication inconsistencies. Construction, in the past and now, has one of the

highest rates of injury and death. This isn’t entirely surprising because of their work with heavy

machinery, but the danger posed to workers repels prospective workers while complicating

construction projects and putting people at risk. The answer to this is extensive training upon

hiring followed by intentional ongoing training as crews introduce new systems and

technologies, as well as improved communication among crewmembers. There are several ways

to improve construction site communication—one example is introducing two-way radios to

allow your workers to send urgent messages immediately without costly or dangerous delays.

The Construction Industry is one of the most important sectors of the Philippine

economy. It is responsible for the erection of buildings and infrastructures, development of roads

and bridges that are necessary for a well-functioning economic system. Output of the sector

allows less disruptions in transporting goods and services across the country. The industry

continues to provide services that help not only in building of structures and facilities, but also

that of the nation.

The Philippine real estate has been one of the promising investment options in the

Southeast Asian region for years now. Backed by its strong macroeconomic fundamentals –

sustained growth in production and consumption, highly conducive investment climate, robust

tourism performance and booming public and private construction growth, among others,

investment entry has remained a highlight of the local economy.

To top this, local governments’ initiative of hastening the priority infrastructure projects

further improves the general investment confidence of both local and foreign investors.

Nowadays, it’s a usual sight in most highly urbanized and commercialized centers of business in

the Philippines, other than the Mega Manila, that cranes are seen towering amid urban sprawls.

This is but one of the most apparent indicators of the booming real estate industry in the

Philippines.

1.1 Background of the Study

 Construction during primitive times consisted of mud huts and stone monoliths such as

Stonehenge. The tools of the trade included animal bones, copper plates, and axes.This activity

eventually lead to proto-cities — putting an end to pastoral life and paving the way to society as

we know it.

Over time, humans refined their construction practices and started building more

permanent structures. Historians believe what we know as traditional construction began to take

shape in Ancient Egypt and Mesopotamia. As humans abandoned nomadic life, these societies

built permanent shelters. The Egyptian Pyramids are some of the first examples of large-scale,

permanent structures.

As the population grew and urbanization took over, construction quickly became a staple

of civilization. Although this type of construction is a far cry from buildings we see today, this

type of activity laid the foundation for contemporary construction.

The story of the construction industry is one of human advancement. Innovation

compounds over time, and anyone who has been inside of a building owes a debt of gratitude to

the industry pioneers of yesteryear. The construction industry is only able to progress into the

future thanks to the breakthroughs of the past

Construction industry has some peculiar characteristics like any other industry. Firstly, it

is a capital-intensive industry involving current and future outlays of funds with the expectation

of a stream of benefits extending far into the future. Secondly, construction project takes a long

duration to complete and they also have a long gestation period. Thirdly, the useful life of

construction project of national importance is very long usually more than 60 years for most of

the major constructions. Fourthly, in construction project, products and services are combined
together. In construction, product is fixed and machine and men move, contrary to assembly line

production in which product moves. Fifthly, a large construction needs a large land area.

Acquisition of such land leads to payment of compensation to the owners of the land, which has,

legal and political over tones. In some cases like construction of dam, it needs rehabilitation of

nearby villages. Such problems usually do not occur with the other industries.

1.2 Scope and Delimitation

1. The study focuses on the evolution of construction industry in the Philippines and

how

2. The study discuss the changes in construction industry over the years.

3. The study includes statistical data supporting the discussions.

4. The study will just assess the current situation, facts, and data about the evolution of

construction industry in Philippines and will not create a solution for the discovered

problems.
 CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1 Related Literature

2.1.1 Construction Industry in United States

The U.S. construction industry is among the world’s largest, with annual

expenditures of over (US)$1,231 billion. With this annual spending driving the U.S.

economy, U.S. construction companies, for example, spend more than (US)$10 trillion in

goods and services, employing over 10 million workers. Construction projects are taking

place all over the country, making the industry’s outlook a positive one.

This doesn’t mean it’s all clear sailing from here. It isn’t. U.S. construction

companies face roadblocks and operational challenges every day, like improving safety

and a labor shortage. To stay competitive in 2019, these problems must be beaten, during

a period where the industry only has the ability to grow modestly. To stay competitive in

2019, these problems must be beaten, during a period where the industry only has the

ability to grow modestly. A rise in interest rates and the U.S. economy may also slow

down construction’s future growth.

The U.S. construction industry continued to expand during the first half of 2018

but still more slowly than 2017. A strong economy and positive market fundamentals for
commercial real estate did help to fuel this modest expansion. This was along with an

increase in federal and state funding for public works, and institutional buildings.

2.1.2 Construction Industry in India

The construction industry in India is an important indicator of the development

as it creates investment opportunities across various related sectors. With a share of

around 8.2%, the construction industry has contributed an estimated ₹670,778 crores

(US$ 131 billion)[1] to the national GDP at factor cost in 2011–12.[2] The industry is

fragmented, with a handful of major companies involved in the construction activities

across all segments; medium-sized companies specializing in niche activities; and small

and medium contractors who work on the subcontractor basis and carry out the work in

the field. In 2011, there were slightly over 500 construction equipment manufacturing

companies in all of India.[3] The sector is labor-intensive and, including indirect jobs,

provides employment to more than 49.5 million people. The construction sector is

visualized to play a powerful role in economic growth, in addition to producing structures

that adds to productivity and quality of life. economic development is a term that

economics politician and other have used frequently in the 20th century, modernization

westernization and specially industrialization are other terms people have used while

discussing economic development. economic development has a direct relationship with

the environment. government undertaking to meet go abroad economic objectives such as

price stability, high employment and sustainable growth, such efforts include financial

and economic policies, regulations of financial industry trade and tax policies. The Indian

economy has witnessed considerable progress in the past few decades. Most of the

infrastructure development sectors moved forward, but not to the required extent of
 increasing growth rate up to the tune of 8 to 10 per cent. The Union Government has

underlined the requirements of the construction industry.

CHAPTER THREE

DISCUSSION

For hundreds of years the construction industry was largely unchanged. Sure, motorized

equipment and power tool made specific tasks quicker and more efficient, but the work they

wasn't all that different. Plans were drawn by hand, notes were handwritten and physically filed

and construction workers communicated using good ol' fashioned eye contact and voices. Then,

the technological revolution began.

In the past two decades, the construction industry has seen more rapid-fire changes than

in any period in history, including both the industrial revolution and the post-war era. From

digital records and 3-D imaging systems to smart construction software and drone technology,

the construction site functions a little differently than it did when our fathers and grandfathers

strapped on their tool belts.

5 Construction Industry Innovation

1. Digital records and plans. While we all like to have our hands on a nice set of paper

plans from time to time, digital records of everything from building plans and permit

applications, to safety inspections and client communication have seriously lessened

the amount of paper we have floating around the office - as well as the jobsite. Now,

electronic gadgets (see #2) and digital records means you can see a plan page, a
 detail, or a change order right on your screen. These digital features include the

ability to see plans in 3-D, which assists both the client and your construction crew to

see both the big picture as well as how all the pieces of the puzzle fit together.

2. Smart gadgets. Perhaps one of the most notable features on a constructions site these

days is that everyone has a phone. Coming to work with a phone, and using it while

on the job, would have been unheard of - even in the 90s. It was considered bad

etiquette and personal calls were considered a no-no. However, as smart phones and

other gadgets have become the social norm, workers have their personal devices

strapped on their persons at all times. Sure, we bemoan the personal texts and

Facebook checks, but what we love is instant access to communication with any of

our workers, on any jobsite, at any time. Without their gadgets, there would be no

way to transmit the instant changes in instructions, plan change orders and other

tidbits that need to be disseminated from the office or the job trailer to the work site -

and smart gadgets make instant communication possible. They also make it possible

for workers and managers to take instant pictures of interior wall spaces before they

are closed-in, or design features that aren't quite working out, so instant decisions can

be made.

3. Construction management software. Here is an industry that didn't even exist 20

years ago in any serious way, and now you'll be hard-pressed to find a medium- to

large construction company that doesn't use it to run their company. Construction

management software has been so successful that even smaller operations are finding

it worthwhile to make the investment. This piece of technology facilitates plans and
 plan changes, communication between the building owner, project managers and

anyone else involved in the project. It can assist with budgeting and billing processes,

timeline management and real-time communication and collaboration tools. There are

even features that can be used between developers, builders and municipalities,

streamlining the permitting and inspection processes.

4. Health and safety standards. This one has been a long time coming, and it's taken a

long time to implement health and safety standards as a regular part of company

culture. It used to be that only "wusses" wore masks or ear plugs, and even fall

protection procedures were taken loosely, often resulting in crew members wearing

harnesses - - - that weren't attached to anything. Now, however, the message has

begun to sink in. Continued efforts by OSHA, as well as companies that recognize

health and safety standards improve working conditions and worker efficiency, has

led to a whole new attitude about safety regulations on the site. 

5. Drones. Here's a new kid on the block and he took up residence quick. The potential

for unmanned aerial vehicles (UAVs) on construction sites are being rapidly

metabolized by construction sites around the country. These remotely operated

devices - often using pre-programmed flight patterns using GPS technology - mean

large-scale projects can be surveilled from remote locations to monitor a project's

progress. They can be used to inspect areas of the building that are more dangerous to

access and can pick up on minor and major plan deviations so they can be corrected.
 The Philippine construction industry increased in value at a compound annual growth rate

(CAGR) of 12.01% during the review period (2009?2013). This growth was supported by public

investments in the infrastructure and residential markets, which are expected to be the main

growth drivers over the forecast period (2014?2018). The industry is projected to record a

forecast-period CAGR of 9.90%. Business process outsourcing, public-private partnership (PPP)

initiatives and rise in the number of tourist arrivals will also drive industry expansion, leading to

the construction of more residential properties, roads, bridges, offices and power plants.

Construction value add in nominal terms registered a review-period CAGR of 10.18%.

The construction value add is expected to register a CAGR of 10.63% over the forecast period,

owing to the country's robust economic conditions. The forecast-period outlook for construction

in the country is more optimistic, with increased government spending, an increased proportion

of construction expenditure in the country's GDP, and the rise in the number of tourist arrivals.

 The Philippine construction activity has been growing. According to the Philippine

Statistics Authority (PSA), the number of approved building permits increased by 20.8%,

from 24,400 new construction projects in the first quarter of 2013 to 29,468 in the first

quarter of 2014. Moreover, residential-type building projects recorded a faster rate of

expansion, with 17.1%, compared with non-residential buildings with 15.2%. While the

rise in activity indicates improvements in the industry, there are concerns over the impact

this will have on material and labor prices.

 In a bid to revive the country's housing market and meet demand from the growing

population, the Housing and Land Use Regulatory Board (HLURB) has set a target to

construct 1 million housing units by 2016, and also announced the construction of 301

condominium projects in Metro Manila, constituting 134,421 housing units over 2013–
 2017. Of the total, the mid-market segment consisted of 49,997 units (37.0%), while one-

bedroom housing units accounted for 104,028 units (77.0%). Residential sales are

stronger among the high-end market and foreigners, as they are more prone to leasing and

renting property. This will support residential construction activity in the country over the

forecast period.

 The Philippines invested heavily in infrastructure projects during the review period, with

this anticipated to continue over the forecast period. In October 2012, the Philippines

Department of Public Works and Highways (DPWH) announced plans to launch several

infrastructure projects over the forecast period, amounting to PHP239.1 billion (US$5.5

billion). This will include the construction of PPP projects such as the 7.15km-long

Ninoy Aquino International Airport Expressway, the C-6 Expressway and Global Link,

the 13.4km North Luzon Expressway-South Luzon Expressway (NLEx-SLEx), the

Connector-Elevated Expressway and Metro Manila Skyway Stage-3, the 36.0km-long

Cavite-Laguna Expressway, the Kennon Road and Marcos Highway improvement, and

the second phase of the Southern Tagalog Arterial Road. It also aims to construct new

bridges, upgrade unpaved roads, and upgrade expressways and highways. The major

project will be a 10-year contract for the operation and maintenance of Manila's electric

train systems, which will amount to PHP14.1 billion (US$325.0 million).

The Philippine construction industry registered a growth of 15.1% in real terms in 2018.

This was preceded by an average annual growth of 9.6% during the preceding four years.

Growth during the review period (2014-2018) was driven by positive developments in regional

economic conditions and government investment in residential, transport and energy

infrastructure.
 The industry’s output value is expected to continue to expand in real terms over the

forecast period (2019-2023), driven by the government’s plans to upgrade the country’s transport

infrastructure. In addition, public and private sector investments in residential, commercial and

educational infrastructure construction projects are expected to support growth in the industry

over the forecast period. The government’s investment in the development of the country’s

transport infrastructure under the Build, Build, Build program is expected to support industry

growth. In the 2019 budget, the government proposed to spend PHP909.7 billion (US$17.2

billion) under the Build, Build, Build program to develop the country's crumbling transport

infrastructure. In addition, the government’s aim to improve local energy resources is expected

to support investment in energy infrastructure projects, which will in turn fuel growth in the

industry.

The prices of construction materials remained steady throughout most of 2018, but began

to increase slightly in the first couple of months of 2019, particularly in Metro Manila. Indeed, in

the National Capital Region (NCR) the Construction Materials Retail Price Index rose by 0.04%

in April 2019 over the previous month, which increased by 0.03% compared to February 2019.

The higher costs in April primarily stemmed from heightened prices for carpentry and plumbing

materials. Moreover, April 2019 marked a 1.7% y-o-y increase, while March showed an annual

climb of 1.9%.

In December 2018 the Cement Manufacturers’ Association of the Philippines (CMAP)

called attention to the fact that 13% of national annual cement demand was being met by imports

despite the local industry having sufficient capacity, and requested that the government level the

playing field for domestic players. According to the CMAP, the country had an installed and
operating capacity of 34.5m tonnes at the beginning of 2019, while annual demand was roughly

25m tonnes in early 2018. Capacity for steel is also set to expand in step with the implementation

of BBB, yet the Philippines remains a regional laggard in terms of steel production and

consumption. Domestic mills almost exclusively produce rebar, and the country relies on imports

for roughly 70% of consumption.

Investment pledges in Philippines soared dues to influx of infrastructure investment

under the Build Build Build Program. From Php 26 Billion from 2016, investment pledges

soared Php 131.6 Billion by 2017 with a total leaped by 402.3%.

Construction added contribution to employment of 8.7% share to total employment at 1 st

quarter of 2018. On the same year, there are a total of 3.826 M average domestic employment in

construction plus additional 2.5 M workers are needed.

Based on insights from construction industry players, the Philippines is experiencing a

shortage of skilled laborers in the construction sector, as the government stepped up

infrastructure spending in the second half of 2019 and the private sector continued the rapid

development of office and residential projects across the country.

Construction companies are looking for thousands of workers, including project

engineers, foremen, mason, carpenters, machine operators, plumbers, electricians and painters. I

have learned that many companies are having a hard time filling the vacant positions despite the

above-minimum wage they are offering.

While this is a problem for the industry, it speaks of the vibrant economic activities

happening across the country. Data from the Department of Budget and Management (DBM)
show that public spending on infrastructure projects climbed 54 percent in September 2019 to

more than P100 billion, from just P65.2 billion in the same month of 2018.

The private sector’s strong need for construction workers is not expected to dissipate

anytime soon as companies are planning to build more projects. The PSA said the building

permits issued by the local building officials nationwide reached 43,394 in the second quarter of

2019 alone, up 8 percent from 40,182 permits approved a year earlier.

By type of construction, residential permits reported the highest number at 32,077, or

73.9 percent of the total in the second quarter and representing a 10.4-percent increase from a

year ago. The number of applications for nonresidential constructions hit 5,966, up 5.7 percent

from 5,644 nonresidential constructions recorded in the same period of 2018.

The growth is clear in terms of construction value. The PSA said the total value of

constructions were estimated at P123 billion in the second quarter, up 21.6 percent from P101.2

billion registered in the second quarter of 2018. Such a strong growth in construction

applications in the second quarter was a continuation of the industry’s robust performance in

2018 when the total number of constructions from approved building permits reached 173,193,

up 3.9 percent from 152,012 constructions in 2017.

The building construction industry in Philippines is expected to record a CAGR of 14.4%

to reach PHP 871.1 billion by 2024. The residential construction industry in value terms

increased at a CAGR of 9.7% during 2015-2019. The commercial building construction market

in value terms is expected to record a CAGR of 15.3% over the forecast period.
 It provides a comprehensive understanding of construction industry sectors in both value

and volume (both by activity and units) terms. The report focuses on combining industry

dynamics with macro-economic scenario and changing consumer behavior to offer a 360-degree

view of the opportunities and risks. In addition to country level analysis, this report offers a

detailed market opportunity assessment across key cities, helping clients assess key regions to

target within the city.

The PCA also observed that the construction industry practices a monopolistic

competition:

 Has differentiated product, brands, or companies

 Small contractors – has the same competition (termed as a political capital)

 Prices vary on the sophistication of the project; big firms are the only ones who can

engage in research and division

 Customer relations has purely become a domestic orientation among the contractors.

 High growth but only profit in B segments but very low in small contractors

 According to the Philippine Economic Society, a possible economic crisis will occur if

we don’t address the widening trade deficit of the trade industry while dollar reserves

dwindle.
 CHAPTER FOUR

CONCLUSION

In the past two decades, the construction industry has seen more rapid-fire changes than

in any period in history, including both the industrial revolution and the post-war era. The

construction industry generates jobs for large numbers of people. . There is a need for skills

training for workers and managerial training for enterprises to adapt to such changes. The

decentralization of government activities related to construction bring new demands for local

authorities.

The construction industry in the Philippines grew over the past years due to the

following — the emergence of the Business Process Outsourcing sector, increase in the number

of tourists and investors, as well as the government’s flagship program Build Build Build. The

next 10 years may bring a potential implosion in its capacity unless a system and a harmonized

intervention of the key players of the industry is agreed upon. The coming years are expected to

be positive for construction

 LIST OF REFERENCES

https://businessmirror.com.ph/2020/02/28/its-full-speed-ahead-for-the-philippine-real-estate/

https://www.dixonpilot.com/2020/05/04/3-modern-challenges-in-the-construction-

industry/

https://www.whirlwindsteel.com/blog/bid/406699/5-ways-the-construction-industry-has-

changed-in-20-years

https://gocontractor.com/blog/us-construction-industry/

https://www.ilo.org/global/industries-and-sectors/construction/lang--en/index.html

https://shodhganga.inflibnet.ac.in/bitstream/10603/53626/11/11_chapter%201.pdf

https://ppp.gov.ph/in_the_news/construction-industry-seen-sustaining-growth/

https://www.marketresearch.com/GlobalData-v3648/Construction-Philippines-Key-Trends-

Opportunities-13142680/

https://www.prnewswire.com/news-releases/construction-in-the-philippines---key-trends-and-

opportunities-to-2018-276835501.html

https://store.globaldata.com/report/gdcn0466mr--construction-in-the-philippines-key-trends-and-

opportunities-to-2023/
https://businessmirror.com.ph/2019/11/26/we-need-more-builders/

https://oxfordbusinessgroup.com/philippines-2019