POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

OPEN UNIVERSITY SYSTEM

SCHOOL OF DISTANCE EDUCATION
MASTER OF SCIENCE IN CONSTRUCTION MANAGEMENT
STA. MESA, MANILA, PHILIPPINES

CM650 – Principle of Construction Management

“INDIVIDUAL RESEARCH & ASSIGNMENT, IRA01”

PRINCIPLE OF CONSTRUCTION MANAGEMENT

LITERATURE REVIEW: TOPIC 1

Presented to

Ar. Reynaldo C. Ventura, Jr.

In Partial Fulfillment for the Requirements of Master of

Science in Construction Management (MSCM)

Submitted By:

Engr. Apolonio Dela Cruz Mallorca II

2022
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES-
OPEN UNIVERSITY SYSTEM
SCHOOL OF DISTANCE EDUCATION
MASTER OF SCIENCE IN CONSTRUCTION MANAGEMENT
STA. MESA, MANILA, PHILIPPINES

Table of Contents

The Importance of Construction Industry to the Economy of a Nation: Literature Review ...... 3

1. Introduction ................................................................................................................ 3

2. Importance of Construction Industry to Economy ....................................................... 3

Attracts Foreign Investment ........................................................................................... 4

Boosts Tourism .............................................................................................................. 4
Spurs Growth for Other Sector ....................................................................................... 5
Creates Jobs.................................................................................................................. 5
Attracts Talent ................................................................................................................ 5
3. Construction Industry to the Global Economy ............................................................. 5

Analysis of the General Situation of the Development of China's Construction Industry . 6

Analysis of the General Situation of the Development of Japanese Construction Industry
...................................................................................................................................... 6
Analysis of the General Situation of the Development of American Construction Industry
...................................................................................................................................... 7
Analysis of the General Situation of the Development of the Construction Industry in
European Union ............................................................................................................. 7
4. Construction Industry to the Philippines’ Economy ..................................................... 8

5. Philippines” Golden Age of Infrastructure” .................................................................. 9

6. Conclusions and Recommendations ........................................................................ 10

7. References ............................................................................................................... 11

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Engr. Apolonio Dela Cruz Mallorca II
CM650 1-1B
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES-
OPEN UNIVERSITY SYSTEM
SCHOOL OF DISTANCE EDUCATION
MASTER OF SCIENCE IN CONSTRUCTION MANAGEMENT
STA. MESA, MANILA, PHILIPPINES

The Importance of Construction Industry to the Economy of a

Nation: Literature Review

1. Introduction

An economy is an area of the production, distribution, and trade, as well as

consumption of goods and services. In general, it is defined as a social domain that emphasize

the practices, discourses, and material expressions associated with the production, use, and

management of scarce resources. A given economy is a set of processes that involves its

culture, values, education, technological evolution, history, social organization, political

structure, legal systems, and natural resources as main factors. These factors give context,

content, and set the conditions and parameters in which an economy function. In other words,

the economic domain is a social domain of interrelated human practices and transactions that

does not stand alone (In Wikipedia,2022).

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

in the construction domain are equally diverse. The construction industry can be divided into

three sectors of construction namely building, infrastructure, and industrial. They can be

further classified as residential, non-residential, and engineering projects. The construction

activity can be carried out as a private or public endeavor (Technofunc,2020).

2. Importance of Construction Industry to Economy

According to the blog (The Learning Station, 2017), the construction industry represents

the building blocks of a community. Without the industry, we won't have any schools, hospitals

or even homes. But more importantly, there wouldn't be any offices, factories, or shops. It is

these buildings that represent the fundamental foundations of a strong economy.

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Engr. Apolonio Dela Cruz Mallorca II
CM650 1-1B
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES-
OPEN UNIVERSITY SYSTEM
SCHOOL OF DISTANCE EDUCATION
MASTER OF SCIENCE IN CONSTRUCTION MANAGEMENT
STA. MESA, MANILA, PHILIPPINES

Attracts Foreign Investment

Having a strong construction sector with the right health and safety regulations can help to

bring in foreign investment. The health and safety regulations give foreign investors the added

reassurance that the project will get completed ethically and with a minimum chance of any

life-threatening incidents occurring. Foreign investors want to see their investments protected

and having a robust health and safety protocols is the step in the right direction. Property

investment is big business, no matter where in the world you invest. And by developing new

buildings, you're attracting more investments. These investments would generate much

needed capital that can then be invested into something else.

Boosts Tourism

If you've ever seen images of Dubai in the United Arab Emirates (U.A.E.), then you've

probably seen the Burj Khalifa. Now, the Burj Khalifa is the world's tallest man-made

skyscraper, standing at a whopping 829.8m. The Burj Khalifa is a statement to the rest of

world, not just in terms of architecture, but to showcase of Dubai's ambition. Since the

completion of Burj Khalifa, Dubai's tourism industry has boosted (who wouldn't want to see

the world's tallest building?). As well as foreign investments. In fact, according to the U.A.E.'s

national news website Khaleej Times, the construction industry in the U.A.E. is expected to

grow with further projects already in development. But it is not just about visiting countries that

have the tallest buildings. Popular cities like New York, Rome, Barcelona, Athens, and Paris

are renowned for historical architecture and landmark buildings. None of these buildings would

have existed without the construction industry.

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Engr. Apolonio Dela Cruz Mallorca II
CM650 1-1B
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES-
OPEN UNIVERSITY SYSTEM
SCHOOL OF DISTANCE EDUCATION
MASTER OF SCIENCE IN CONSTRUCTION MANAGEMENT
STA. MESA, MANILA, PHILIPPINES

Spurs Growth for Other Sector

No matter what industry you work in, you can rely on the construction sector for growth in

your sector. To give you an example, the UK's offshore wind farm sector has grown from

strength to strength. And it is having now cemented its status as the world leader in offshore

wind farms (probably thanks to our lovely wet and windy weather). At the moment, the first

offshore wind farm on the south coast of England is currently under construction. The project

will finish in 2018. Again, if it weren't for the construction industry, these wind farms would not

have been made. And it would not have cemented the UK as world leader in offshore wind

farms. Shopping centers, office blocks, retails parks, you name it, these structures have

helped to boost the economy. And this leads to my next point.

Creates Jobs

A new construction projects leads to very exciting times in the sector. Not only does it bring

a new challenge, but it creates jobs as well. And as soon as the project is completed, the

purpose of those buildings will then go on to create new jobs as well.

Attracts Talent

In seeing a city continually develop itself, it will go on to further establish a stronger culture.

It will bring new cafes, restaurants, bars and clubs. As well as boutique activities such skiing

and golfing ranges. And let's not forget about those museums and art galleries too. This will

definitely attract talented individuals who want to move to a more vibrant city with a buzzing

social life.

3. Construction Industry to the Global Economy

According to the article (Market Prospects, 2021), the scale of the world construction

market is constantly expanding. According to market survey data, the scale of the world

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Engr. Apolonio Dela Cruz Mallorca II
CM650 1-1B
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES-
OPEN UNIVERSITY SYSTEM
SCHOOL OF DISTANCE EDUCATION
MASTER OF SCIENCE IN CONSTRUCTION MANAGEMENT
STA. MESA, MANILA, PHILIPPINES

construction market has grown from USD 9.5 trillion in 2014 to USD 11.4 trillion in 2019, with

a compound annual growth rate of 3.71% from 2014 to 2019.

Forecast of the development prospects of the global construction industry. It is predicted

that the total output of the global construction industry in 2030 will increase by 85% compared

with 2014, reaching 17.5 trillion US dollars, with a compound annual growth rate of 3.9%. The

cumulative output value of the global construction industry from 2016 to 2030 is expected to

reach US$212 trillion.

Analysis of the General Situation of the Development of China's Construction Industry

China promotes the "One Belt One Road (OBOR)" policy and drives the infrastructure

construction of countries along the route. With the continuous advancement of the

urbanization of the countries along the route, there is a huge demand for existing urban

transportation, water supply networks, power supply systems, and other infrastructure

investment. It is estimated that the cumulative output value is expected to reach 44.6 trillion

U.S. dollars, and the average annual market space is expected to exceed 3 trillion U.S. dollars.

With the continuous enrichment of the overseas business experience of China's international

engineering companies, the future overseas market is expected to become an important

growth point for China's international engineering contracting companies.

Analysis of the General Situation of the Development of Japanese Construction

Industry

Japan is a highly developed industrial country, and the construction industry is Japan’s

pillar industry. Strictly speaking, Japan’s economic take-off after World War II was largely

driven by government investment in the construction industry. Infrastructure has taken shape

in the 1970s and 1980s. With the reconstruction after the earthquake in 2011 and the hosting

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Engr. Apolonio Dela Cruz Mallorca II
CM650 1-1B
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES-
OPEN UNIVERSITY SYSTEM
SCHOOL OF DISTANCE EDUCATION
MASTER OF SCIENCE IN CONSTRUCTION MANAGEMENT
STA. MESA, MANILA, PHILIPPINES

of the 2020 Tokyo Olympics and Paralympics, a round of domestic infrastructure construction

needed to be upgraded, leading to an increase in domestic infrastructure orders. At the same

time, with the economic stimulus policies adopted by Japan in 2013, the devaluation of the

yen, and monetary easing policies, the Japanese construction industry has entered a period

of recovery. In 2017, the added value of the Japanese construction industry was 3,128,800

million yen, and its share in Japan's GDP further rose to 5.7%.

Analysis of the General Situation of the Development of American Construction

Industry

The construction industry in the United States is quite developed. More than 96% of the

residences are equipped with modern sanitary facilities, and the design, construction, and

decoration of the residences are of a high level. Modern residential areas in the United States

are developed based on traditional residential quarters. After decades of hard work and

exploration, they have shown good results in community planning, design, residential building

and community environmental construction, and property management. Its living environment,

and ecological environment are of high quality, ranking among the world's leading levels. In

2018, the added value of the U.S. construction industry reached 839.1 billion U.S. dollars,

accounting for 4.1% of GDP.

Analysis of the General Situation of the Development of the Construction Industry in

European Union

The construction industry is very important to the EU economy. It provides 15 million direct

jobs and contributes about 4.84% of the EU’s GDP. In the European Union, the construction

industry also creates new jobs, drives economic growth, and provides new solutions to social,

climate, and energy challenges. From 2010 to 2018, the added value of the construction

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Engr. Apolonio Dela Cruz Mallorca II
CM650 1-1B
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES-
OPEN UNIVERSITY SYSTEM
SCHOOL OF DISTANCE EDUCATION
MASTER OF SCIENCE IN CONSTRUCTION MANAGEMENT
STA. MESA, MANILA, PHILIPPINES

industry in the 28 EU countries maintained an overall growth construction trend. In 2018, the

added value of the construction industry in the EU reached 777.797 billion euros, a year-on-

year increase of 6.4%.

4. Construction Industry to the Philippines’ Economy

On the second quarter of 2021, Philippine gross domestic product (GDP) posted an 11.8%

growth, according to the Philippine Statistics Authority (PSA). The construction industry is one

of the main contributors to the growth together with manufacturing, wholesale, and retail trade

as well as repair of motor vehicles and motorcycles.

Among the major economic sectors, industry recorded the fastest growth at 20.8%. This

was followed by services with a growth of 9.6 percent. Agriculture, hunting, forestry, and

fishing (AHFF) registered a negative 0.1% growth.

Construction posted the highest growth rate for the quarter at 25.7% followed by

manufacturing at 22.3%. Other industry sectors which recorded positive growth were

electricity, stream, water, and waste management at 9.8% and mining, quarrying with 0.8%.

The construction industry likewise substantially contributed 69.6 percent to overall capital

investments or gross capital formation (GCF) in the country. Construction share to GDP by

expenditure is equivalent to 16.6%. Amidst the pandemic, the construction industry placed

second with 1.7% points as one of the top contributors to GDP growth for Q2 2021, together

with manufacturing which had 3.9 percentage points and wholesale and retail trade with 1.0

percentage points.

The share of construction to total employment of 45.075 million as of June 2021, was

equivalent to 9.6%. The construction industry continues to provide job opportunities,

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Engr. Apolonio Dela Cruz Mallorca II
CM650 1-1B
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES-
OPEN UNIVERSITY SYSTEM
SCHOOL OF DISTANCE EDUCATION
MASTER OF SCIENCE IN CONSTRUCTION MANAGEMENT
STA. MESA, MANILA, PHILIPPINES

employing on the average a total of 4.337 million workers (Department of Trade and Industry

,2021).

As the development of the construction industry continues, more jobs will be created, and

the economy will grow — promising lucrative opportunities for investors (Salonga, 2022).

Foreign companies that are now outsourcing programming and business processes to the

Philippines estimate approximately 40% of savings in business costs, 15% to 30% for call

center services, and 35% to 50% for software development. Not to mention, according to the

March 2000 survey of Hong Kong’s Political Risk Consultancy Ltd (PERC), the Philippines is

the best Asian country in terms of overall quality of expatriate life (Salonga, 2019).

5. Philippines” Golden Age of Infrastructure”

According to the article (Department of Finance, 2019), Build, Build, Build is the centerpiece

program of President Rodrigo R. Duterte that ushers in the “Golden age of infrastructure” in

the Philippines that has generated jobs and economic activities particularly in areas outside

Metro Manila.

Under the “Build, Build, Build” program, the government’s infrastructure spending, as

measured by the gross domestic product (GDP), is expected to grow to 7-7.5 percent by 2022

from a historic high of 5.1 percent of GDP in 2018.

Historically, the government’s infrastructure spending-to-GDP ratio only averaged at 2.6

percent over the past six administration. The Duterte administration seeks to end this decades-

long neglect in infrastructure investment.

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Engr. Apolonio Dela Cruz Mallorca II
CM650 1-1B
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES-
OPEN UNIVERSITY SYSTEM
SCHOOL OF DISTANCE EDUCATION
MASTER OF SCIENCE IN CONSTRUCTION MANAGEMENT
STA. MESA, MANILA, PHILIPPINES

When the current administration took office in 2016, the government immediately set the

highest budget allocation for infrastructure in Philippine history to sustain and even accelerate

the country’s growth and, most importantly, make Filipinos lives more comfortable.

As an archipelago of over 7,000 islands, the Philippines requires efficient and modern

transport infrastructure, logistics facilities and power infrastructure to accelerate and sustain

its socioeconomic growth, improve its global competitiveness, and promote physical

integration.

Build, Build, Build is composed of more than 20,000 infrastructure projects nationwide,

involving roads, highways, farm-to-market roads, airports, seaports, terminals, evacuation

centers, lighthouses, hospitals, schools, government centers, among others.

Because of Build, Build, Build, the construction sector experienced a 12.7 percent growth

since 2016, while its number of workers has ballooned to 4.2 million this year from 3.5 million

in April 2017, accounting for 51.9 percent of the industry segment’s total employment.

6. Conclusions and Recommendations

In this study, the researcher reviewed the importance of construction industry to the

country’s economy especially in Philippines. It concluded that the Construction industry is one

of main contributors to the economic growth that drives the other fast-growing industries (i.e.,

real estate, manufacturing and IT/BPO industry) and creates job opportunities.

1. Real Estate Industry. Due to country’s rapid urbanization, construction of transport-

oriented infrastructures such as expressway, bypass roads, highways, etc., where

makes all locations to be more accessible. Hence, prospective investors/ buyers

will stimulate to deal in real estate businesses.

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Engr. Apolonio Dela Cruz Mallorca II
CM650 1-1B
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES-
OPEN UNIVERSITY SYSTEM
SCHOOL OF DISTANCE EDUCATION
MASTER OF SCIENCE IN CONSTRUCTION MANAGEMENT
STA. MESA, MANILA, PHILIPPINES

2. Manufacturing Industry. The manufactured goods have increased the demands in

market due to construction industry requirements such as building raw materials,

gadgets, tools and equipment/machinery. In result, manufacturing companies will

also build many plants and buildings.

3. IT/BPO Industry. Philippines is known as the prime hub for BPO services where

being operated in major buildings. As many buildings were being built, it attracts

more BPO companies to outsource in the Philippines.

4. Employment Rate increasing. As a result of those industries rapidly growing, it will

create job opportunities. Hence, it could increase the Filipino’s purchasing power

that spurs growth for the other sectors such as services and agricultures.

Therefore, it recommends that the Philippine government shall continue to boost the

construction industry in the country that could be beneficial to the country by enforcing the

improvement of mass transport system and promoting transit-oriented development. It will

minimize the traffic congestion, in result, it could decrease fuel consumption rate and make all

Filipinos to travel comfortably.

7. References

Department of Finance. (2019, December 25). Filipinos start benefiting from Build,

Build, Build. This article was published in Manila Bulletin on December 25, 2019.

https://taxreform.dof.gov.ph/news_and_updates/filipinos-start-benefiting-from-build-

build

Department of Trade and Industry. (2021, August 27). Construction industry contributes

16.6% to GDP amidst pandemic. https://www.dti.gov.ph/news/construction-industry-

contributes-to-gdp

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Engr. Apolonio Dela Cruz Mallorca II
CM650 1-1B
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES-
OPEN UNIVERSITY SYSTEM
SCHOOL OF DISTANCE EDUCATION
MASTER OF SCIENCE IN CONSTRUCTION MANAGEMENT
STA. MESA, MANILA, PHILIPPINES

Economy. (2022 August 24). In Wikipedia.

https://en.wikipedia.org/w/index.php?title=Economy&oldid=1106394622

Market Prospects. (2021, August 13). Global Construction Trends. https://www.market-

prospects.com/articles/global-construction-industry-trends

Salonga, R. (2019, March 18). Advantages of Investing in the Philippines. Science Park of

the Philippines, Inc. https://sciencepark.com.ph/blog/advantages-investing-

philippines/

Salonga, R. (2022, April 25). 4 Fast-Growing Industries in the Philippines to Invest In.

Science Park of the Philippines, Inc. https://sciencepark.com.ph/blog/fast-growing-

industries-philippines/

Technofunc. (2020, September 24). Construction Industry – The Sectors.

https://www.technofunc.com/index.php/domain-knowledge/engineering

construction/item/construction-industry-sectors

The Learning Station. (2017, December 22). Why The Construction Industry Is So Important

to an Economy. https://www.thelearningstation.co.uk/blog/construction-industry-

important-economy

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Engr. Apolonio Dela Cruz Mallorca II
CM650 1-1B