Construction firms come under austerity hammer

By curbing capital spending, the government is driving many construction firms out of business, contractors complained on Tuesday. The Cabinet decided recently to freeze the implementation of new projects and to cut capital spending by 10 per cent as part of the government’s austerity measures to address an unprecedented fiscal shortfall. Only to complete ongoing schemes, capital expenditure in the 2012 budget law is estimated at JD962 million. Ahmad Tarawneh, president of the Jordan Contracting Construction Association (JCCA), told The Jordan Times yesterday that the sector is facing a “very difficult situation” due to the financial straits in the Kingdom and that local contractors, who have been idled for a while, are also unable to enter other markets outside. He indicated that government delay in paying around JD100 million in dues to construction companies is exacerbating the situation and pushing firms to lay off employees. “The government should give special treatment to the sector as it is a major engine for economic activity supporting over 120 professions,” Tarawneh said. Omar Fazza, executive director of a construction firm based in Amman, agreed that companies which executed government contracts are unable to receive their financial claims, and noted that many other firms have not found projects to implement for over a year. Construction firms will be dismissing some staff because contractors are struggling to pay loans to banks and dues to suppliers, he said. “Due to sharp competition, some contractors undercut prices and take up projects below real costs in a bid to delay their death for another year or two” Fazza added . He blamed the government for not making enough efforts to promote the ‘qualified’ sector outside Jordan in countries like Libya and Saudi Arabia. Although Jordan helped Libya politically, the contractor was not optimistic that the Kingdom’s construction firms would have a share in the reconstruction of the North African country, saying the government did not focus on such an issue when decision makers in both countries discussed bilateral cooperation. Khalil Abul Jloud, director of another Amman-based company, complained that his firm has not implemented any project for over a year. “This is the first time the company has been idled,” he said, noting that the construction company has entered bids for projects in Saudi Arabia, knowing beforehand that it is hard to enter the Gulf country market. “As it stands now in Jordan, many firms are competing for small projects,” he added, echoing Fazza remarks that several companies are willing to lose in some projects as long as they get cash to repay loans to banks and avoid high interest rates. “This year is the toughest for the sector in decades,” Abul Jloud, who has been in the industry for over 20 years, said. By The Jordan Times