FIEC predicts industry stabilisation

A decline of -1,8% in the EU's total construction output for 2010 over the previous year has been noted by FIEC (the European Construction Industry Federation).

FIEC vice president Jacques Huillard said, "The EU total construction output amounted to € 1186 billion in 2010.

Mr Huillard, who is in charge of economic issues for FIEC, said, "Due to Member States' severe budgetary constraints, and the major crisis affecting the Euro zone and impacting the investment capacity of private operations, the situation remains worrying in most EU countries, but we can see the first signs of recovery, which should give us hope."

He added that it was also clear that the EU and national stimulus packages had softened the downturn to some degree.

"We are pleased today that our messages have generally been heard. As a result, the civil engineering and public non-residential renovation of private residential buildings has been boosted by a number of tax incentives and direct subsidies."

A new edition of FIEC's annual statistical report was launched at its Annual Congress, held this year in Sofia, Bulgaria.

FIEC statistics found that the reduction in construction activity had mostly concentrated within the private non-residential segment (-4,5%) and, to a lesser extent, in the new housebuilding segment (-1,2%).

In contrast, the public non-residential segment grew by +2,2% in 2010, which FIEC said reflected decisions made at government level to maintain, bring forward or even increase expenditure on public buildings as part of the national stimulus packages.

It said that it was disappointing that there had been a further decrease experienced by the civil engineering segment (-1,1%) as a recovery in 2010 had been forecast.

Rehabilitation and maintenance activities have, in most EU countries, benefited from fiscal incentives in favour of energy efficient measures, according to FIEC, which added that this segment had therefore almost stabilised now (+0,2%).

FIEC said that as a consequence of the downturn, the number of people employed in construction had been strongly impacted. EU employment in construction fell again, by -5,8% in 2010, it reported, with a further decrease expected this year.

It added, however, that despite these weak figures, the construction industry remained one of the major engines of Europe's growth. It still represents 10% of EU GDP (gross domestic product) and over 3 million enterprises, it said, most of which are SMEs, and provides jobs to nearly 14 million workers, without counting the indirect employment generated in related sectors.

Mr Huillard said, "Looking ahead, total construction output is forecast to stabilise in 2011 (-0,2%). However, we must remain extremely vigilant. Most of these stimulus packages have been insufficient to ensure a real and sustained revival of economic activity and a number of measures announced have finally not been implemented."

He added, "Investment that can ensure long-term sustainable development must not fall victim to budget cuts, and/or strengthened regulation of the financial markets - otherwise Europe's future prosperity is in danger."

'Positive position'

The FIEC Congress was addressed by Svetoslav Glossov, president of the Bulgarian Construction Chamber, who told the delegates that he was optimistic about the future in Bulgaria, especially in terms of roads as the country has five pan-European corridors. He said that in 2010, out of the hardest-hit sectors of the EU, only construction remained in a positive position.

Rosen Plevneliev, Bulgaria's Minister of Regional Development & Public Works, told Congress about the economic situation in his country. He said capitalism was about cycles - if there is growth for many years, there is a long way to fall.

"If growth is less, then it is a fall from the first floor," he said. "Others fall from the 10^th floor."

He said, "It is all about sustainability. Bulgaria is a small country with a small industry. The Bulgarian construction industry was one of the worst hit, but it found an honourable way through the crisis. It looked for solutions - we're very proud of that. There was very good communication and we addressed the future by sharing the same visions. It was a sustainable model.

"We did not take cheap, easy money at the cost of the next generation. The next won't have to pay the debts of the previous generation."

Looking at Europe, FIEC president Luisa Todini said that stabilisation was expected for 2011, with Germany leading the way along with the Nordic countries and Poland.

One of the themes of the Congress was the problem of achieving a level playing field for contractors facing competition from state-owned enterprises.

Ms Todini told delegates, "Globalisation of the construction market is a fact that has to be addressed."

She said that an unfair situation was created by third-party countries. "We have to fight for fair competition."

Raffaele Baldassarre, Member of the European Parliament and vice chairman of the European Parliament Committee on Legal Affairs, told the Congress that public procurement, at 16% of GDP (gross domestic product) was important in the recovery process.

He said reciprocity was an issue. He felt it was difficult for European countries to proceed with the recovery process while the current situation with third party countries continued.

"There is a lack of balance," he said. "China is the main culprit on public procurement. There have been many infringements, with bids of 70% less."

He queried whether European labour legislation and minimum wages were being adhered to, and said he shared the position of FIEC over having a stricter attitude over illegally low bids, and being in a position to withdraw from a bid that was felt to be very low.

He said that if a bid was unusually low because it was subsidised by the state, it should be possible to withdraw if it could not be proved why it is so low.

Ms Todini added, "We are not talking about protectionism because we have workers all round the world. It is preventing unfair competition. It is also not China-bashing. The Chinese are welcome in Europe, providing they respect the rules - as we have to ourselves."

A statement was sent to the FIEC Congress from the director general of the World Trade Organization (WTO), Pascal Lamy, in which he discussed the WTO plurilateral Agreement on Government Procurement (GPA). There are 14 parties to the Agreement - 14 WTO members, including the EU as one member.

He said the GPA was currently undergoing three parallel negotiation processes. The first is that the text of the Agreement was being rewritten to ensure that it is up to date and conforms with modern procurement techniques. This includes the widespread use of e-procurement tools, and greater flexibility is being introduced to the rules, particularly where e-procurement is used.

Mr Lamy said, "Second, negotiations are under way to broaden and deepen the parties' coverage commitments under the Agreement, and to reduce the extent of discriminatory measures that are incorporated in some parties' schedules to the Agreement."

The third negotiations concern the accession of additional WTO Members to the Agreement.

He said, "While the accessions of Armenia and Jordan are at the most advanced stage, that of China - which I know to be of particular interest to you - is also progressing. In particular, China has publicly committed itself to provide, before the end of 2011, a robust second revised accession offer that will include coverage of sub-central government entities.

Mr Lamy added, "I do not expect that this will be the conclusion of the negotiations on China's accession. It will, however, be an important further milestone. Of course, China's accession cannot be concluded without the assent of all the existing GPA parties."

'Listen carefully'

Michel Démarre, president of the EIC (European International Contractors) told the conference that in the last 20 years, "Chinese contractors, definitely helped by their government, have found a number of innovative ways to develop their activities. They have come up with new concepts, new financial packages, including some barter aspects such as exchange of raw materials, and they have done that under a go-global policy that has simply been decided on by the government.

"I think we should listen to the Chinese carefully, because usually what they claim they will do, they do in the end."

He added that a historical perspective was important for international business. He suggested it would be either naive or stupid not to consider that when considering the European market now.

"The sheer size of the amount of money involved now makes it clearly impossible for European companies to match the financing possibilities of such state-run enterprises and we need to be active in this field."

On the subject of reciprocity, Mr Démarre said, "It is still amazing to me to see that after China joined the World Trade Organisation, this corresponded exactly to the time when the share of European contractors in China decreased in a spectacular way."

Ms Todini closed the Congress by saying, "I want to stress that the European construction industry is a robust industry. Globalisation has led to the emergence of new economic powers in the world which has provided many opportunities for our contractors.

"We know that globalisation is at least a two-sided coin - it has therefore also brought competition to our own markets and while we welcome the challenge fair competition brings - both in providing value for money and innovation - we absolutely reject the unfair competition in the use of state aid by non-European countries."