World-wide value of new construction put in place
Patrick H. MacAuley
World-Wide Value of New Construction Put in Place
Introduction
The total value of new construction put in place world-wide was about $1.6 trillion in 1983, as measured in 1983 prices and exchange rates. (See “Definitions and Methodology’ section of article.) This estimate is based on a variety of data developed by international organizations, foreign governments, private organizations, and U.S. government agencies.
The estimated $1.6 trillion total includes both new residential and nonresidential construction, but generally excludes maintenance and repair construction. It covers 141 nations, excluding only three war-torn countries– Afghanistan, Cambodia, and Lebanon–and several tiny island states. (The excluded countries are believed to account for less than one half of one percent of total construction in the world.) The most recent year for which estimates could be made for all 141 countries was 1983. (See Table 4.) Estimates of construction activity for 1984 are available for the 12 largest countries in the following table.
The Top Twelve Countries
These twelve countries accounted for 72 percent of world-wide construction in 1983. The United States alone accounted for about 17 percent of the world total in 1983, and this percentage was even higher in 1984. The construction sector of the Soviet Union was a close second to that of the United States. Japan, in third place, also has a very large construction market, followed by West Germany and France. These 5 largest countries, in terms of construction, accounted for 55 percent of construction put in place in all of the 141 countries in 1983. Of the remaining 7 countries in the top 12, 4 are industrialized countries: Italy, Poland, the United Kingdom, and Canada. Only 3 developing nations–China, Saudi Arabia, and Brazil–are among the 12 leading construction markets.
The United States and the Soviet Union have the largest construction sectors in the world, and together account for more than a third of world-wide construction. The relative size of the U.S. and Soviet construction sectors are difficult to compare, because the Soviet Union controls currency exchange rates and uses nonmarket prices for structures. Furthermore, the mix of construction is very different, with the Soviet Union building far less residential construction but much more heavy construction. This study uses estimates for the Soviet Union developed by the Central Intelligence Agency (CIA). Although the Gross National Product (GNP) of the United States is much larger than that of the Soviet Union, construction accounts for a much larger share of the GNP in the Soviet Union (16 percent of GNP in the USSR compared to 9 percent in the United States). The Soviet construction sector is largely self-sufficient: almost all work is done by the indigenous industry, with few imports or exports of building materials. Foreign construction done by Soviet enterprises is chiefly related to military and foreign aid programs.
The Japanese construction sector is one of the largest and most modern in the world. On a per-capita basis, the level of construction in Japan is even larger than in the United States. Growth of the Japanese market has slowed in the 1980s, and Japanese construction contractors and building products companies have been searching for markets abroad, especially in the United States. The Japanese government is considering a massive economic stimulation program to increase homebuilding and infrastructure construction in Japan. The Commerce Department’s Office of Major International Projects is making a special effort to help American construction contractors enter this unfamiliar market.
The Canadian construction market is not only one of the larger markets in the world, but is also relatively open and geographically convenient to U.S. firms. With a 1983 value of $30.4 billion (in U.S. dollars), it is about one-tenth the size of the U.S. construction market. The building cycle in Canada has lagged the U.S. building cycle by about 2 years during the 1980s. Thus, the current recovery in construction, which began in 1983 in the United States, did not begin in Canada until 1985.
Construction by Geographic and Economic Region
The distribution of construction by continents, as shown in Table 2, indicates that 80 percent of the world’s construction is outside of North America. Eastern Europe, including the Soviet Union, had 27 percent of the world total. Asia and the Pacific accounted for 24 percent. Western Europe, with 21 percent of the total, had more construction activity than North America. South America, the Carribean, and Africa had less construction activity, but this still totaled $115 billion.
Another way of analyzing the world-wide distribution of construction is according to the type of economy, which is often an important factor in marketing strategy. In Table 3 the value of new construction is shown by the type of economy. The total was divided between Industrial Countries and Less Developed Countries. Industrial Countries were found to account for nearly 78 percent of the total value of construction put in place. The subtotal for industrialized countries was further divided among market economies and socialist economies, with market economies having much more construction than socialist economies.
The less developed countries (LDSs) were found to account for about 20 percent of world-wide construction. Nevertheless, the value of construction in these countries totalled $370 billion, about as much as the United States. These countries also accounted for the majority of international construction contracts and a large share of building material exports. Part of the explanation is that LDCs are less likely to have the technology, industrial base, and developed raw materials to be self-sufficient in construction. Since the 112 LDCs comprise a vast range of sizes, living standards, and growth rates, they have been subdivided into three groups for the purpose of this study. The first group includes 12 oil exporters, which together accounted for nearly half of total LDC construction in 1983. A second group of 7 “newly industrializing countries,’ or “NICs.’ accounts for $74 billion in construction. The third group, “other LDCs,’ accounted for about $125 billion dollars in construction.
During the 1970s and early 1980s, the oil exporting LDC’s were large and growing markets for U.S. exports of construction services and building products. High petroleum prices provided these countries with purchaseing power for numerous construction projects far beyond the capacity and capabilities of their domestic industries. These markets have declined in recent years because of falling oil prices, but still account for a very large share of LDC construction.
NICs are loosely defined as those non-oil producing LDCs which are on the verge of becoming modern industrial economies. While the list of countries in this category varies slightly, for 1983 it includes 7 countries Taiwan, South Korea, Singapore, Malaysia, Hong Kong, Brazil, and Argentina. Since construction activity is usually correlated with the rate of economic growth as well as with the level of economic activity, these countries have more construction than would otherwise be expected. Since all of these NICs are in Latin America or the Pacific Rim, U.S. suppliers may have a transportation cost advantage over European competitors, although they may often be at a disadvantage relative to Japan.
Definitions and Methodology
These estimates of construction activity are made on a “value of new construction put in place’ basis. They are meant to be comparable to the U.S. data developed by the Bureau of the Census and shown in the regular Construction Review tables A-1 and A-2. This basis of measuring construction differs from the “gross product’ basis used by the U.N. and the CIA, in that gross product excludes the cost of building products and services purchased by construction enterprises. The difference between these two concepts is substantial; for the United States, the value put in place of new construction was $279 billion in 1983, while the gross product was $138 billion.
All of these estimates are made in current U.S. dollars using effective currency exchange rates calculated by the International Monetary Fund. For the nonmarket (socialist) economies, CIA estimates of currency exchange rates and comparable prices were used. Although there are conceptual and practical problems with converting foreign construction values to U.S. dollar equivalents, this approach provides a common denominator for evaluating national construction industries. Furthermore, measuring these markets in U.S. dollars provides a context more readily understood by potential U.S. exporters.
For most countries, data were not available on a construction put-in-place basis, so estimates were made based on the type of data which was available. The most common type of construction data were for “gross product originating in the construction industry’ (GPO), as developed by the CIA and the U.N. This value was multiplied by 2.02, which is the ratio of construction put-in-place to construction GPO in the United States. In some other countries, the best construction data were the estimated ratios of construction GPO to the gross domestic product (GDP), as developed by the CIA. These GPO/GDP ratios were multiplied by 2.02 times the estimated GDP of these countries. For some of the less-developed countries, there were no usable construction data, and estimates were made by assuming that these countries had GPO/GDP ratios similar to neighboring countries.
Table: 1.–Value of New Construction put in place, by the top 12 Countries, 1984 (in billions of 1984 U.S. dollars)
Table: 2.–Value of Construction by Regions of the World, 1983
Table: 3.–Value of Construction by Type of Economy, 1983
Table: 4.–World-Wide Value of New Construction Put in Place, 1983
COPYRIGHT 1986 U.S. Department of Commerce
COPYRIGHT 2004 Gale Group
