A model to assess alternative policies to promote the construction industry in developing countries

Construction plays a major role in the economic development of any country. It is largely responsible for the generation of basic infrastructure, which is the backbone of a prosperous economy, and is a major contributor to the gross domestic product and employment. Therefore, an indigenous construction industry is a most important component in the economic development of a developing country. However, the political and economic volatility of developing countries provides a challenging environment for fostering this growth. In particular, it is difficult to forecast with any degree of confidence the rate of growth of the economy or to assess the effect of governmental policies in stimulating the growth of indigenous construction firms. The objective of this study is to synthesize input-output analysis and a consensus forming-technique to develop a methodology for investigating and evaluating policies to promote the establishment of indigenous construction industries in developing countries. Input-output analysis provides a method for forecasting both the impact of future economic growth on construction activity and the total impact of increases in construction activity on the economy. Consensus-building offers a means for using expert opinion both to establish final demand growth estimates and to rank construction stimulant policies. The usefulness of this methodology is demonstrated by applying it to the country of Jordan. Jordan recently embarked on a peace process with Israel, and, as a result, tremendous overall economic growth is expected. This condition makes Jordan a good case study for assessing the effectiveness of stimulus policies to promote the growth of an indigenous construction industry. Based upon an analysis of this case, it is determined that past stimulus policies are not specifically targeted to foster growth in the indigenous construction industry and they do little to reduce market volatility for indigenous firms. The result is that extensive effort must be directed by government officials to identify clearly defined objectives, evaluate stimulus programs, and implement relevant stimulus policies.