(Photo Source: Google)
(Project Submission Date: 15th December, 2015)
CHAPTER I: INTRODUCTION
Nepal was heavily impacted by the recent M 7.6 earthquake on Saturday, 25th April, 2015 at 11:56 NST and a major aftershock of M 6.8 on Tuesday, 12th May, 2015 at 12:50 NST. Post Disaster Needs Assessment (PDNA) published by the National Planning Commission, Government of Nepal estimates that the total damages and losses caused by the Gorkha Earthquake is NPR 706 billion (US$ 7.0 billion) which is about one third of the country’s Gross Domestic Product (GDP) in FY 2013-2014. Of the total damages and loses incurred by the country, the private sectors sustained over three times in damages and losses compared to the public sectors. The Housing & Human Settlements alone sustained about 50 percent of the total damages and losses.
The impacts sustained by the construction sector businesses in Nepal have far-reaching repercussions which need to be analyzed to support the ongoing reconstruction efforts. It is highly expected that the demand for construction materials such as bricks, cement, reinforcement steel bar, CGI-Sheets, GI-Wires, etc. would shoot up and the reconstruction work would also suffer due to increasing labor scarcity in the country.
Out of over 100 brick chimneys inside the Kathmandu valley, almost all collapsed in the wake of the Gorkha Earthquake while most of the iron and cement industries outside the valley were structurally intact and suffered no significant downtime during the earthquake. Businesses which suffered fewer damages and reduced downtime had better probability of continuing their business. Besides, prices of construction materials are expected to grow significantly in coming days as people will begin reconstruction. Due to the high rate of migrating labors out of the country over the past decade, the scarcity of construction manpower will be another major bottleneck faced by the country.
In the post-earthquake period, this research study attempts to examine the available data from various sources including government agencies, private sector stakeholders as well as authentic literature to explore the Gorkha Earthquake’s widespread impact on the major construction sector businesses nationwide. Furthermore, the findings of this research aspire to support the government and private sector stakeholders in prioritizing their future reconstruction and Disaster Risk Reduction (DRR) initiatives.
The broad objective of this research, a significant part of Public-Private Partnership for Earthquake Risk Management (3PERM) program under the National Society for Earthquake Technology-Nepal (NSET), was to study the widespread impact of the Gorkha Earthquake on various construction sector businesses in Nepal and to evaluate their manufacturing capacity as the country prepares to enter the reconstruction phase. The specific objectives are listed below.
- To study the the Gorkha Earthquake impacts related to employee casualty, damage loss, revenue loss and employment loss.
- To study and gather information related to business recovery, production capacity, nationwide demand for construction materials and their market price fluctuations.
- To carry out a comparative study on business resumption time for different construction related industries.
- To calculate the nationwide supply and market demand for various construction materials such as Brick, Cement, Reinforcement steel bars, CGI sheet and GI wire.
- To conduct a capacity survey of various construction material businesses such as Brick, Cement, Reinforcement steel bars, CGI sheet and GI wire industries.
The Gorkha Earthquake had an extensive impact on private sector businesses nationwide and in coming days/years this would inevitably show up in construction businesses as well. As per the Federation of Construction Materials Business Association of Nepal (FCMBAN), consumers will face a price hike of around 10 to 15 percent on cement, 10 percent on reinforcement steel bars and 40 percent on sand & aggregates. The price of bricks is expected to increase arbitrarily in the next fiscal year with around 25 percent hike in wages of workers. Immediately after the disaster, the demand for bricks came to a complete halt while the demand for other construction materials such as cement and steel rods have been confined to 30 percent as compared to the same period in previous fiscal year. It is predicted that although there will be sufficient capacity to fulfill the demand for cement, there will be significant crisis for iron rods and bricks. There could also be artificial scarcity and price hike for bricks, sand, aggregates as well as construction labor. (The Himalayan Times, June 2015)
The Federation of Nepal Brick Industries (FNBI) predicts the damage loss to be around NPR 1.2 billion while around 90 percent brick kilns came to a complete halt. Around 70 percent of them are in need of complete renovation. The government states that there is a need of at least 12 billion brick to raise the damaged buildings. FNBI claims that Nepal produces around 3 billion bricks every year. With the four-fold increase in the demand of bricks, meeting the demand remains a challenge for the entire brick industry. Around 850 brick kilns across the nation were operating before the earthquake. With over 100 damaged brick kilns within Kathmandu valley alone and a total of around 350 damaged kilns across the country, meeting the construction needs remains a major challenge for this industry. (My Republica, July, 2015)
As per Cement Manufacturers Association of Nepal (CMAN), the ban on construction after the earthquake has induced an estimated 85 percent dip in the demand for cement. As the cement factories are currently operating only at 50 percent of installed capacity, they can fulfill an extra 50 percent demand in the coming days when reconstruction will start in full swing. According to CMAN, the annual consumption of cement totals 4.5 million Metric Tons and there are 45 cement factories operating across the country. (The Himalayan Times, June 2015)
Nepal Steel and Iron Rolling Mills Association (NSIRMA) assures that although post-earthquake Nepalese steel and iron industry may be utilizing around 48% of its production capacity, it will be sufficient to meet the demand. There are around 20 steel and iron factories operating across Nepal. This sector consists of industries like the rebar industry, corrugated iron industry, and wire industry, among others. The steel rod industry, under normal conditions has an estimated annual production capacity of 1.5 million tons. Likewise, the corrugated iron industry and wire industry has an annual production capacity of around 300,000 tons and around 200,000 tons respectively. (New Business Age, July 2015)
CHAPTER II: METHODOLOGY
Data Collection Procedures
A semi-structured interview methodology was utilized to gather information about earthquake impact on construction sector industries including brick, cement, reinforcement steel bar, CGI sheets and GI wires. A total of 15 industries including major business houses and pertinent professional associations were interviewed. The open-ended interview questionnaire was widely divided in two segments. The first part targeted to extract information related to employee casualty, damage loss, revenue loss and employment loss. The second part focused on gathering information related to business recovery, production capacity, nationwide demand for construction materials, as well as their market prices. A telephone survey was conducted for altogether 37 construction sector industries to estimate their production capacity of construction materials throughout the country.
Data was analyzed to study the widespread impacts of the Gorkha Earthquake including, employee casualty, damage loss, revenue loss, employment loss, business recovery time, production capacity, nationwide demand for construction materials, as well as their market price repercussions. The results from the semi-structured questionnaire were used to identify the total number of industries, employee casualty, damage loss, monthly revenue loss, immediate loss of employment, average business recovery time, annual production capacity (before & after the earthquake), nationwide annual demand after the earthquake and change in unit market price.
The results from the open-ended interview questionnaire was also utilized to carry out a comparative study on business resumption time for different construction related manufacturing industries, their percentage revenue losses for first 3 months after the earthquake, nationwide supply capacity (before & after the earthquake) and market demand (before the earthquake) for various construction materials such as brick, cement, reinforcement steel rods, CGI sheet and GI wire.
Post Disaster Need Assessment (PDNA), Government of Nepal, in its preliminary report estimated the construction materials’ Projected Demand for the Earthquake Reconstruction which was further added to the existing Annual Demands before the Earthquake to calculate the Total Annual Projected Demand after the Earthquake.
The data collected from the telephone survey was utilized to estimate the production capacity of construction material industries such as, brick, cement, reinforcement steel bar, CGI sheets and GI wire before the earthquake.
Limitations of the Study
The limitations of the study are given below:
- The study, analysis and conclusions were strictly based on the collected data from the surveyed/interviewed business houses, industries, professional associations and employees working there.
- The semi-structured interview and telephone survey were conducted to limited number of employees within the selected organizations and may not necessarily reflect the view of the entire construction sector organizations or the employees working there.
- The study is limited to the impact-study of the Gorkha Earthquake on construction sector industries and does not include the consecutive effects of national economic blockade merely 4 months after the earthquake.
CHAPTER III: RESULTS
Results from semi-structured interview
Private construction businesses and professional associations including brick, cement, reinforcement steel bar, CGI sheets and GI wires industries were interviewed to analyze the widespread impact of the Gorkha Earthquake on these industries. The open ended semi-structured interview method was utilized for this purpose. The interview questionnaire and the list of participating industries/associations are given below in Table 1 and Table 2.
Table 1. Open ended interview questionnaire set
Table 2. Construction sector manufacturing industries/associations interviewed for the study
(To Be Contd. ….)