50 years of International Construction part 9 - the world today

By Chris Sleight07 December 2012

Stimulus spending during the recession in the US has helped pave the way for the proposed Los Angele

Stimulus spending during the recession in the US has helped pave the way for the proposed Los Angeles – San Francisco high-speed rail link in California.

The last five years have reminded us all that construction is a cyclical business. The collapse of Lehman Bros. in September 2008 precipitated the biggest downturn in construction seen in iC’s history – you would have to go back to World War II, or the Great Depression – for more difficult conditions for the industry.

According to IHS Global Insight, the global construction industry saw a -1.8% fall in output in 2008, followed by another -3.7% drop in 2009, before flattening-out in 2010. But while the overall picture was gloomy, there were pockets of activity that kept going throughout the recession, and some markets even saw rapid growth.

The most striking of these was China, where the government announced a US$ 585 billion stimulus plan to fend of the recession. It meant boom times for the construction industry, with the majority of the money being spent on infrastructure, most notably China’s high-speed rail network.

Indeed, it was this stimulus plan that spurred-on the construction of the Beijing to Shanghai high-speed rail link. Construction started before the crisis in April 2008, but the extra stimulus spending meant the link was completed before the end of 2010. It was a remarkable achievement to build this 1,300 km rail link in just 2 ½ years, and with trains hitting speeds of over 300 km/hour, it is now possible to travel by land between China’s two most important cities in just under four hours.

But the huge flood of money into the Chinese rail sector also turned into a bad news story, when in February 2011, railway minister Liu Zhijun was removed from office on suspicion of embezzlement of hundreds of millions of Dollars of state funds. He has since been expelled from the Chinese Communist Party, which means he can never hold a government post again, and is awaiting trial for corruption.

And the current situation in China suggests the industry has suffered a hard landing after the stimulus spending bonanza. Construction equipment sales are down -40% or more this year, while controls on inflation and bank lending have put the brakes on many schemes.

Investments

But it was not just China that enacted stimulus measures to fend off recession. In the US, the 2009 American Recovery and Reinvestment Act (ARRA) channelled an extra US$ 787 billion into the economy, with some US$ 105 billion going towards infrastructure projects.

As in China, high-speed rail was a key recipient, and ARRA helped lay the foundations for schemes such as the proposed Los Angeles – San Francisco high speed rail link in California.

But that is not to say that it was only stimulus projects that got underway in these tough years for the industry. Most of the preparations for the London, UK, 2012 Olympic Games took place throughout the recession, including the UK£ 5.7 billion (US$ 9.5 billion) that was spent on venues and infrastructure.

Likewise, following a referendum in 2006, work on the US$ 5.25 billion expansion of the Panama Canal got fully underway in 2009, with the awarding of the contract for dredging and six new locks.
A more recent development still has been the launch of the Kingdom Tower project in Jeddah, Saudi Arabia, which at 1 mile (1600 m) high, promises to eclipse the Burj Khalifa in Dubai, UAE as the world’s tallest building.

Preliminary site investigations began in 2008, followed by the appointment of architect Adrian Smith – the designer of the Burj Khalifa – in 2010. Binladen Group was appointed as the main contractor in August 2011, and by this September, all the financing for the project was said to be in place. The construction timeline is put at 63 months.

And perhaps it is fitting to end this series of articles on the last 50 years in the global construction industry on yet another project that promises to push the boundaries of what the industry can achieve.

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