Back
 ME  Vol.12 No.8 , August 2021
Impact of Covid-19 on Construction Industry of Nepal
Abstract: The paper aims to examine the impact of COVID-19 on the construction industry of Nepal. This research is based on primary data, and the nature of the data is qualitative. The sources of empirical data have been collected with the help of unstructured interviews with nine professional contractors who have been directly involved in the construction sectors for a long time. This study used a thematic analysis to examine the responses provided by participants in the research field. The major three themes and 12 sub-themes were generated from the study to find the impact of COVID-19 on the construction industry in Nepal. The study finds the three-level of impacts—financial, operational, and institutional on construction sectors. The government budget reduction, the deteriorating financial situation of the contractors, late payment, and over cost runs of the projects are the financial impact. Likewise, the operational level impact is related to delay in project completion, supply chain problems, difficulty in workforce management, and maintaining the health and safety of the workforce. The study finds no adequate support and special packages from the government, including professional associations. The government and regulatory authority should support the construction industry to build efficient, competent, and resourceful sectors. Once the issues and expectations of constructional professionals are addressed, that ultimately helps to enhance the construction industry’s performance. Finally, the construction professionals, the industry, and the government will be benefited.

1. Introduction

Back in December 2019 world experienced the first case of COVID-19 from Wuhan city, China, rapidly spread across the globe, becoming a global pandemic in March 2020 (World Health Organization, 2020). After the public health emergency issued by the WHO, to slow down the increasing number of cases day by day, many countries have chosen to impose nationwide lockdown as a rapid action. Likewise, Nepal Government also decided to go for complete lockdown from March 24, 2020, to June 14, 2020, and continued the partial lockdown on different local states as per the cases seen (Neupane & Mishra, 2020). After the decline of COVID-19 cases for six months, the second wave of COVID-19 hit Nepal in April 2021, with the significant transmission of the delta variant (WHO, 2021).

Ministry of Physical Infrastructure and Transport had classified construction companies under four categories; class A, class B, class C, and class D. There are about 17,000 construction companies registered in Nepal under the above categories, among which there is the maximum number of a small construction company (The Asia Foundation, 2020). These sectors employed 1.5 million workers, where one-third are migrated workforce from India (CBS, 2018). COVID-19 affected every industry at worst; among them, the construction industry is highly influenced. Larger contractors may have different perspectives than small and medium enterprises (SME) contractors on the problems faced because of COVID-19, and other mechanisms are required to address the issues.

The extraction of raw material to the production of construction materials, the overall construction industry, transportation of materials, inspection, labour, etc., has been facing trouble. Many workers become infected, quarantined, and sick, labour shortages had arisen, and this caused delays and effects in construction projects. These industries had faced difficulties with supply chain disruptions and labour shortages even after the lockdown based on observed events. The closure of the international border between Nepal and India is the primary cause of the market’s labour shortage and materials.

The construction industry plays a significant role in the nation’s economic, societal, and political development (Donaldson, 2018). The gross domestic product (GDP) from construction in Nepal was 54,499 NPR million in 2019, which is likely to decrease in 2020, affecting the overall economy of the country and the contractors, too (CBS, 2020). The responsibility to pay the loan installment and interest, carriage installment interest, office rent, staff salary, workers, taxes, etc., are affecting the mental health of construction professionals terribly.

This research aims to undertake a deeper understanding of the lived experiences of construction industry professionals to develop a theme related to the impact of COVID-19 on small contractors in Nepal. This study focuses on how the small contractors are affected by the COVID-19, analyzing the challenges they face during and beyond COVID-19 in managing the construction resources such as workforce, construction materials, technology, capital, including its construction resources contributions to the society and nation.

COVID-19 pandemic is affecting the economy worldwide in every sector. The construction sector is one of the highly affected sectors after the tourism and hospitality industry. This research is significant to develop a strategy to promote the construction sector. It may contribute good literature to the policy makers, academicians, researchers, and practitioners interested in the construction industry. Moreover, it may help to investigate the financial, operational, and institutional level of impact on the construction industry due to COVID-19. The study is limited to the critical professional contractors involved in the construction industry at the executives level of their professional association. Researchers have used the qualitative research method; however, further research can be conducted mixed-method with many respondents.

2. Literature Review

Many studies have been carried out to determine the impact of COVID-19 in the construction industry.

Alsharef et al. (2021) find the following impacts of COVID-19 on construction sectors in the USA: 1) material delivery delays and shortage, 2) delays in inspections and securing permits, 3) reduction in efficiency and production rate, 4) slowing of ongoing projects and delay in the start of new projects, 5) price escalations, additional costs, loss of revenue, payment delays, 6) safety concerns, workforce shortages, and 7) expected increase in disputes, litigation, and claims. They conducted a series of structured interviews with 34 construction professionals on the pandemic impacts on their work.

Zamani et al. (2021) identified the problems caused by the pandemic COVID-19 on the building construction industry. The operation is affected by project timelines due to shortening construction activities and late approvals by related authorities. In addition, shortage of skilled workers and supplies and logistic issues have affected project operation. The study established that COVID-19 is influencing the building construction industry by causing operational and financial matters. Most companies require financial aid to encounter them with economic issues. Therefore, the study suggests the government and banks help the companies by providing subsidies for their existence and deal with the lack of foreign workers tactfully.

Amri (2021) examines the economic impact of COVID-19 on the construction industry in Oman. The falling oil prices and supply chain disruptions have dealt a severe blow to the construction industry. Not only the construction industry has seen a fall in financial support and funding, but many players in the industry have also sustained hit that further increases the financial burden of Oman’s construction industry. The construction sector needs to be alert on the future growth determinants of the industry and act accordingly rather than synchronizing the strategies at once (Pathirana, 2020).

The critical aspects of the impact arising from the COVID 19 in the GCC area are related to the delays of the construction projects, effective management of workforce, health and safety issues, and legal aspects. Construction delays are caused due to close of the borders, reducing the number of workers at construction sites, and disturbance in the supply chain management. In addition, the government should support businesses to sustain themselves during this period (Umar, 2021).

Baniya, Ghimire and Mahat (2021) reviewed impacts on COVID-19 on the world economy and SDGs practices in Nepal; the estimated and forecasted data shows that global GDP has declined, and the global economic recession had found extreme in 2020. With the economic slowdown on international and national scales, community instability and violence increase due to unemployment. The pandemic has challenged the developing world to meet sustainable development goals, affecting construction, as a significant part of the country’s GDP is associated with the construction industry.

Thapa and Shrestha (2021) find the high impact of COVID-19 on the construction industry, causing a severe impact on supply chain disruption due to a halt in the entire transportation and aviation industry. The project cost and time increase due to uncertainty regarding the availability of subcontractors, suppliers, and labour. Materials and equipment procured from other countries could not be entered due to customs clearance. The shortage of steel and bringing labour from outside the construction territory was prohibited. Besides, government protocols caused an impact on the construction industry, increasing the cost of projects and time due to uncertainty regarding the availability of subcontractors.

Kabiru and Yahaya (2020) concluded that COVID-19 harmed the construction industry in Nigeria as it has obstructed site work, affect the bill of quantities, affect project completion, and affect the law of contract. This is capable of causing the force majeure event in the Nigerian construction industry.

Yadeta and Pandey (2020) summarized that the COVID-19 pandemic had left an enormous amount of uncertainty regarding contractual implications for those involved in the construction industry, resulting in merit in the parties considering the negotiation of some contract amendments. In addition, enactments are made to protect workers’ health and safety, affecting construction projects, causing force majeure and project costing. Collaboration and good communication between government and contractors could be an essential solution to manage the impact and pilot projects through this period of uncertainty.

Gamil and Alhagar (2020) find the most impacting factors are the suspension of projects, labour impact and job loss, time overrun, cost overrun, and financial impact. Contractors are also inevitably faced legal issues due to the nonconformity of contractual terms, which is caused by the suspension of the project and sudden fluctuation of material price. In contrast, projects that are still running due to the urgent need to expand medical facilities are also about to face many challenges such as shortage of workers, the rise of materials price, and shortage of materials and supply chains.

Neupane and Mishra (2020) find that house owners trust less on native labours and think migrated ones from India have good skills and expertise, which caused the scarcity of workforce. It is difficult to find more skilled labourers with experience due to their migration to abroad countries to earn foreign currency. Fear of COVID-19 transmission also discouraged labours from involving themselves in reconstruction works. It has been difficult for contractors and workers to manage the PCR and isolation centres during the project. Hansen (2020) finds the construction industry is unforeseeable, unavoidable, and uncontrollable.

Timilsina et al. (2020) find 56 different causes for delay of bridge construction through the literature review and a pilot survey involved in constructing such bridges. The eight most important are lack of stakeholder analysis, poor portfolio management, lack of inadequate pre-execution planning and improper time management, lack of site management, inadequate budget allocation and delay in payment, lack of provision of reward and penalty, lack of detailed survey, improper soil exploration and preparing report without depth study, and contractor’s excessive workload. The cost, quality, and schedule of bridge construction projects can be maintained by addressing the problem of unnecessary delay and enhancing the competency of the construction industry.

Most of the studies have focused on analyzing the impact of the pandemic on project performance and developing guidelines for safely executing projects. However, there has been little discussion on the perception of the professional association of the construction sector towards the financial, operational, and institutional impact. This research can provide significant insights into the perception of the professional association of the construction sector and helps to develop a strategy to promote the construction industry in the context of Nepal.

Based on a reviewing the numbers of literature related to the impact of COVID-19, the following theoretical framework has been developed (Figure 1).

3. Research Methodology

The research is based on qualitative research, a semi-structured interview with a framework of various themes to be explored, drawing on the lived experiences of research participants (Bryman, 2012). This research aims to undertake a deeper understanding of the lived experiences of construction industry professionals to develop a theme related to the impact of COVID-19 on small contractors in

Figure 1. Theoretical framework.

Nepal. The construction industry professionals, known as contractors (having licensed as “A”, “B”, “C”, and “D” class) having two or more decade’s experience, are the respondents of the research. The fieldwork was carried out for data collection through in-depth unstructured interviews with professional contractors who have been directly involved in the construction sectors for a long time.

Since this research is based on qualitative research, an in-depth unstructured interview was applied with nine key professional members of the contractor association, including former and existing advisors, central members, president and vice-president, general secretary of the construction-related association of Nepal. The professional members of the contractors association represent the voice of the construction industry because they are nominated and elected from all registered contractors of Nepal. The questionnaires were not developed and administered in this study because of the qualitative nature of the data. The interview was conducted almost for one hour with each respondent during the period May-June 2021. After completion of data collection, the field data were translated from Nepali into English. This study used thematic analysis, examining the responses provided by participants in the research field (Braun & Clarke, 2006).

The semi-structured interview was focused on the area of the impact of the COVID-19 pandemic on construction business such as problems faced by the contractors, delay for project completion, price adjustment issues, contractors’ expectation and their role, the role of the state addressing the issues related to the construction industry, reform strategies to promote the construction business, etc. This study used a thematic analysis to examine the responses provided by participants in the research field. In this study, themes and sub-themes were thus generated to analyze field data about the impact of COVID-19 on the construction industry in Nepal. This study has been based on an inductive analysis of participants’ lived experiences by a qualitative research approach (Shank, 2006).

3.1. Reliability and Validity

Reliability indicates the stability of responses to multiple coders of data sets. Detailed field notes can enhance it by using recording devices and by transcribing the digital files. The responses were verified at the end of the respondents’ answers were over. The consistency in the answer was found in this research while summarizing their opinions at the end of the semi-structured interview related to the impact of COVID-19 on the construction industry.

Creswell and Poth (2013) refer to the accuracy of the results, a process of verification made by extensive time spent in the field, detailed description, and a close relationship between the researcher and the participants. This research attempted to focus on the validity of the research outcomes. The maximum efforts were made to understand the respondents’ intent related to the impact of COVID-19 on the construction industry in Nepal. The respondents spent adequate time conducting in-depth unstructured interviews to collect their valuable experiences and views.

3.2. Data Collection

This research is based on primary data, and the nature of the data is qualitative. The sources of empirical data have been collected with the help of unstructured interviews. The in-depth unstructured interview was conducted with former and existing advisors, central members, president and vice-president, general secretary of the construction-related association of Nepal. The interview was conducted almost for one hour with each respondent during the period May-June 2021.

4. Discussion

This study examines the critical issues of the construction industry after the COVID-19 with the help of qualitative research. The semi-structured interview was conducted with nine respondents who have valuable experiences in the construction sector. The contractors, who represent the contractor association of Nepal, were interviewed to assess the impact of COVID-19 on construction industries. The experiences of the contractors have been presented.

Source: In-depth unstructured interview, 2021.

This study can be summarized into major three themes and 12 subthemes. The impact of COVID-19 on construction industry has financial, operational and institutional support impact. All the three themes and their subthemes have been presented as:

The financial impact of the COVID-19 is one of the critical issues in the construction industry. The study finds the following five significant subthemes under the financial effects of COVID-19 on the construction industry:

● Government budget reduction

● The deteriorating financial situation of the contractors

● Late payment

● Over cost runs of the projects

● Difficult to sustain

The operational issues of the construction industry are related to the workforce, supply chains, and other routine problems faced by the contractors. The study finds major following major four subthemes under the operational impact of COVID-19 on the construction industry:

● Delay in project completion

● Supply chain problems

● Difficulty in workforce management

● Difficulty in maintaining health and safety of the workforces

The institutional supports consist of both government and professional associations. The study finds the following three subthemes of institutional support to promote the construction industry:

● No adequate support

● No special packages

● No support from professional association

Based on the above discussion, the following themes and subthemes can be developed on the impact of COVID-19 on construction industry (Figure 2):

Figure 2. Impact of COVID-19 on construction industry.

5. Conclusion and Suggestions

The construction industry is one of the highly affected industries by the COVID-19 pandemic. The study finds three-level impacts—financial, operational, and institutional on construction sectors. The government budget reduction has minimized the number of construction projects due to COVID-19. There is a deteriorating financial situation of the contractors due to the poor financial performance of the industry. Moreover, contractors faced the problem of late payment and over cost runs of the projects. Likewise, the operational level impact is related to delay in project completion, supply chain problems, difficulty in workforce management, and maintaining health and safety of the workforce. There are limited qualified workforces at the local level in the construction industry. The study finds no adequate support and special packages from the government, including professional associations. The study finds the expectation of construction professionals to promote the construction industry: 1) subsidized loan; 2) special packages; 3) necessary to extend construction contract; 4) government adequate support. The government and regulatory authority should support the construction industry to build efficient, competent, and resourceful sectors. Once the issues and expectations of construction professionals are addressed, that ultimately helps to enhance the construction industry’s performance. Finally, it will provide good benefits to the construction professionals, the industry and the government.

Acknowledgements

We are thankful to the respondent for their valuable information and time. Likewise, we are grateful to the Editorial Board and anonymous referees for their insightful suggestions and feedback that helped to improve the research paper.

NOTES

*Corresponding author.

Cite this paper: Timilsina, S. , Ojha, S. and Dhungana, B. (2021) Impact of Covid-19 on Construction Industry of Nepal. Modern Economy, 12, 1232-1244. doi: 10.4236/me.2021.128064.
References

[1]   Alsharef, A., Banerjee, S., Uddin, S. M. J., Albert, A., & Jaselskis, E. (2021). Early Impacts of the COVID-19 Pandemic on the United States Construction Industry. International Journal of Environmental Research and Public Health, 18, Article No. 1559.
https://doi.org/10.3390/ijerph18041559

[2]   Amri, T. A. (2021). The Economic Impact of COVID-19 on Construction Industry: Oman’s Case. European Journal of Business and Management Research, 6, 146-152.
https://doi.org/10.24018/ejbmr.2021.6.2.806

[3]   Baniya, B., Ghimire, A., & Mahat, A. (2021). Impacts of COVID-19 on the World Economy and Sustainable Development Goal in Nepal. COGNITION A Peer-Reviewed Transdisciplinary Research Journal, 3, 27-35.

[4]   Braun, V., & Clarke, V. (2006). Using Thematic Analysis in Psychology. Qualitative Research in Psychology, 3, 77-101.
https://doi.org/10.1191/1478088706qp063oa

[5]   Bryman, A. (2012). Social Research Methods. Oxford University Press.

[6]   CBS (Central Bureau of Statistic, Nepal) (2018). Nepal Labour Force Survey 2017-18. Central Bureau of Statistics Nepal.
https://cbs.gov.np/

[7]   CBS (Central Bureau of Statistic, Nepal) (2020). Trading Economics: Nepal Economic Indicators.
https://tradingeconomics.com/nepal/indicators

[8]   Creswell, J., & Poth, C. (2013). Qualitative Inquiry and Research Design: Choosing among Five Approaches (4th ed.). SAGE Publications.

[9]   Donaldson, D. (2018). Railroads of the Raj: Estimating the Impact of Transportation Infrastructure. American Economic Review, 108, 899-934.
https://doi.org/10.1257/aer.20101199

[10]   Gamil, Y., & Alhagar, A. (2020). The Impact of the Pandemic Crisis on the Survival of Construction Industry: A Case of COVID-19. Mediterranean Journal of Social Sciences, 11, 122-128.
https://doi.org/10.36941/mjss-2020-0047

[11]   Hansen, S. (2020). Does the COVID-19 Outbreak Constitute a Force Majeure event? A Pandemic Impact on Construction Contracts. Journal of Civil Engineering Forum, 6, 201-214.
https://doi.org/10.22146/jcef.54997

[12]   Kabiru, J. M., & Yahaya, B. H. (2020). Can Covid-19 Considered as a Force Majeure Event in the Nigerian Construction Industry? International Journal of Scientific Engineering and Science, 4, 34-39.

[13]   Neupane, B. R., & Mishra, A. K. (2020). Impact of COVID-19 on Labour Management: A Case of Reconstruction Works at Bharatpur Metropolitan City, Nepal. East African Scholars Journal of Economics, Business and Management, 3, 789-794.
https://doi.org/10.36349/easjebm.2020.v03i10.004

[14]   Pathirana, L. P. D. S. (2020). Effect of COVID-19 and Strategic Response: A Review on Sri Lankan Construction Industry. SSRG International Journal of Economics and Management Studies, 7, 73-77.
https://doi.org/10.14445/23939125/IJEMS-V7I6P110

[15]   Shank, G. D. (2006). Qualitative Research: A Personal Skills Approach. Pearson Merrill Prentice Hall.

[16]   Thapa, P., & Shrestha, S. K. (2021). Assessment of the Impact of COVID-19 Lockdown on Nepal’s Construction Sector Based on Selected Construction Projects. Journal of Advance Research in Civil and Environmental Engineering, 8, 1-9.

[17]   The Asia Foundation (2020, May 13). The Impact of COVID-19 Lockdown on Nepal’s Construction Sector: A Rapid Assessment.
https://asiafoundation.org/

[18]   Timilsina, S. P., Ojha, S. K., & Dhungana, B. R. (2020). Causes of Delay in Construction of Motorable Bridges under “Design and Build Model” of Bridge Project, Department of Roads, Nepal. Modern Economy, 11, 1451-1462.
https://doi.org/10.4236/me.2020.118103

[19]   Umar, T. (2021). The Impact of COVID-19 on the GCC Construction Industry. International Journal of Service Science, Management, Engineering, and Technology, 13, 1-17.
https://doi.org/10.4018/IJSSMET.20220301.oa1

[20]   World Health Organization (2020, October 12). Coronavirus Disease (COVID-19).
https://www.who.int/news-room/q-a-detail/coronavirus-disease-covid-19

[21]   World Health Organization, WHO (2021). Focused COVID-19 Media Monitoring, Nepal. Health Emergencies Programme.

[22]   Yadeta, A. E., & Pandey, D. (2020). Analysis of the Global Impact of the Pandemic (COVID-19) on Construction Industry: Possible Scenarios. Current Trends in Civil & Structural Engineering, 6, 1-8.

[23]   Zamani, S. H., & Rahman, R. A. & Fauzi, M. A. & Yusof, L. M. (2021). Effect of COVID-19 on Building Construction Projects: Impact and Response Mechanisms. IOP Conference Series: Earth and Environmental Science, 682, Article ID: 012049.
https://doi.org/10.1088/1755-1315/682/1/012049

 
 
Top