The construction budget is a victim of the government’s extravagance – Tejaratnews

According to Tejarat News, economic observers believe that the most important reason for the ineffectiveness of annual budgets in Iran is the fatness of governments, which has caused a lot of overhead costs to be imposed on the country. The costs that governments generally invest in the construction sector to provide it; The result of this government approach is the overloading of defined construction projects and the serious backwardness of this sector in recent years.

The research arm of the parliament has recently analyzed the overall economic situation in an analytical report entitled “Budgeting Reform Strategy and Proposed Transformational Axis on the Eve of Submitting the 1402 Budget Bill” and has provided a lot of data on the critical process of the country’s economic development in recent years. An important part of this report deals with the state of acquisition of capital assets or the construction budget of the country in different years, which contains important points.

The decline of capital formation in the construction industry

As stated in this research, the ratio of gross fixed capital formation to GDP has experienced a free fall over the past 10 years; In a way that it has reached from 26% in 90 to less than 15% in 1400. One of the main sectors that pushed this index back is the government’s performance in the construction sector.

The data of this report shows that the construction sector has faced a serious drop in capital formation in recent years. Based on this, the ratio of gross capital formation in construction to gross domestic product has decreased by seven percent during the 10 years under review and has reached 10 percent from 17 percent in 1990.

Another point that can be obtained from these data is the serious drop in capital formation in the construction sector since 1995. This is despite the fact that in previous years, the process of capital formation in this sector had maintained a certain level despite some fluctuations. At the same time, it should be noted that during these years, the ratio of net capital formation has also fallen sharply and has been negative since 1997.

Capital sleep in forgotten projects

The research center’s statistics show that every time the government has increased its public expenses in the budget, the construction budget has faced a decrease, and every time it has deducted from its expenses and expenses, the construction budget has grown. However, the same budgets are allocated to the construction sector and productive infrastructures only on paper and generally do not reach any results in practice.

The Research Center of the Iran Chamber had previously pointed out this importance in the review of the 7th Development Plan, that currently there are more than 6,000 small-scale national and provincial plans and projects, mostly in the direction of repair and maintenance, in a half-finished state, which according to expert estimates even If the new project is not defined, with the current process of providing credit by the government, it will not be completed and put into operation for another 20 years!

At the same time, it is also necessary to point out that even if a part of this budget is realized, generally the resources are spent on maintaining and repairing half-finished projects, deprivation or redistribution policies, and it does not lead to the strengthening of economically productive infrastructure.

Unproductive budgeting

Surveys show that the share of construction credits from the budget increased this year and reached 19%, but we have to wait for the budget deduction report next year to determine how much the government has adhered to the road map it has compiled. However, it is clear from the available evidence that the government has not been able to achieve success in this matter; Especially, in this year’s budget, the government’s expenditure is 40% and it has increased its financial obligations throughout the year.

According to the research center’s report on the government’s adherence to the budget law in the first 6 months of this year, only 36 thousand billion tomans of capital asset acquisition credits approved for the 6 months of the year (equivalent to 27 percent of six twelfths) have been paid; However, the contribution of the construction sector in this year’s budget law was 251 thousand billion tomans. It should be noted that the government had increased the amount of the construction budget in the construction budget of 1401 compared to 1400, amounting to 75 thousand billion tomans, equivalent to 42%. But all these figures remained on paper so that only 36 thousand billion tomans of this amount were paid!

What is certain is that every year the government gets caught in the trap of current expenses such as employee salaries, government debt payments, and so on, thus pushing the budget resources to the non-productive and unproductive side of the economy.

Falling productivity index

Another research that deals with the pathology of industrial development strategy in Iran provides interesting data about the low efficiency of capital in Iran’s economy. In this report, which was also published by the Majlis Research Center, it was announced that the productivity of production factors went from 112.8 in 1990 to 3.98 in 1999, and its annual average change was negative 40.1. At the same time, all the productivity indicators have faced a serious decline. Article 3 of the Sixth Development Plan, based on the productivity of 2015, had targeted a 15% increase in productivity by 2014 and an average annual growth of 2.8%!

At the same time, this study shows that the process of gross fixed capital formation has been negative in many years of the 10-year period, so that its change from 1990 to 1999 was equivalent to negative 40% and the average annual change was negative 4%. The rate of capital formation in the construction sector has also experienced a bad situation and has declined in the period under review. In such a way that from 1990 to 1999, it decreased by 26% and the average annual changes were negative 3%.

These data show that although on paper high budgets are considered for the construction and productive sectors of the economy, these budgets are not realized operationally and the capital efficiency in this sector is very low. Meanwhile, the rate of capital formation in the productive sector of the economy and the construction sector has been decreasing for many years and has lost its attractiveness due to various factors.

Budget deviation

A look at the list of organizations and institutions involved in the development of the industrial development roadmap shows that most of these organizations and institutions have generally had a useless performance and while they have always sought to attract resources, these resources have generally been wasted. A survey shows that while every year large budgets are allocated to sectors related to industrial research and development, but in practice, these budgets have had very low productivity. The table below is an overview of this flawed process.

Although according to the law, the government has been obliged to present the budget bill for 1402 to the parliament by December 15, but until today there is no news about this bill, and at the same time, it is not yet clear what plans and plans the government has made for the construction sector in the coming year. But if he does not apply some reforms in the formulation of the budget, next year the budget performance will be the same as the previous years and the construction budget will also become a piggy bank that the government will tap into every time it faces a lack of resources.

Read more reports on the housing page.