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EFFECT OF CONSTRUCTION INDUSTRY ON

COUNTRY ECONOMY AND ITS ECONOMIC
GROWTH ANALYSIS- EVIDENCE FROM
AFGHANISTAN
Mobeenullah Habibi 1*, Humaib Nasir 2
1*
Student, School of Civil Engineering, Lovely Professional University, Phagwara Punjab.
144411,
2
Asst. Professors, School of civil Engineering, Lovely Professional University, Phagwara
Punjab. 144411

Abstract
The construction industry has a vital role to boost the aggregate economy in any country. The construction
industry has significance distinct from other industries, this is a unique industry in which various parties are
involved those are the owner, contractor, architect, Materials, labours, suppliers and technical and non-technical.
This research is basically concerned with the construction industry in Afghanistan. It is a developing country in
which construction facing with various problems like non security, material, week skill labour and etc. And
research is carried out through a survey by filling a form of questionnaire in the construction project site, and
form filled by the project concern skill staff. After that a simple bar chart through Ms. Excel has carried for each
question.

Keywords: Construction sector, bar chart, GDP, Economic growth, employment

Introduction
The construction industries have important roles in the economic growth of a country. the construction industry
with regard to the economic is the part of the economy which make and implement vision to reality, it containing
budget, plans, designs, execute, repair and maintaining immobile infrastructures and buildings which involved
with building complexes, highways, railways, power plants, dams, transmission line, bridges, pipelines, tunnels,
airports, sewerage disposals, water supply and other construction work involving civil, electrical, mechanical and
containing other facilities and skills. The construction sector has significance distinct from other sectors, this is a
unique sector in which different parties are involved those are the owner, contractor, architect, Subcontractors,
Materials, labours, suppliers other technical like electronic engineers, mechanical engineers, equipment, and
regulatory agencies. The construction sector is the main contributor to the economic growth of a country and also

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generates great numbers of employs. It consumes tremendous materials in a limited time. Due to this event
inflation may occur in a specified area of the construction. The construction industry contribution has strongly
relationship with the country gross domestic product (GDP). The construction output can be the integral part of
the country output (Raymond, 1996). But this output will be different regarding to each country. For each country
the contribution of the construction sector to the economic growth of a country is different. And also, this is
different from year to year in each country. Changes and variation in the construction sector can affect other
sectors due to its linkages (Xing, 2005). It is certain that expansion of the construction activities is preceded by
increase in economic product, with the first effects felt greatly within the construction industry and merely
subsequently on the economic growth. Investment in the construction sector is a derived demand in which growth
become related. The relationship between construction demand and country output, are mixed. Greater demands
of the construction produce more employment and consumes vast materials and provide greater nation output.
On the other hand, if a country has greater income, they can deploy more construction.
Overview of global contribution of construction industry:
Construction is the largest fragmented industry through the worldwide. According to an estimation the
construction output is counted near to US $4.5 trillion in 2004 (Raza Ali Khan 2005), the construction industry
offering millions job for skilled, semi-skilled and unskilled employees through the worldwide. The table-1 exhibit
of the global construction industry employment and its output in developed and developing countries. We can
absorb from the table-1 that the construction contribution is about over US $3000 billion in 1998 counted through
worldwide. This Output is highly concentrated in the high-income countries (77 per cent) like through these
developed countries (Western Europe, North America, Japan and Australasia). The construction output for
middle- and low-income countries was counted as 23 % of total world construction contribution (Raza Ali Khan
2005).
Table-1: worldwide construction contribution in 1998

Number Region Output $ in Million

of High Low Total
Countries income income
countries countries
9 Africa - 20 962
23 America 723569 243 247
22 Asia 666556 387831
02 Oceania 46 433 -
34 Europe 876546 123 345
90 Total 2312104 701 755 3013 859
percentage of Total 77 23
Sources: International Labor Office Geneva Report 2001
Overview of global employment of construction industry:
The contribution of the construction industry in the behalf of employment through worldwide exhibited in
table 2. It is visible from the table that there was 111477 million manpower employed by the construction
industries through worldwide in 1998. But the low income and middle-income countries have high rate of
employed in the world against the construction contribution to the GDP of these countries worldwide. In this case
the construction distribution to the employment of the high-income countries provide 26% and low- and middle-
income countries provide 74% of the employment. (ILO Geneva2001).
Table-2: Worldwide construction employment in 1998
Number Region Employment (000)
of High Low Total
Countries income income
countries countries
9 Africa - 1867
23 America 92575 10917

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22 Asia 7258 60727

02 Oceania 685 -
34 Europe 11829 8978
90 Total 29038 82439 111477
percentage of Total 26 74
Sources: International Labor Office Geneva Report 2001

Construction’s value added to economy

In each country, the construction sector has to be taken as important elements in the total economic of the
country. As per observation of the construction sector GDP, it is varied from country to country and place to
place. To make an important infrastructure, it is required to extract raw materials and resources to utilize them
on site working, and make an immobile structure such (buildings, roads, railways, bridges, tunnels, dams,
highway…etc.). The end productions in developed countries are more professional and provide high services.
Constructing of the sound infrastructures are the vital factor that bring the construction industry as importance to
the nation economy and play important role in sustainable development. With the utilization of the advanced
technologies and advance new materials, which are using in existing building, the construction sectors play a
vital role in the exhibition of the sustainable and development country. For each country the sustainability is the
first priority for their development. To have a sustainable framework for construction, the sustainability verifying
the cultural, economic and social aspects as a part of it. The construction sectors part in sustainable environment
development are becoming much more important. With the help of advance technology utilizing in building
construction, that enable to save energy such as advance insulation and natural energy, by using solar panel or
use of navel material in building, these provide a contribution to the sustainable environment development. The
evaluation of the construction industry and assessment of the construction sector regarding to its value is still not
easy task, this sector has a vital role in economy, because for government has priority. This is the reality for all
countries, and for those countries who is newly developing and who is developed
Objective of research:
This research is describing the impact of construction industry and economic growth in Afghanistan by
consideration of taking data from 8 construction industries through filing a questionnaire to find out the result of
those industries and how it can increase GDP of Afghanistan and discussing the relationship between construction
industry and economic growth through a literature review.
Limitation of research:
There are two limitation confront to the research, first, the data is not collected from the government for a
specific period of time and also the questionnaire is not filed by them, second, the questionnaire is only filed by
those construction projects which is currently under progress.
Research Gap:
The impact of construction industry on the economy of Afghanistan is not carried out earlier, and it was not
discussed that how the construction industry is important for the growth of economy.
Literature Review:
Anaman, K.A and Amponsah, C. O. (2007) studied th construction sector’s contribution to the economic
growth. They have suggested some recommendation to the policy maker, government should pay full attention
to the construction sector because this sector can increase the economic growth and economic development is the
unique way to decrease poverty. They studied the causal link between construction sector and economic growth
in distinct paper published in same journal which provided result as the construction has strong relationship with
economic growth.
Anaman, K.A and Tsi, C.O. (2017) in causal links between construction sector’s growth and macro economy’s
growth in Ghana; his study showed that construction sector has third position in macro-economics in Ghana and
it is speedily growing sector. After analyzing data, he found that the construction industry is a major driver of
economic growth in Ghana. He used time-series data from 1968 to 2004, to conduct a simple Granger causality

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test, with the help of stationary variables in granger causality test, and finally, he found the result which indicates
the real GDP growth caused by construction sector growth within three years lag.
Barro R.J. (1991) studied economic development in a cross-sectional country. He investigated that the prior
human investment caused of GDP and the real growth rate per capita across 98 countries for a time period 1960
to 1985. With high rate of contribution to the GDP and those countries in which human capital is considered as
high as possible, it provides low rate of fertility. economic development is inversely belonging to the participation
of the government expenditures in GDP. But the participation of public in investment is less significant compared
to the government share. development rates are positively belonging to measures of country stability and inversely
belonging to a proxy for business distortions.
Basu, K. and Maerense, A. (2007) studied the causes and pattern of the GDP growth in India. Their paper
shows the wide parameters of the development of the Indian economy since the country's freedom and a cross-
country assessment of where India stands, drawing out the examples noticeable in these aggregative insights.
They provide a review of the on-going discussion on the segments of the Indian development and the general
significance of the various strategies during the 1980s and 1990s. It adds to this discussion by recognizing the
milestone years, and breaking down the governmental issues behind a portion of the financial matters. The paper
additionally investigated the components behind the adjustments in India's reserve funds rate and the connection
among development and advancement, from one perspective, and the idea of work market guideline, on the other.
Berk, N. and Bicen, S. (2017) studied causal relation between construction industry growth and GDP growth
in emerging countries, they used quarterly data for the period of 2001 Q1 to 2016 Q2 from Turkey to conduct
Granger causality test for determination of the relationship of construction industry investment and economic
growth. their study shows the importance of construction industry and suggested the possibility of basic problems
to solve in short run, but for gaining advantages from long term construction investment, there is need of
identification of new industries. They find that the Turkish economy is directly affected by the construction sector.
Burke (2002) discussed the relationship the economic cycle and stock market. He studied two ancient
aggregate stock market crashes and their impact on GDP growth. The theoretically showed that how the stock
market can impact the economic cycle and against utilizing a vector auto-regression model. He used granger
causality test to determine the causal relationship between economic cycle and stock market.
Dakhil, A. (2013) researched in his PhD study, the construction sector’s contribution to the economic growth
in Libya. His goal was to find out the significance role of the construction industry in economic growth, for
achieving this purpose he undertakes various tests including granger causality test, unit root test (ADF), and co-
integration test and similarly he used the VAR model to find the importance role of the construction sector in
GDP in Libya. He remined that construction can influence other sector like services, health services and
agriculture. He said, the construction sector is also depending the GDP growth for short term, but construction
investment has long term impact on GDP while GDP has short term effect on construction investment. He didn’t
find any special linkage with other sectors except trade sector, trade sector has bidirectional relation with the
construction sector. But closed relationship has been found with the manufacturing, electricity and transport
services. He also gave some recommendation to the authorities and policy makers. Libya is suffering from
unemployment; the construction sector is the best solution for the same issue.
Erol I. and Unal U. (2015) searched for role of construction industry in GDP with the consideration of Turkey.
they investigated the causal relationship between construction sector and GDP while using the data from Turkey
for the period 1998 Q1 to 2014 Q4. Also, the study complied three variables which are RGDP growth, Real
interest rate and Construction sector growth. They utilized various tests which included VAR model used for
indicating the causality relationship in a multivariate setting, they also used Zivot Andrew test which are using
for indicating the building breaks in data, and the other three test which are the granger causality test, unit root
test and co-integration test are used either. They took 17 years data, they divided into small sub-periods for better
analysis. The study shows that the construction has a vital role in the economic growth of Turkey but it is not a
main driver of the economic growth. Although is depended on variety in aggregate economy. They found
construction sector and real interest as bidirectional to each other while suggestion that the construction is not a
permanent solution to Turkish economic growth.

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Flangan, R. and W.Lu. (2007) discussed the competitiveness in construction sector. This exploration, in this
way, audits the surviving writing from four perspectives: idea of aggressiveness, intensity inquire about at the
development business level, intensity inquire about at the firm level, and aggressiveness explore at the task level.
The survey presents the cutting-edge advancement of intensity look into in development, distinguishes the
examination holes, and proposes new headings for further investigations. Further research is prescribed to
approve past thinks about in development rehearses, distinguish the systems that support shared improvement of
intensity at various levels, and how to accomplish its supportability by grasping new administration and/or on the
other hand financial aspects strategies. Finally, his research provides the case study of the recent competitiveness
study in the construction sector and he suggested new alignment for more research. The widely competitiveness
in construction has been accepted by the numerous writers and it will bring much positive effects to the present
construction work and it can cause new development.
Green (1997) investigated the role of both the residential and non-residential construction work on socio-
economic through the economic cycle. He used ADF test for identification of the stationary data and utilizing
Granger causality test. Output of the test described economic growth is granger caused by residential construction
sector, while economic growth is not granger caused by non-residential construction sector.
Hubei, W. and Yunnan, K. (2013). were Analyzed the relationship of construction industry and GDP by
optimizing the UK and China data, they find some similarities in both countries regarding construction and their
attributes. He showed a high correlation coefficient among the growth of construction Value Added and GDP.
Jackman, M. (2010) studied residential construction and economic growth in developing countries: using case
for Barbados. Since the global monetary crises, the Barbados also face with economic crisis in 2009, but with the
stimulation of economic growth, providing many job chances and in the construction field, hence it is using huge
amount of materials, it provided a high contribution to the economy. He tested the relationship between
construction and economy, the paper concluded there is a bidirectional relationship between these sectors.
Therefore, construction has to be considered a major sector of the economy.
Khan, R.A. (2005) investigated the role of construction industry in GDP using empirical evidence from
Pakistan economy. He said construction industry and their activities are to be taken as one of the aggregate
sources of GDP growth, creating and economic activities. Construction and engineering services sectors play
significance role in the economic uplift and improvement of the country. It is good mechanism of making the
employments and offering job occasion to millions of unskilled, skilled and semi-skilled manpower. It may have
important role in making income in both informal and formal sector. He mentioned 2.3% construction value
added to the GDP of Pakistan and 6.1% employment in construction sector. The study exhibits the global
contribution of the construction industry to the economy. Globally, total contribution of the construction sector
was estimated $3000 billion in 1998, 77% output was made by high income countries and 23% output was made
by low income countries. He undertaken three tests which are unit root test, cointegration test and granger
causality test, to find out the relationship between those two sectors, the output of the test indicates the concrete
relationship between the construction sector and country economy. The result exhibits that construction is granger
cause of GDP and not possible vise-versa in case of Pakistan.
Ofori, G. (1988) Construction sector and economic growth in Singapore, he found that construction sector
drive significance role in the growth of Singapore economy, to maintain a sustainable socioeconomic
development, construction can establish the infrastructure, and also it is huge helper to the macro-economic
growth, the awareness of the government about the needs and importance of the construction industry and its
direct support, have substantial benefit for the sector, these are contributing to the sector to fulfil its all tasks
effectively and efficiently.
Raftery. J. et al (1998) discussed construction sector and globalization, and in Asia, the construction sector
development case study. They nominated three trends for the todays development in case of construction industry:
(1) for covering the construction project vertical integration has to be increased, (2) most private sectors involved
in infrastructure project, (3) encouraging abroad investors for local constructions. they took Japan as the study
subject, and the found result illustrate the important recent development and improvement in the construction
sector from the globalization, construction sector development and industrial policy point of view in Asia. The

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obstacles in front of the trade through global are going to be omitted and most countries are interesting for
investment in abroad countries, this situation bring a competition among the global countries in the construction
sector and trade.
Materials and methodology:
This study is basically tended to find the contribution of construction projects in Afghanistan through a survey.
By providing a list of questioners, holding the data from different construction projects. After the collection of
data, a simple statistical analysis would be applied. This research will determine the value added of even one
project to the economy. Survey is the way of getting information and more knowledge about a specific topic by
providing of questionnaire to the pre-identified people or organization. For achieving the specific objectives,
various kind of survey can be applied and it depend upon the method and approaches. Survey is the main way of
collecting data. It may be used for various purposes. A critical procedure has to be taken to gain the data from
the correspondent respondent, and respondent must be able to appropriately answer the questions without any
biased ideas which can bring impact on the result of the research. Survey has various ways to get data by asking
people or organizations with distributing of questionnaire, such as tour to the practical site, using media, email,
social network, QR codes or URLs. Here is the sample of questionnaire.

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Data and Analysis

The data from the construction project has been collected by me with the filling of questionnaire by the
concerned person whether they are (Project Manager, Chief Engineer, Site Engineer, Contractor, Consult
Engineer) Site visit for various construction projects done for the aim that I wanted to see the Projects size from
the near and site pictures has been taken by me. Those projects from whom I collected the data and site pictures,
they were various in size, some of the projects were in large size and some of them were small in size, because
that is the reason for variety filling the questionnaires and they selected different options from the questionnaires
some of the large projects as an example the East zone 600 beds hospital has few structures in same project at
same location and they constructed more than 70% and various building were going on as parallel but in small
projects as an example of Bamiyan local road construction, it has only 10 km construction road in scope which
has less impact on our economy and their late benefits are less compare to large size construction, large size
construction can take large number of skilled and unskilled labour and using huge amount of raw materials at a
limited time.

East Zone Hospital

Result and Discussion:
The data analyzation has been done by the Microsoft Excel, first the data is collected from the projects by
filling a form of questionnaire and for each response a specific value has given, hence, bringing these responses
value to Ms. Excel to make a table from, then making a pie chart for the result. And now I am going to discuss
the result from the chart
Table: Responses values of the questionnaire from the ongoing projects.

Data analyzation and formulating a bar chart will be given to each questionnaire. And for each questionnaire one
bar chart will be given.
Responses for question-1:
In the below bar chart, the bars showed the acceptances of the project’s responses. The result indicates that, 6
responses are agreed about their industry is coming under heavy industry out of 8 and one neutral and disagreed.

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Answer Q1
7
6
5
4
3
2
1
0
Strongly Agree Neotral Disagree Strongly
Agree Disagree

Responses for question-2:

For question-2 the maximum of the responses is Agree and minimum is varying, some of these are strongly
agree, neutral and disagree. It depends on worth and ability of the project and its impact the growth of economy
positively.
Answer Q2
6
5
4
3
2
1
0
Strongly Agree Neotral Disagree Strongly
Agree Disagree

Responses for question-3:

For question-3 the maximum of the responses is disagreeing which are 4 out of 8 projects, and the remaining
have various responses, one project is agreed about that their project can contribute 0.5% to the economy,
although one project is strongly disagree about 0.5% contribution to the economy. It is indicating the ability of
the project to contribute to the growth of economy positively. It depends on the size of project.
Answer Q3
5
4
3
2
1
0
Strongly Agree Neotral Disagree Strongly
Agree Disagree

Responses for question-4:

For question-4 this portion of the questionnaire concentrate on the recruitment in construction projects,
According to this survey the maximum of the responses is 3 for two terms, three projects selected neutral and
other three projects selected disagree option, and also one project is strongly agreed and one project is strongly
disagreed for the term that their project contributing 0.5% in employment, it also depend on the size of project to
contribute to the employment of workforce.

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Answer Q4
3.5
3
2.5
2
1.5
1
0.5
0
Strongly Agree Neotral Disagree Strongly
Agree Disagree

Responses for question-5:

For question-5 this question exhibited the connection of the construction industry and economics, the
maximum of the responses agreed is 7, out of 8 projects and one project is strongly agreed about their project is
important for the growth of economics. It described that all of the construction projects are very important for the
accelerating economy.
Answer Q5
8

0
Strongly Agree Neotral Disagree Strongly
Agree Disagree

Responses for question-6:

For question-6 All the projects are focused on their importance and showing their impact on the growth of
economy, the number of the responses is 5 disagreed and 3 strongly disagreed. The construction projects are
disagreed with non-impact of projects on the economy of Afghanistan.
Answer Q6
6
5
4
3
2
1
0
Strongly Agree Neotral Disagree Strongly
Agree Disagree

Responses for question-7:

For question-7 the maximum number of the responses for this question are 4 which all 4 are neutrals, they
showed the projects consent about recruiting high number of the workforce, those projects employed numbers
workforce but they couldn’t consider to be in high rank of the employing workforce in Afghanistan, and one
project is strongly agreed and one is only agree, these projects are slightly bigger in size and one is disagreed for
employing tremendous workforces, this type of project is very small in size, which doesn’t has big capacity for
employing, this depend on the ability of the project to contribute to the employment of workforce.

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Answer Q7
5
4
3
2
1
0
Strongly Agree Neotral Disagree Strongly
Agree Disagree

Responses for question-8:

For question-8, maximum of the responses is 4 they are agreed for that question that their project has broader
scope for the increasing economy, and one project is strongly agreed for this term, this project is bigger and
heavy, three projects out of 8 are neutral, they couldn’t predict that their projects will have broader scope for the
accelerating economy and nor they rejected. The construction projects showed that they would be able to
contribute to the economy after its completion.
Answer Q8
5

0
Strongly Agree Neotral Disagree Strongly
Agree Disagree

Responses for question-9:

For question-9 this is important question because we want to know how the construction industry is vital for
economy and social benefits, and also to understand how strongly connection does construction sector has with
other sectors. According to this survey the maximum of the responses 4 are agreed, 3 neutrals, and one is strongly
agreed. Hence, most of the projects showed their acceptance that they have relation with other sector, and none
of them rejected their relation with other sectors.
Answer Q9
5
4
3
2
1
0
Strongly Agree Neotral Disagree Strongly
Agree Disagree

Responses for question-10:

For question-10 this question has to be mostly responded positively since the construction had started, they
are using huge amount natural resource, when we are using natural resources, it may increase our economy and
as well as it is easy to access and less expensive, according to the survey the maximum of the responses is 3
strongly agreed, 3 agreed and 2 neutral, most of the projects are accepting that they are using tremendous amount
of natural resources affectively. Only two projects may use less amount of natural resource.

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Answer Q10
3.5
3
2.5
2
1.5
1
0.5
0
Strongly Agree Neotral Disagree Strongly
Agree Disagree

Responses for question-11:

For question-11 this question is common for all the projects and they have to be considered in economic
growth, all the projects whether it is big project or small projects are very important in increasing economy and
their values are considering in economy. Here are the responses of the ongoing projects that they exhibit their
consents, the maximum of the responses is 5 agreed, 3 neutral all the projects are accepting that, their construction
GDP would be consider in the economy of Afghanistan.
Answer Q11
6
5
4
3
2
1
0
Strongly Agree Neotral Disagree Strongly
Agree Disagree

Responses for question-12:

For question-12 this is the last question, we want to know the strongly relation between construction industry
and economic growth, here are the responses of the projects, the maximum of the responses is 5 agreed and 3
strongly agreed, none of the projects rejected the correlation of the construction industry and economic growth.
The projects are accepting that they have strongly correlation with the economy.
Answer Q12

6
5
4
3
2
1
0
Strongly Agree Neotral Disagree Strongly
Agree Disagree

All those recommended bar chart for all of the projects responses values for each question has brought. The bar
chart showed that some the responses are whether, strongly agreed and strongly disagreed, which provided with
the value 5, and 1 respectively. I have total 12 strongly agreed responses from 8 different projects and 5 strongly
disagreed responses for different questions, these strongly disagreed term indicates very low consent of the

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member in the term. But on the other hand, strongly agreed exhibit highly concentration of the staff in the given
terms.
Conclusion
This research has described the importance of the construction industry and their role in the country’s
economy. Defined construction and construction industry, construction is the converting of vision into reality,
and construction industry is a major sector of the economy which can contribute to economy in aggregate form.
Construction is containing budget, plans, execute, designs, repair and maintaining immobile infrastructures and
buildings which involved with building complexes, highways, railways, power and mechanical and containing
other facilities and skills. Disused various researcher’s paper regarding to the importance role and impact of
construction sector in the nation economy. The global contribution of the construction sector has discussed. Many
writers found the strict relationship between the construction industry and country economy. Though construction
is not the main driver of the economy, but it is the main and crucial sector of the economy. As per my survey by
providing a questionnaire and filling them by the construction projects related skill staff whether they are (chief
engineer, project manager, site engineer, contractor, and etc.) and analyzing these collected data through MS-
Excel, Most of the projects showed their consent about contribution to the economy and none of the project
strongly rejected their contribution to the economy in aggregate form. As per my survey 25% of the construction
projects can contribute 0.5% GDP to the economy of Afghanistan. And also 25% of the construction projects
employed 0.5% workforce in Afghanistan. Moreover, construction sector can not drive economic growth in
Afghanistan but against Afghanistan’s economy drive construction industry.

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