Construction Industry in Iran: Problems

Construction Industry in Iran: Problems and Possible Solutions

The construction industry in Iran has been plagued by problems. The literature that has been created on this issue addresses the issues that Iran is facing in its construction industry, and discusses the major elements that are holding back those who want to build in the country. The delays in construction projects are long, and they are affecting the morale of workers and the patience of people who have contracted their projects out and wish to see them completed. In order to find solutions to the Iranian construction problems, it is first important to analyze all of them individually in order to determine which are the most significant and which are not as important in the overall scheme of things. All of the literature that is reviewed here will focus on the delays that are seen in the Iranian construction industry, but also on the reasons behind those delays. It is one thing to point out that there are delays commonly seen in the construction process, but it is another thing entirely to dig deeper into the issue and begin to explore why the delays occur.

Finding out what kinds of things are causing the delays in the construction industry in Iran is the first step toward discovering and working to implement possible solutions for those delays. This literature review will focus only on the issues, and will not look at the potential solutions that could be seen in the construction industry in Iran. That is a topic for another time. However, the literature will provide the researcher with vital information upon which he can base suggestions for solving problems at a later date. With this in mind, the literature review will be broken into sections specific to each one of the main problems that is currently being seen in the construction industry in Iran.

Economic Issues and Financing

Among the most significant problems are the economic issues and financing difficulties that are seen in the construction industry in Iran (Eshtehardian & Nasr Azadani, 2011). Inflation is a serious problem there, and the rate of inflation has been growing at around 25% per year at a minimum. That is a staggering number when one considers that in light of other areas of the world, where the inflation rates in modern countries often grow between 1.5% and 4% per year. Any amount of inflation can lead to rising costs for both labor and materials, so it is easy to see that a very high inflation rate would equal problems with the costs of doing business. Because Iran's inflation rate is high and growing all the time, projects can have trouble getting started and can run out of money before they are ever finished. In addition to the high inflation, the rate of economic growth is low in Iran, so the two work with each other and against those who want to start construction projects. While places like South Korea, India, and China - along with other developing countries - see their rates of economic growth hovering between 5% and 11%, the rate of economic growth in Iran is near 2% (Eshtehardian & Nasr Azadani, 2011).

Obviously, that growth rate is in stark contrast to other countries that are developing, and results in Iran struggling between low economic growth and high inflation - both of which are very detrimental to the construction industry. These kinds of economic problems also result in an average per capita income that is much lower than some of Iran's neighbors. For example, in Europe the median income is $24,000, where in Iran the median income is only $9,000. Most people in the Western world and in developed countries would wonder how anyone could live on only $9,000 per year and still have food and shelter. In developing countries things are a bit different, and many people have low incomes. Still, with a median income that is less than $10,000 along with the inflation and other issues, Iran is clearly struggling economically. Any time there are economic problems or an economic downturn in a country, construction of new buildings and homes is one of the first things to slow down, because people simply do not have the money to build (Frimpong, Oluwoye, & Crawford, 2003; Khoshaghazi, 2005).

Most countries have a private sector, where businesses that are run by individuals and not by the government grow and flourish (Frimpong, Oluwoye, & Crawford, 2003). It is possible to have such a business in Iran, but the private sector is weak. With all of the other economic difficulties, it is easy to see why this would be the case. It is also another reason why the construction industry in Iran is struggling right now and why there are so many problems within it. Businesses are not able to stay open long if they do not make money, and small businesses that open in the private sector often close because they are not making the kind of money for which they hope. Additionally, those people who want to start businesses do not have the capital to do so because there are so many people who make very little money. It becomes difficult to save up for anything unless one acquires money from an inheritance or something else that provides them with start-up capital for their business. The lack of a strong private sector really hurts Iran where the economy is concerned, and that in turn hurts the construction industry.

Financing is available for those who want to build homes and buildings, but there are actually too many methods (Khoshaghazi, 2005). Too much to choose from breeds indecision and confusion, which are both problems for people trying to make a decision as to which financing method would be right for them. They might end up choosing a method that is actually detrimental to them financially, and that can be a serious problem because people who struggle with their finances can get in over their heads quite easily if they get involved with a company that will take advantage of what they do not know about financing. They may have trouble deciding which company or method of financing to use, and they may end up regretting their choice if they find that they should have gone with a different method. Getting financing and getting the construction company to work with the financing company to get something built can be a long and very frustrating process. Many Iranians choose to avoid financing because of the hassles it creates (Asnasshari, Knight, & Hurst, 2010; Assaf & Al-Hejji, 2006).

Financing, like much of the economy in Iran, is tied to the sale of oil and gas around the world (Babai, 2011). If oil and gas are selling for a high price throughout the world, Iran has money. If the prices worldwide drop sharply, there is suddenly much less money with which to work. Because Iran has not built an economy that is strong in more than one area, it flounders easily when there are lower prices for oil and gas throughout the world. That is not to say that Iran should get its money from somewhere else, but diversity in income sources would be helpful. However, right now Iran must work with what it has available, and that is rich reserves of oil and gas. The money that is generally used to finance construction projects in Iran comes from the sale of oil and gas, so a worldwide downturn in the price can stop people from financing projects and can dry up money that was previously promised for projects that are already ongoing (Babai, 2011). That can lead to the delays that are so often seen in the construction industry in Iran, and cause frustration for the companies that are doing the building and for the people who have contracted to have the buildings constructed.

Education

In the construction industry, there are many issues with mismatching skills and needs. The training that is provided is not really the training that most people need to work on the projects that are ongoing or that will be started in the future. That means that the workforce in the construction industry in Iran is often unclear about what it is doing and may not have the appropriate skills for the buildings that are being erected. With this being the case, it is very important that proper training is available. The projects that are researched and that discuss industry needs are often also inaccurate, leading to more poor training that will not help the construction workers get the job done. Most of the workers in this industry are unskilled Afghan refugees, and if they do not have the proper training the buildings they create will not be safe (Eshtehardian & Nasr Azadani, 2011). Inspecting the buildings and fixing mistakes that were made in the construction of those buildings also causes many of the delays that are seen in the construction industry in Iran at any given time.

Building Materials

If one is going to build a home or a business, one needs good materials with which to construct those dwellings. However, most of the materials that are used in construction projects in Iran are far from meeting international standards (Babai, 2011). They are of a low quality, and they do not hold up in the way that they would if high quality materials had been used. Many of the designers and others who are in charge of recommending and/or purchasing materials for the construction projects are faced with conflicting feelings about what they are using. They know that the items are substandard, but they have to meet a deadline and a budget. There is no room in that budget for materials that meet international standards, because they are much more costly. It is also not possible to order other materials that are better and wait for them to arrive, because that would delay the deadline even further. When substandard materials are used, however, there are delays while materials are modified, replaced, or repaired, and that can take valuable time away from the construction (Babai, 2011). It can also be costly, driving up the budget and causing problems with financing.

Among the building material problems are the non-standard uses of concrete, the use of low quality iron, making joists in workshops that are non-standard and not designed for that type of construction, and a lack of experienced engineers to monitor what is really going on when building materials are being created and buildings are being constructed (Babai, 2011). There are thousands of problems with building materials in Iran, and those problems are too numerous to mention them all here. The problems with the materials, though, have led to poor construction and little to no earthquake resistance, making the buildings highly dangerous places in which to live and work. Engineers have tried to create buildings that withstand earthquakes, but the materials available for use and the lack of skill of many of the workers make it nearly impossible. Pipes, ceramics, tiles, and other items are used - at a high price and a large time commitment - to make buildings in Iran look beautiful, but there is no real stability to the buildings and they will likely crumble during an earthquake (Babai, 2011).

International Sanctions

Iran is not particularly friendly with many other countries, and that actually hurts its construction industry (Afshari, et al., 2011). Much of the modern technology that is used in other countries is not shared with Iran, and has not been developed in that country, so the Iranian people do not have access to it. They must build in a more primitive way, and that results in long delays, projects going over budget, and buildings that are not stable and that would not meet codes and standards in most other parts of the world. Part of the reason for a lack of knowledge, technology, and equipment to make buildings structurally sound comes from a lack of investment companies that are interested in Iran. The international sanctions that have been placed against Iran have stopped companies from investing there. In turn, that has weakened Iran's construction industry to the point that it is struggling to get anything completed that will be safe for people to live and work in on a daily basis (Afshari, et al., 2011; Al-Momani, 2000).

With the sanctions comes not only a lack of money, but a lack of experience (Afshari, et al., 2011; Al-Momani, 2000). Iran is not able to consult with the managers of foreign construction companies as to how things should be built or what kinds of materials should be used. Because that is the case, Iran's construction industry is left without knowledge that would be very helpful to it. Being left to figure it out on their own is not necessarily working well for the Iranian people when it comes to construction. In addition, the sanctions prevent Iran from getting financial resources from institutions such as World Bank and the IMF, so they are limited in what they can borrow in order to acquire new and better technology for their construction industry. While there are financing options available to them, they are all in-country and reliant on gas and oil in order to have money to loan (Eshtehardian & Nasr Azadani, 2011). Because of this, financing of equipment and technology has come to a virtual standstill, not allowing the construction industry in Iran to advance and keeping the buildings at a level of construction not deemed safe or stable for those who live and work in them - especially in the event of an earthquake.

Design

Regulations are a large part of the design industry (Mahdavinejad & Molaee, 2011; Pourrostam, 2011). The general design regulations that are used in the construction industry in Iran come from the regulations in major industrial countries such as Canada, New Zealand, and the United States. These regulations reflect the needs of the construction industries in those countries, and showcase what is required to build successfully and safely in the country to which the regulations belong. While they can differ slightly from country to country, there are similarities in the regulations for construction in virtually all developed countries, in order to ensure that the buildings that are created are designed for their intended purpose and safe for people to inhabit. Many of these countries are rich compared to Iranian standards, and the average per capita income is much higher than what would be seen in Iran. While the median income in Iran is near $9,000, which is still very low, the average per capita income is only around $2,000 - a startling contrast to other, more developed countries where life is far different and the income levels are much higher even for those who make minimum wage.

Regulations are very important to any construction industry, but the people of Iran are not able to meet the regulations that are seen in more developed countries (Mahdavinejad & Molaee, 2011). The money is simply not available to do so. These regulations are designed to identify the amount of material that must be used in the construction, what types of materials are required, and the cost of the building as a whole. However, the problems that are seen in the construction industry in Iran make it nearly impossible to meet regulations that are seen in other countries. As a result, the cost of building in Iran has risen but the quality of the construction has failed to improve to meet the rising costs. The buildings often look very nice and have all of the expected amenities, but this is mostly a facade. The actual construction and foundation of the building are both often very poor and not up to the standards that would be seen in any of the well-developed countries anywhere else in the world (Mahdavinejad & Molaee, 2011; Pourrostam, 2011).

How the buildings are designed also matters. All engineers use available software such as SAFE, SAP, and ETABS. That sounds like they are doing the right thing, but the software they are using is actually hacked copies. There is no copyright law in Iran, so the software that they are using to design buildings has been taken and is "jailbreak" software that will not provide them with what they really need where design is concerned. The engineers usually have little experience with the software and little experience in design as a whole, so they introduce errors into the information that they are providing to the software program (Mahdavinejad & Molaee, 2011). Experienced engineers using proper software would not make the same kinds of mistakes, but engineers who are uncertain and who are using pirated or hacked copies of software will not be able to achieve a design plan that is realistic and accurate. That will not allow for an optimal design plan for the building.