Government plans major reforms to modernise Pakistan’s construction sector
ISLAMABAD: The federal government has stepped up efforts to reform Pakistan’s construction industry, with a comprehensive package under consideration to improve regulation, financing, taxation, procurement practices and construction quality.
Federal Minister for Economic Affairs and Establishment Division Senator Ahad Khan Cheema chaired a high-level meeting on Saturday to review proposed reforms aimed at strengthening the construction sector and bringing national practices closer to modern standards.
The meeting was attended by Minister of State for Finance Bilal Azhar Kayani, Federal Secretary for Housing and Works Captain Mahmood (retd), Managing Director of the Public Procurement Regulatory Authority (PPRA), representatives of the Construction Association of Pakistan (CAP) and senior government officials.
The discussions focused on developing a coordinated policy framework capable of addressing longstanding regulatory, operational and financial challenges faced by the construction industry.
Construction Industry Development Board proposed
As part of the proposed reform package, the government is considering the creation of a Construction Industry Development Board (CIDB) to serve as both a development and regulatory body for the sector.
The proposed board would be responsible for supporting the growth of the construction industry while also establishing and enforcing standards for contractors, consultants and other stakeholders.
According to the plan discussed at the meeting, the CIDB would include representatives from both the public and private sectors, creating a platform for cooperation between government institutions and industry stakeholders.
Senator Ahad Cheema said there was broad agreement between the federal government and CAP on the need for such an institution.
He said the government would prepare the proposed framework and present it to the prime minister for approval.
The proposed regulatory mechanism is expected to address gaps in the existing system, particularly those relating to professional standards, project quality and accountability.
Consultants may face greater accountability
One of the major issues discussed during the meeting was the lack of a clear accountability mechanism for consultants involved in public infrastructure projects.
Cheema noted that contractors could face penalties for delays, defaults and poor performance, but similar legal and financial consequences were not adequately available for consultants when design or technical shortcomings resulted in project failures.
Under the proposed CIDB framework, consultants would come under a more formal regulatory structure.
The objective would be to ensure that professionals responsible for project design and technical supervision could also be held accountable for serious errors, design deficiencies or technical mistakes.
CAP representatives supported the proposal, maintaining that stronger oversight of consultants would improve the quality of project designs and help safeguard public funds.
Defect liability period to be extended
The government is also preparing to increase the Defect Liability Period (DLP) for public development projects.
At present, the standard liability period is one year. The government plans to initially extend it to three years and subsequently work towards increasing it to five years.
Cheema said public infrastructure should remain durable for a considerable period after completion and should not begin deteriorating soon after being handed over.
He argued that extending the liability period would create stronger incentives for contractors and executing agencies to maintain quality standards throughout construction.
Under a longer liability period, contractors would remain responsible for addressing defects for an extended period, potentially discouraging the use of substandard materials or poor construction practices.
The government views the proposed change as an important step towards improving the long-term value of public development spending.
Construction development package under consideration
The proposed construction industry development package is expected to address several financial and policy constraints currently affecting the sector.
The package could include targeted tax reforms, revised import and export policies and incentives aimed at encouraging the adoption of modern construction technologies.
Officials also discussed the need to strengthen domestic construction capacity by facilitating access to modern machinery, equipment, materials and technical expertise.
The government believes that a more predictable policy environment could encourage greater private investment while supporting the development of local construction companies and suppliers.
Proposal for Construction Development Bank
Financing challenges faced by construction companies also came under discussion.
CAP representatives highlighted difficulties encountered by contractors in obtaining banking facilities, particularly when arranging financial and performance guarantees required for government projects.
The industry also proposed establishing a dedicated Construction Development Bank (CDB) to address the sector’s specialised financing needs.
In response, Cheema directed Minister of State for Finance Bilal Azhar Kayani to consult the State Bank of Pakistan (SBP) and the Pakistan Banks Association (PBA).
The feasibility of creating a dedicated construction development bank will be assessed after obtaining feedback from the central bank and commercial banking sector.
Officials will also examine the financial implications and potential structure of such an institution before any decision is taken.
Import and export policies to be reviewed
The government is also considering changes to import and export policies affecting construction-related businesses.
The proposed review is intended to facilitate access to modern technologies and equipment while simultaneously encouraging greater domestic production and development of local industrial capacity.
The authorities are expected to examine existing duties, procedures and policy barriers to determine whether adjustments could help improve competitiveness without undermining domestic manufacturing.
Focus on value for public money
During the meeting, Cheema stressed that improving construction quality was directly linked to protecting public finances.
He said the government’s objective was not simply to complete infrastructure projects but to ensure that they delivered value over their intended lifespan.
The minister emphasised the importance of cost-effectiveness, durability and accountability at every stage of public construction projects.
The proposed reforms, if approved, could introduce significant changes to the way construction contractors and consultants are regulated, how public projects are monitored and how construction companies access financing.
The government is now expected to consolidate the proposals into a broader policy framework and seek approval for the proposed measures.
