THE PATHWAY TO PROSPERITY

Colombia 2019 | INFRASTRUCTURE & CONSTRUCTION | INTERVIEW

Cutting red tape and streamlining a variety of setup procedures are key to boosting growth in the construction sector.

Jonathan Malagón
BIOGRAPHY
Jonathan Malagón graduated with honors from the economics faculty at the Universidad Nacional de Colombia and holds a degree in business management from the University of London. He also holds an MPA in economic policy from Columbia University, a master’s in finance from the University of Barcelona, and a PhD in economics from Tilburg University. He was selected as one of 100 Global Young Leaders by the World Economic Forum in 2019 and one of the 100 most influential young people in the world by Apolitical in 2018. He was previously vice president of Asobancaria, Director of Economic Analysis of Fedesarrollo, General Manager of the Compartel program, and head of Economic Studies of Telefónica Colombia.

The ministry has projected 3.7% growth for the construction sector. How does this compare to the rate of growth in previous years?
In the last 10 years, the construction sector in Colombia has grown at an average rate of 2.6% per year. Our projections for 2019 show the consolidated recovery process that the sector is experiencing, which is expanding at higher levels than the national economy. In fact, the ministry estimates that the building sector will become an engine for productive activity, which is expected to be 3.4% during the year. It should be emphasized that there are currently favorable perspectives for the sector. It has experienced two consecutive quarters with strong signs of recovery. For example, the GDP of the building sector registered growth rates of 6.2% and 4.4% for 3Q and 4Q of 2018, and the leading indicators, including employment and the willingness of consumers to buy houses, have shown positive growth rates in the first three months of the year.

The ministry has a four-point plan to boost the construction sector. What reforms will the ministry advance, and how will they affect the sector's growth?
Our strategy to promote digitalization and technological progress needs to respond to present conditions where the procedures for licensing not only increase costs, but also affect the transparency of the whole process. For example, evidence has shown that the time spent on the paperwork required to issue construction licenses can increase costs by up to 10%. However, the highest delay comes in obtaining the necessary certificates to apply for construction licenses, which, by law, must be issued in 45 days. The ministry will expedite this procedure through a transactional information system called Terra. This system will be the result of the application of technological tools and the improvement of inter-institutional coordination. Digitalizing the process will allow the integration of the acquiring of certificates that are needed to get the licenses in a single system. However, the coordination between government entities becomes a key factor as this means to ensure that the information that lays in the system remains updated and certified. This is possible through the standardization of content and its interoperability with other existing information systems. The possibility of having standardized information and a platform that allows one to carry out the procedures will significantly reduce the time required to collect the necessary documentation to apply for the construction licenses. This time-saving will result in a reduction of overcosts currently faced by project developers and increase productivity in the sector.

How can the ministry foment the digitalization and technological advancement of the sector?
One of the core elements in our productivity strategy is digitalization, specifically, the application of building information modeling (BIM), which is currently implemented at a low rate in Colombia and with a limited number of projects. Whereas in the UK 74% of the companies of the sector implement it, in Colombia this percentage goes as low as 37%, ranking below Chile, which is a regional benchmark, with 52%, according to the IDB. The implementation of BIM translates into a reduction of times and costs in construction projects, and therefore an increase of productivity. McKinsey Global Institute estimates that the adoption of good technological practices, including BIM, generates a cost reduction of between 4% and 6% and an increase in productivity between 14% and 15%. These gains are the result of the reduction of design risks and improvements in project planning. Our goal is to encourage the use of BIM so that at least one third of the companies use the methodology in more than 80% of their projects.