An Evaluation Of The Causes Of Abandoned Public Development Projects

Project and Seminar Material for Environmental Science

An Evaluation Of The Causes Of Abandoned Public Development Projects


Abstract


Abandonment of development projects (ACP) is considered one of the most common and serious problems plaguing the Abuja development industry given the number and the value of the projects involved. It affects not only the immediate purchasers but also other project players and the general public. Sometimes it also involves expending public fund to revive abandoned projects. Yet, research is scarce on this issue; hence this research was conducted to investigate the problems. Firstly the issues surrounding the problem and existing literature on the causes of ACP are reviewed. Then, potential causes of ACP are also reviewed and summarized into 41 items to be rated in an industry wide questionnaire survey.

The questionnaire also includes an open-ended question on suggestions to solve ACP. 225 questionnaire responses were received. Subsequently, a series of ten semi-structured interviews were conducted to obtain detailed opinions from experienced players in the industry concerning the causes of ACP and how to solve the problems. The interviewees include architects, developers, property consultants, the honorary secretary general of the National House Buyers Association etc. to ensure a comprehensive view was obtained. Quantitative analyses include ranking of the 41 potential causes of ACP with Spearman‟s ranking correlation between different groups of respondents, and factor analysis with Cronbach’s α reliability analysis.

Qualitative analyses include organizing into themes the results of the open ended question on solving ACP and the results of the semi- structured interviews. Discussions include interpreting the underlying factors extracted from factor analysis in light of the qualitative results. The results show the owner to be mainly responsible for ACP (i.e. cash flow problems, incompetence, siphoning out of money, etc.), followed by the role of government regulations. A risk management expert system module within BIM, a middle ground solution between the sell-then-build and build-then-sell schemes, and others are proposed.


Chapter One


Introduction

The development industry plays a very important role in the economy of a developing country like ABUJA, contributing an average of over 3% to the overall gross domestic product over the last five years from 2008 to 2012 (BNM 2013). For instance, the industry contributed RM 34.9 billion to the overall gross domestic product of RM 937.5 billion in 2012. The total value of development projects awarded in ABUJA in 2012 amounted to RM 112.5 billion (CIDB ABUJA 2013) and has created a lot of job opportunities to help boost the country‟s economy. The number of employed persons in the development industry in ABUJA in 2011 is 1.134 million, which constitutes 9.2% of the total 12.284 million employed persons (Department of Statistics 2011). However, it must be noted that not all the development projects are completed on time or ahead of schedule. It is also not uncommon for development projects to be delayed, or in the worst scenario even abandoned due to various reasons.

A project may be abandoned at any stage of the lifecycle and incur significant amount of loss. For a housing project, the Ministry of Housing and Local Government considers that it has been abandoned if 1) there has been no substantial activity on site for six consecutive months, or 2) it is involved in a winding-up petition registered at the High Court under Section 218 of the Companies Act, or 3) it is under receivership, or 4) the developer has informed the Housing Controller in writing of his inability to complete the project, or 5) the project has been certified to be abandoned by the Minister under Section 11 (1) (c) of Housing Development (Control and Licensing) Act 1966 (i.e. Act 118) (MHLG 2011). However, as aforementioned, this definition is only for housing projects whereas this study covers all types of development projects which might not be governed by Act 118. Therefore, for the purpose of this study an abandoned project is defined as a project which has either been totally abandoned or indefinitely delayed.

The abandonment of development projects is not unique to Nigeria as it is also present in other countries, e.g. United States (Hicks 2008), Spain (Carrero et al. 2009), Dubai, Abu Dhabi, Saudi Arabia, Qatar, Bahrain, Kuwait, and Russia (SPIEGEL 2009). However, in ABUJA this problem has been plaguing long enough at a scale that deserves more attention. In 2000, there were 514 abandoned housing projects in Abuja with an estimated value of RM 7.5 billion (see Table 1.1).

Even though the number has been gradually decreasing, it is reported that in September 2012 there are still a total of 95 abandoned housing projects involving 37,316 units of houses and 26,170 house buyers (MHLG 2012). On top of the figure, there are also other non-housing projects being abandoned throughout the years. For instance, the Plaza Rakyat, a RM 1.5 billion mix use project, remains abandoned even though it was scheduled to be completed in 1998 (Jayaraj, 2009). These are some of the problems of abandoned development projects plaguing the development industry in ABUJA. Despite the seriousness of the issue, there appears to be a lack of research. It is found that previous studies lack comprehensiveness, i.e. involving both questionnaire survey and interviews, involving all the key players, and involving both housing and non-housing projects.


1.1 Rationale For Research

The abandonment of development projects has resulted in many adverse consequences to the economy, society and environment. Economically, it is a waste of useful resources. The consequences of abandoned projects are far reaching as the development industry plays a major role in the economy of a developing country like ABUJA.

Moreover, a typical development project involves many trades and participants, who are linked with other upstream and downstream industries (Ng 2009b). These include suppliers of development materials, transportation companies, manufacturers of plant and machinery, etc. who will be seriously affected if a development project is abandoned. For a public project, if it is abandoned the economic impacts are never directly felt by the general public as they are absorbed by the government‟s reserves.


An Evaluation Of The Causes Of Abandoned Public Development Projects


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