The Informal Construction Sector in the Greater Manila Area

The study deals with the informal construction sector in the Greater Manila Area (GMA). The sectoral and regional distribution and growth of small vis-a-vis large establishments are analyzed in terms of value-added, employment, wage shares, among other factors, during the 1950s to the early 1970s. GMA accounted the largest number of construction firms, but the ratio of small to large firms was lowest in GMA than in any other region. Also GMA's small firms had significantly accounted a larger share in value-added, employment, and wages than those in any other region. Notwithstanding the greater share of GMA in the country's construction activities, small firms in GMA absorbed a negligible percentage of the area's construction output, employment and wage. Of the 11 establishments sampled for the construction industry in GMA, most had enormous values of capital equipment. It appears that the sample firms are owned by the poor or that capital requirements must be huge particularly in some construction activities. Turning to "enterpreneural" qualities, it is worth noting that all heads of the firms had formal education and had over 14 years of formal schooling. Known earnings of the entrepreneurs were substantially high and most of them preferred to stay in GMA due to this, although most felt that their earnings had not improved. In spite of high earnings, all of the sample firms felt that there are too many firms in the industry. And many expressed fears that larger enterprises affected their revenues to a great extent. The study concludes that small firms can be efficient because they, as a whole, survive in some activities like special trade contracting. It would be very difficult to conclude, however, that the optimum size for these activities should be small scale since we do not know whether the entry of new firms just offsets the exists of old ones. In some regions, small firms, in fact, registered greater labor productivity compared to big establishments. Like in our sample survey, however, this is imply that many small firms are very capital-intensive. Finally, because the government is the biggest client in the construction industry it is suggested that it should consider small firms in awarding construction work particularly where these firms can be subcontracted at, more or less, the same costs compared to big establishments.