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114 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA environmental standards. The second commitment provides that a foreign investor making an investment in foreign currency shall be entitled to repatriate the following amount outside Nepal: • The amount received by the sale, in whole or part, of the investors share of equity; • The amount received as profit or dividend as a result of an equity investment; • The amount received as the payment of the principal of and interest on any foreign loan; and • The amount received under an agreement to transfer technology approved by the Department of Industries or the Department of Cottage and Small Industries. From the commitments Nepal has undertaken it appears that its commitments are closer to the prevailing regime. The construction and related engineering services sector is an important sector in Nepal and plays a crucial role with respect to adding to the growth and employment. Exact figures on employment provided by the construction industry in Nepal are not available. However, it is estimated that for three quarters of those who are economically active, the main place of work is the agriculture sector and for almost half (47%) of those who work in agriculture are considered to be underemployed, construction offers a viable option. Being a landlocked country any infrastructure bottleneck has a relatively heavy effect of pricing. In order to upgrade its infrastructure it needs to have a liberal regime. Nepal has a strong import interest in the sector and also has some export interest particularly with a view to exporting construction workers to other South Asian countries. It may also have some export interest under Mode 1. However, it should remove barriers to Mode 4 and make wider commitments in the sector for other countries from the region. Nepal lacks skilled labour and the other SAFTA countries can fill this gap which will raise the skill level and bring best practices in the country. The Maldives Although the Maldives submitted its schedule of commitments on services in 1995, its commitments cover accounting, auditing and book-keeping services under professional services and computer and related services. Hence it has undertaken no commitments in the construction and related engineering services sector. It is estimated that the construction industry is the fourth largest industry in the Maldives (MCPI 2006). However, the recent past has seen this industry going through a lot of dynamic changes. These changes reflect the aspirations of the private sector to promote the construction industry as a properly regulated industry, and the government’s efforts to promote and regulate the growth of the construction industry. The private sector, with the support of the construction ministry, has come together in a joint effort to create the Maldives association of construction industry (MACI), aimed towards creating a structured industry. In order to increase private sector participation in promoting the construction industry, MCPI suggests setting up a construction industry development board to look after the industry. As regards professional associations, it recommends the government to work to help set up, increase role and involvement of professional associations in promoting the industry, including financial assistance to such recognised associations such as Architects’ Association of Maldives and Association of Engineers. MCPI also suggests the government to prepare and implement regulations lacking in the construction industry which should include building code, building control regulations, building designers registration, building practitioners registration, contractors registration and categorisation, procurement guidelines, health and safety regulations, arbitration guidelines, Acts of parliament, and construction industry policy paper. The construction industry in the Maldives has grown, primarily due to tourism. It is made up of many small firms who act independently and do not have common working conditions and practices. It is unique in the sense that practically all building materials have to be imported in bulk, broken down into lots, and shipped from the port to the islands (The World Bank 2006). There is little storage space available and construction is hostage to importation. The construction costs have become exorbitant in the past few years. There do not appear to be construction-industry indices against which to benchmark. Nor do construction/ building inspection and control seem to be exercised sufficiently. The following measures are recommended by the World Bank to address these issues: (i) development of indices of construction, such as costs per square metre or per room; (ii) better supervision of construction, possibly using specialized firms. Access to land has emerged as one of the biggest obstacles to business growth in the Maldives. The majority of business operations are being carried out in rented/leased out land and buildings. Given the traditional allocation of land by government at request, there is no proper land market in the Maldives. How-
CONSTRUCTION AND RELATED ENGINEERING SERVICES 115 ever, a market is emerging in an area nearby the Male capital island. The World Bank suggests that the government needs to become a facilitator/regulator instead of land provider. The absence of a vibrant private land market aggravates the access-to-finance issue, especially since banks still focus on collateral based lending rather than cash flows. In this regard, the World Bank suggests that the government should promote the establishment of modern movable assets registry in order to encourage using such assets as collateral. One of the major challenges for the government is how to attract investments within the structure of an increasingly competitive market economy while protecting the vulnerable groups. This is endorsed by the government’s Vision 2020. Land and housing markets are an integral component of a dynamic market economy, which was recognised in the sixth National Development Plan. This will require, as the World Bank suggests, a paradigm shift in the role of the government from being a direct provider to being a facilitator and a regulator by allowing the development of housing markets in the private sector and local communities (The World Bank 2006). Presently, no comprehensive regulatory framework for housing and urban management exists in the Maldives. The Maldives is an import dependent country and it requires modern construction services to support its thriving tourism sector and other needs of the country. WTO commitments in this sector help the country in better articulate its import requirements. This will also bring in transparency and predictability in the system from which both the Maldives as an importing country and others as exporting countries would benefit. Also since its trade regime seems to be relatively liberal, there is no reason why the Maldives should not undertake wider and deeper commitments in this sector given its very strong import interest. At least under the SAFTA it must do so. This will help the country immensely by accessing cheaper services from the region and may lead to enhancement of the skill levels of the labour force. Bhutan Although as part of its accession negotiations Bhutan has already submitted its offer in services, the same has not been made available for the use of public. However, there is evidence suggesting that Bhutan has made relatively liberal commitments in services. It should be a repeat of Nepal’s story. Thus it is expected that Bhutan might have undertaken commitments in the construction and related engineering services sector. According to the restricted document available with WTO members, Bhutan has offered to undertake commitments for warehouses and industrial buildings (CPC 51230) under the sub-sector – general construction work for buildings. It has also proposed to make commitments for highways (except elevated highways, streets, roads, railways and airfield runways (CPC 51310); bridges, elevated highways, tunnels and subways (CPC 51320); long distance pipelines, communication and power lines (cables) (CPC 51340); local pipelines and cables, ancillary works (CPC 51350); and construction, mining and manufacturing (CPC 51360). Thus in two sub sectors of the construction sector Bhutan has taken broad commitments and coverage wise it is by no means less than that of Pakistan. Further, in the Market Access column, under Modes 1 and 2 there are no restrictions inscribed. Under Mode 3 the limitations include services to be provided through incorporation where the foreign investor equity shall be limited to a maximum of 49% and jobs below $11 million to be reserved for the domestic industry. Mode 4 remains unbound and refers to the horizontal section. In the National Treatment column, Modes 1, 2, and 3 have got no restrictions and the status of Mode 4 is same as in the Market Access column. In its horizontal section, Bhutan has inscribed certain limitations in the Market Access column under Mode 3 that in order to establish a new commercial presence in Bhutan the minimum size of foreign investment shall be $0.5 million, foreign investor’s equity holding limited to 70%, and the business must also be incorporated in Bhutan. The investment shall be governed by sector specific policies and procedures as established in the sectors included in this schedule. Also Mode 3 is unbound for measures regulating publicly funded services including with respect to national treatment. In the National Treatment column there are some limitations, which include foreign investors required to foster transfer of technology, introduction of management skills and provide training and employ Bhutanese nationals at all levels in the enterprise. Moreover, the shares held by foreign nationals and foreign juridical persons in locally incorporated companies are not transferable without prior permission by the Government of Bhutan. The share of construction sector in the Bhutan’s GDP has increased from 7.9% in 1980 to 12.1% in 2001 (UNESCAP 2003:191). However, this has been largely attributable to the construction of hydropower projects. In Bhutan the regulatory body is the construction development board (CDB) – an interagency of the Royal Government of Bhutan – that regulates the
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QUANTIFICATION OF BENEFITS FROM ECO
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QUANTIFICATION OF BENEFITS FROM ECO
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Preface Our consultations with seni
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viii CONTENTS 7. Revenue and Welfar
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Executive Summary OBJECTIVE This st
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EXECUTIVE SUMMARY xiii Table 1 EAMA
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EXECUTIVE SUMMARY xv India A full S
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EXECUTIVE SUMMARY xvii indicates th
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EXECUTIVE SUMMARY xix ments on basi
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Part I BENEFITS FROM TRADE, INVESTM
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4 QUANTIFICATION OF BENEFITS FROM E
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10 QUANTIFICATION OF BENEFITS FROM
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2 Literature Review and Rationale f
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4 Effective Additional Market Acces
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6 Impact of SAFTA on Member Countri
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7 Revenue and Welfare Implications
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8 Impact of SAFTA on Inward and Out
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15 Prospects for the Telecommunicat
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APPENDICES
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Appendix 8 Intra SAARC FDI Collabor
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Appendix 11 Table A11.1 On an Emplo
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Appendix 12 Original Commitments/In
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Appendix 14 Table A14.1 Telecommuni
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Appendix 15 REFERENCE PAPER Scope T
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Bibliography Abelson, P. (1996),
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BIBLIOGRAPHY 241 Cuba (2002), Negot
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BIBLIOGRAPHY 243 (2004), Impacts of
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BIBLIOGRAPHY 245 Silva, Patricia an
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BIBLIOGRAPHY 247 (1998), Tourism Se
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