International Trade in Services.pdf - DSpace at Khazar University

Building Empires Overseas 187
The current global economic downturn is, in the short term, likely to result in a
significant setback in the expansion of trade in construction services. In the
mediumandlongterm,theprospectsforgrowthwillbecomemorepositiveasthe
global economy starts to pick up again. Interest rates around the world have fallen
to historically low levels in many countries. The reduced cost of capital should
have a positive impact on private sector investment in construction projects, particularly
when banks are ready to return to business as usual. Fiscal expansion programs
in some of the world largest economies, such as China, Japan, the United
States, and the European Union, will also result in large investments in infrastructure
projects. The expansion of the Chinese construction sector into foreign markets
has gained momentum in the last decade and is expected to continue. Prices
for oil, gas, and many other natural resources have recently come down as a result
of the economic turmoil. This has caused many projects to be put on hold and
guest workers to go back to their home countries. However, if the emerging markets
around the world were to return to the positive growth path they enjoyed
prior to the economic turmoil, there is reason to expect that trade in construction
services would recover to the relatively steady growth it once experienced.
What Can Be Done to Harness Trade
Opportunities
Policy makers in developing countries may have significant scope to facilitate
trade in construction services. The sector is hampered by poor productivity
growth in a number of countries, not least within developed-country markets,
and effective competition would generate gains by clients and suppliers. This
section identifies three broad areas where countries may want to focus their attention.
The first set of initiatives would involve reviews of domestic regulations to
highlight reform needs. Improving the administration of construction permits
and the management of government procurement could greatly facilitate investments
in construction projects. However, while effective reforms may require
limited commitments in terms of government capacity, they are likely to consume
significant political capital given the sector’s political influence (more on this
below).
The second set of initiatives would seek to remove rules and regulations that
are more trade restrictive than necessary. This would allow companies to take
advantage of the economic benefits stemming from international exchange.
Movement toward more open access to domestic construction markets will
stimulate competition, save government resources, and improve the choice for
local investors. Seeking improved market access for Mode 3 and Mode 4 transactions
in major trading partners could also help increase exports to countries with