International Trade in Services.pdf - DSpace at Khazar University

188 International Trade in Services
protected markets. A review of these options, taking into consideration local conditions,
would allow developing countries to harness trade opportunities and
improve operations in the domestic construction service sector.
The third and final set of initiatives would aim to enhance the competitiveness
of the domestic construction service sector. The implementation of applicable
international or regional standards for construction materials and best practices
for building codes would lower transaction costs and facilitate integration in international
supply chains. Addressing human resource shortages and introducing
incentives for cooperation and technology transfers between foreign contractors
and local contractors would strengthen the domestic sector. Similarly, fostering an
environment in which local companies can form consortia and bid for larger
projects would also allow the homegrown sector to build capacity in markets associated
with cutthroat competition among many small players.
Reviewing domestic regulations and their implementation
to identify reform needs
Domestic regulations and the effectiveness of their implementation can have a large
impact on the functioning of the construction service sector. Many of these regulations
are not discriminatory and affect domestic and foreign companies more or
less equally. Other regulations are discriminatory toward foreign providers. This
subsection considers both types of regulations and identifies a number of common
weaknesses that can be addressed through mostly unilateral initiatives.
Administration of construction permits
The Doing Business 2009 report of the World Bank (2008) presents data on indicators
related to dealing with construction permits in some 181 countries. While any
benchmarking exercise with a reach and simplification similar to the Doing Business
Project should be interpreted with caution, the data still tell of large differences
in the administrative capacity in construction permits around the world.
The transaction costs and business risks associated with slow and opaque procedures
have a negative impact on trade and investment flows. Yet, the size of this
impact is not clear. Some of the transaction costs involved in dealing with construction
permits may end up in the pockets of officials, as rents to smooth the
application process. However, most of the resources are wasted, and the price of
larger than necessary transaction costs is paid by the clients. Normal economics
apply. Higher than necessary prices result in lower investment in new infrastructure
and buildings. Less building activity equals fewer jobs in the construction
sector, lower utility for prospective end users, and higher rents charged by landlords,
who are often relatively affluent citizens. Figures 6.5–6.7 show the time and