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Building Empires Overseas 207
the construction service sector. While the sector is an intensive user of low-skilled
labor, it is also dependent on semiskilled or technical workers, as well as highly
educated project managers and the like for larger and more sophisticated construction
projects. The lack of adequate training facilities means that on-the-job
training is a common way to develop expertise. This not only affects quality in the
delivery of services, but it also often leads to weak organizational capacity and
poor pricing and contract management (Mburu 2008). In countries in which the
human resource pool is especially weak, the only option may be to bring in foreign
contractors, including some of the labor force of these contractors.
Foreign companies can aid the process of capacity building by integrating local
suppliers in their supply chains and by nurturing local talent. Much of this process
is taking place naturally as a result of the industry’s dependency on local production.
Some countries legislate that market access by foreign providers is contingent
on the formation of joint ventures with local partners and the hiring of local
management. Joint ventures are common because of domestic regulatory considerations,
but also because of the synergies or complementarities in terms of
financing and transfers of technology and expertise (Nielson and Taglioni 2004).
Such partnerships have, for example, raised the expertise in Mauritius among
local contractors and helped the country become an exporter of construction
services (UNCTAD 2000b).
There are plenty of success stories despite the significant challenges faced by
developing-country contractors. While developing countries enjoy comparative
labor cost advantages, many of the companies in developing countries have dramatically
improved management and project execution, and they can increasingly
tap into local talent across the skill spectrum, from builders and carpenters to
architects, information technology specialists, environmental analysts, and civil
engineers (Nielson and Taglioni 2004). Particularly in Asia and Latin America,
companies are nowadays offering a wide range of construction services, including
postconstruction operations and maintenance services based on tailored software
solutions. Box 6.7 provides examples of companies successfully exporting construction
services.
Integrating local product standards and building codes
with international good practice
Construction service companies must generally conform to numerous regulations.
These may, for example, include rules regarding the use of land, building
regulations and codes, technical requirements, and product standards. Companies
may need to obtain building permits; comply with environmental, safety, and
licensing regulations; deal with service inspectors; register proprietors, contractors,
and professionals; and fulfill minimum criteria of solvency (WTO 1998).