International Trade in Services.pdf - DSpace at Khazar University

214 International Trade in Services
standards. The supply of construction services is local in nature, and commercial
presence is consequently the most common mode of service delivery. The local production
requirement helps allay the fears of prospective labor adjustments and
favors increased openness to foreign direct investment. However, the other common
mode of supply is the temporary movement of natural persons, which represents
an advantage for some developing countries because of their relative abundance
in labor. There are many millions of foreign construction workers imported
to building sites, for example, within the OECD, the Persian Gulf region, and Russia.
Openness to foreign guest workers has historically been politically sensitive despite
the fact that the prospective benefits are significant.
The trade in construction services is growing in importance, and developing
countries feature high on the list of major importers and exporters of these services.
Firm-level data reveal that Chinese, Egyptian, Indian, Russian, Turkish, and
Southeast Asian companies are some of the larger exporters. The sector is highly
regulated in many countries, but most regulations are applied on a nondiscriminatory
basis and are designed to uphold the safety of human life, protect the environment,
and provide quality assurance and the orderly expansion of developed
areas. The important question from a trade perspective is whether the rules and
regulations are more trade restrictive than necessary to achieve the objectives. For
example, the heterogeneity of standards, processes, and procedures that companies
face in different export markets may not be discriminatory, but do give rise to
increased transaction costs that may impede market entry. There is ample evidence
that certain types of regulations are imposed mainly to prevent international
contractors from providing competition in domestic markets.
Policy makers in developing countries may have significant scope to facilitate
trade in construction services. Effective competition would generate gains among
consumers and suppliers. This chapter identifies three main areas where policy
makers could focus their attention in helping the domestic construction sector
raise standards and thereby facilitate the sector’s integration in international
markets, as follows:
1. Policy makers could review domestic regulations and the implementation of
these regulations to highlight reform needs. The administration of construction
permits and the management of government procurement are two areas
in which improved governance could greatly stimulate the sector and attract
foreign investment. Effective measures to tackle the corruption that is common
in construction and public works are of paramount importance not only in
nurturing a healthy domestic construction sector, but also in attracting new,
productive companies to enter the market.
2. Policy makers could aim to enhance the competitiveness of the domestic construction
sector through the implementation, if feasible, of international or