Engineering: issues, challenges and opportunities for development ...

ENGINEERING: ISSUES CHALLENGES AND OPPORTUNITIES FOR DEVELOPMENTThe Other Assets GFCF represents at most a few per cent oftotal GFCF. Like Construction, it generally involves activitiesthat require technology-based intellectual services, so for thepurposes of estimating the potential demand for these services,it can be combined with Construction GFCF leaving onlytwo categories: A&E and Industrial.World GFCF in 2007 was US$9,271 billion for a GDP ofUS$54,747 billion. National statistics also give accurate estimatesof A&E and Industrial GFCF (e.g. European Union 2007:54 per cent and 46 per cent, respectively). GFCF is consideredto be a better indicator than CFC for monitoring trends aschanges in inventories are subject to large fluctuations. Thus,GFCF fluctuations often reflect future business activity and thepattern of economic growth.The consulting engineering industryGiven the extent and depth of GFCF data, and the fact that thedata mirror the categories that would be used in a bottom-upapproach to measuring the demand for consulting engineeringservices, it is clearly attractive to use GFC for industry sectorstatistics. The only reported examples of this approach arefor the UK construction industry and for the European Uniontransport sectors.For construction and plant, GFCF includes new build structuresand new plant, but depreciation and repair and maintenanceare not taken into account. The durability of buildings and someplant means that repair and maintenance, which is almost halfof construction output and a significant part of manufacturingoutput, is largely ignored. This is consistent with omitting depreciationfrom GFCF as the repair and maintenance accounts forcapital consumption (GFCF is a measure of net new investmentsin fixed capital in the domestic economy).Allowances for repair and maintenance can be estimated bynoting that the construction industry typically reports that7 per cent of its turnover is spent doing repair and maintenance.The figure for plant and equipment will be less owingto the much shorter lifetime, say 3 per cent. As a first-orderapproximation, A&E and Industrial GFCF should be multipliedby factors of 1.07 and 1.03, respectively. Making these allowances,worldwide A&E GCF is 52 per cent of total GFCF ofUS$9,693 billion and Industrial is 48 per cent.As mentioned above, it is assumed that all construction GFCFrequires technology-based intellectual services of the typessupplied by a consulting service. However, only a percentageof Industrial GFCF will require these services. In principle, it ispossible to sum up the value of technology-based intellectualservices supplied in each of the product categories that makeup Industrial GFCF. Some categories will require a considerableamount of, say, engineering design service (e.g. engines,non-electrical machinery, electric generators, motors, electricalmachinery, and communications equipment) in all phasesof their production, installation and maintenance. Others willrequire much less. Overall, preliminary estimates indicate that54 per cent of worldwide Industry GFCF requires technologybasedintellectual services, so the total of investments in fixedassets that require these services is US$7,553 billion in 2007.The final stage of the analysis is probably the most difficult.What is needed is an estimate of the percentage of theUS$7,553 billion in investments that is spent on technologybasedintellectual services. Only a few attempts have beenmade to estimate the demand for technology-based intellectualservices for the A&E and Industrial sectors. For instance,the value added by a sector (that measures the activity in thesector and provides the level of demand for services in the sector),the breakdown between asset types (from GFCF data)and the skills profiles of staff working in the sector, gives theskills required and thus an estimate of the number of jobs.Such an exercise has been carried out for the South Africanconstruction sector. Similarly, a European Union study used aso-called marginal labour-to-capital ratio method to quantifythe number of jobs created by an injection of a given GFCFinto the A&E and Industrial sectors. Given the numbers of jobsand the salary levels for the various skill levels, one can estimatefee revenues for technology-based intellectual services.The usual approach, however, is to use national statisticaldata for product categories in order to estimate the volumeof technology-based intellectual services. Samples taken froma selection of countries indicate that the average for the A&Eand Industrial sectors combined is 8.3 per cent or US$627 billion.This represents the potential worldwide demand for technology-basedintellectual services. As mentioned above, someof the demand (estimated to be 42 per cent worldwide) will besupplied internally by organizations responsible for a projector for supplying plant and equipment to a project. The remainder(78 per cent) will be supplied externally by both specializedand multidisciplinary firms whose principle activity (morethan one-half of firm revenue) is to meet this demand. It isthese firms that make up the consulting engineering industrywith a worldwide turnover of US$490 billion.4.3.6European Federation ofNational EngineeringAssociations (FEANI)Willi Fuchs and Philippe WautersIt was the conviction that the engineering community inEurope could and should contribute to peaceful developmentin a continent so deeply devastated by the SecondWorld War, that lead in 1951 to the creation of the ‘InternationalFederation of National Engineers Associations’ by144