The international construction market has always been a a lucrative avenue to do business for construction companies. It provides new opportunities to contractors seeking to expand and to cushion local and regional market fluctuations.
But, it also is highly volatile, subjecting contractors to financial and geopolitical risks. Governments encourage private sector developers and contractors to seek contracts overseas and line up support through their missions abroad advising commercial banks and other departments to provide political and financial assistance.
Such decisions taken quickly by the government always pay dividends. Markets that are saturated have little to offer, but emerging/developing markets have a great deal to offer provided necessary financial support to Pakistani contractors for infrastructural development projects overseas is provides by banks. A few contractors are working overseas. without the official support.
The construction industry can promote technology advancement and generate more skilled and unskilled jobs, earn foreign exchange and can be competitive globally.
In 1996, US services exports exceeded imports by $80 billion off- setting 42 per cent of the deficit in merchandise trade. US services compete successfully worldwide. Major markets for US services include the European union, Japan and Canada. At $8 billion, Mexico is presently the largest emerging market for service exports.
Even major construction companies pursuing projects overseas are facing problems as banks are not geared to provide bid securities or performance bonds in the overseas markets although these banks maintain branches and are operational in select international markets where projects are located.
Many Pakistani and foreign banks have international banking departments with specialists who are familiar with markets of specific foreign countries and trading in various types of commodities and transactions. These large banks, located in major cities of foreign countries maintain correspondent relationships with smaller banks. Larger banks also maintain contacts with their peers in many foreign countries or operate their own overseas branches, thus providing a direct channel to foreign customers.
International banking specialists are generally well informed about export matters, even in areas that fall outside the usual limits of international banking. If they are unable to provide direct guidance or assistance, they refer inquirers to other specialists who can do so. Banks frequently provide consultation and guidance free of charge to their clients since they derive income primarily from loans to the exporter and from fees for special services.
Many banks also have publications available to help exporters. These materials often cover particular countries and their business practices and can be a valuable tool for familiarization with a foreign industry. But our banks, due to SBP regulations, are unable to provide bid securities and performance bonds. Lack of such credit facility by Pakistani banks for projects in the overseas markets denies opportunities to local contractors to procure overseas business.
There is no infrastructure project support. Pakistani contractors can compete for contracts for engineering constructing and systems installation for large foreign projects in the areas of transportation, power generation, water and environmental installations, buildings and commercial infrastructure, and manufacturing plant and other industrial equipments.
As circumstances warrant, infrastructure projects support policy is needed on urgent basis to help Pakistani companies pursue overseas business opportunities. Through the funding of feasibility studies, orientation visits, specialized training grants, business workshops and various forms of technical assistance, an infrastructure project support agency could be formed which an help Pakistanis to compete in the emerging markets.
Infrastructure projects support agency’s mission should be to provide level the playing field for local forms heavily subsidized by foreign competitors.
Some aspects that differentiate the exporting of services from products include intangibility and customer involvement. Since services are less tangible than products, communicating a service offer is much more difficult than communicating a product offer. Also, services frequently require to be tailored to the specific needs of the client.
The intangibility of services makes financing somewhat more difficult given that no form of collateral is involved and financial institutions may be less willing to provide financial support to a company in foreign land.
Protecting our own industry against the heavily subsidized foreign companies is crucial for the transfer of technology. Ultimately what is earned overseas is repatriated back home. More opportunities mean more jobs and more foreign exchange. Commercial banks can at least extend necessary financing facilities overseas to those companies having long standing business relationship with them.
The international construction market has always been a a lucrative avenue to do business for construction companies. It provides new opportunities to contractors seeking to expand and to cushion local and regional market fluctuations.
