Regulations and Trade Restrictions Affecting Construction and Consultancy Services: Construction, architectural and engineering services are subject to a plethora of rules and regulations related to maintenance of safety of construction works, protection of health and safety of workers and users, building regulations and technical requirements, environmental issues, etc. Such regulations are applied not only at national levels but also at regional and local levels.
One of the major barriers to trade in these services is the differential treatment for foreign service providers. Such restrictions include measures, which affect the mobility of labour, such as, restrictions on entry and stay of persons, regulations concerning requirement of qualifications, work experience and licensing/certification, residency and nationality requirements. International trade is also affected by regulations on the mobility of construction equipment and supply of related services, such as insurance and transport. Lack of transparency in rules, multiple licensing policies, high registration fees are some of the other barriers to trade. Since commercial presence is an important mode of supply of construction and related services, restrictions on the establishment and operation of foreign firms including limitation on foreign equity, restriction on establishment of branches, local incorporation requirements, economic needs tests for commercial presence, limits on contract amount available to foreign firms etc. also affect trade in these services.
Government taxation and subsidisation policies can discriminate against foreign service providers. Government sometimes offers explicit and implicit subsidies in the form of mixed credits financial support and export and operating subsidies, which give local firms a comparative advantage over foreign firms. For instance, in the case of engineering services, the Canadian government, at the provincial and federal level, subsidizes Canadian firms’ bids for feasibility studies and other work in third countries. Export subsidies are provided through the export development corporation, the Canadian International Development Agency and the program for export market development.
In most countries public sector financing and public procurement practices play an important mle in the consumption of construction and related services. The two main reasons for government procurement are political patronage and protection of industries from international competition Procurement practices are characterised by lack of transnarency in the bidding procedure and are rvices by government subject to discriminatory and discretionary treatment. The use of local services authorities does not promote full competition. With the increasing globaltrend te full competition. With the increasing global trend towards liberalization ments and financing and privatisation of state-owned enterprises, the importance of public procureme are likely to decline in the long run.
With respect to movement of professionals, several regional and bilateral undertaken to facilitate access for foreign architects and engineers. For instance, hitects and engineers. For instance, with economic integration there is free movement of professionals and recognition of diplomas an within the EU. A large number of countries have notified Mutual Recognition Agreement under the GATS Article VII: 4 which requires notification of existing recognition measures.nu
res. In the case of architecture, there is an inter-recognition agreement between the USA and Canada. In engu the Washington Accord was signed by professional bodies from six countries (Australia, Canada, Ireland, New Zealand, United Kingdom and United States) in 1989. Since then professional bodies from Hong Kong, China and South Africa have also become signatories. The APEC countries have also signed a number of bilateral agreements on recognition of practice standards in engineering.
Although there are significant restrictions to trade in construction, architectural and engineering services there is a distinct move towards liberalisation and increased private participation in these services. Also, companies from both developed and developing countries have shown a keen interest in expanding their businesses beyond national boundaries. The current round of GATS negotiations is likely to play an important role in removing the barriers discussed above and expediting the process of liberalisation.
Q.7. Discuss the role of consultancy services in India.
Ans. After independence, industrial and infrastructural developments in India boosted the growth of construction, architectural and engineering services. In the 1950s and 1960s, the government played an active role in the development of these services and most of construction activities during this period were carried out in the public sectors and by government departments. In the first five-year plan, construction of civil works was allotted nearly 50 per cent of the total capital outlay. The first professional consultancy company, National Industrial Development Corporation (NIDC), was set up in the public sector in 1954. Subsequently, many architectural, design engineering and construction companies were set up in the public sector (Indian Railways Construction Limited (IRCON), National Buildings Construction Corporation (NBCC), Rail India Transportation and Engineering Services (RITES), Engineers India Limited (EIL) etc.) and private sector (M N Dastur and Co., Hindustan Construction Company (HCC), Ansals etc.). Since the late 1960s government started encouraging foreign collaborations in these services. The guidelines for foreign collaboration, first issued in 1968, stated that local consultant would be the prime contractor in such collaboration. The objective of such an imposition was to develop local design capabilities parallel with the inflow of imported technology and skills. This measure encouraged international construction and consultancy organisations to set up joint ventures and local affiliates in India.
Construction services constitute more than 5 per cent of India’s GDP. It is, however, difficult to state precisely the total number of firms engaged in construction and related activities since the size of firms range from one-man operations to large public limited companies and there are a large number of private players in this sector. It is estimated that the sector has grown from a handful of companies employing 500 persons in 1950s to more than 200,000 companies in the year 2001. It is also not possible to compute the precise number of workers employed in construction, architectura
and engineering services since many firms hire both professional staff and skilled/semi-skilled unskilled workers on casual, part-time or project basis. According to the Ministry of Labour estimates und 12 lakh were employed in the construction sector in 1999 and this constituted more than 4 per cent of the total employment. On the other hand, a CIDC estimate shows that around 31 million ople were employed in construction and allied industries in the same year. In the current year. around 28,000 architects are registered with the Council of Architecture.