International construction has started to assume great importance in recent years. There are more indications that this trend will progress. The competitions for international projects have become intense and the global marketplace has flooded due to the development of expertise and capability of firms from numerous emerging countries (Abidin, 2010 p.77). The emerging firms can now export their services and compete effectively with other established firms. For success in international construction projects, the firms are required to address factors such as technical expertise, managerial expertise, management of cultural issues and risk management. They must be experts at management. The company should have a team of experts on management in order to control a project of a large scope. The international companies must be capable of managing issues of cultural differences so that they work well with the local people (Sarala and Vaara 2010, p.92).
International construction also means that different countries can participate in different parts of one project (Hillebrandt 2000, p.13). These parts may include; providing construction materials, providing equipment, financing the construction projects and outsourcing of the activities of design and development. In the construction sector, the companies should have technical expertise, use information in a strategic manner and have an expert to manage the construction to compete in the international market. The companies must have technical expertise (Jung et al 2010, p.19). The international construction company must be capable of finding solutions to unique problems (Ravanshadnia, Rajaie and Abbasian 2010, p.21). They must be able to use information in a strategic way and be able to come up with innovations.
The Chinese construction industry has experienced a sensational change caused by internationalization as of late. Over the last 10 years, the Chinese construction industry has made striking accomplishments, through drastically opening up and becoming coordinated into the worldwide development market. Despite the Chinese construction industry showing a noteworthy movement in the worldwide market in the last decade following entry into the World Trade Organization (WTO), it is experiencing some serious problems as compared to other developed nations. By 2007, the Gross Output Value (GOV) of the Chinese construction industry was over$806 billion (NBSC, 2008). After the promotion to WTO in 2001, the yearly development rate of the GOV expanded significantly, from 10% to over 20% (Zhang and London 2010, p.87). Additionally, the Chinese construction industry gives a different scope of occupations and offers numerous new chances. Before the end of 2007, there were in excess of 33 million individuals working in the Chinese construction industry (NBSC 2008). For example, China Construction America works on the East Coast of the U.S and the Gulf of Mexico, the Caribbean, and Latin America, having many completed and progressing projects around the world.
The construction industry is one of the significant supporters of economic progress in the world. Its commitment ranges from empowering the obtainment of merchandise and ventures to the arrangement of structures and other frameworks, in this way giving business chances to its work drive while colossally expanding Gross Domestic Product. This paper seek to discuss the scope of construction from developing countries to developed nations and how they manage to cope with construction firms in the developed nations.
Over the past decade, the progress of the construction industry has grown tremendously in developed and developing countries due to increased demand for housing and infrastructure as a result of population growth. The construction industry is one of the major sectors that a country relies on for their economic growth. The current situation is such that the governments in different countries are finding ways of making a suitable environment for the growth of the industry. In developing countries, there has been an increased need for better housing and infrastructure (Horta et al 2012, p.40 and Edwards 2011, p.18). The countries are, to a large extent, trying to construct better roads and housing in various parts of the countries.
There are major challenges experienced in this process. These challenges include; lack of skilled labor required locally, lack of funding for the projects, the bad state of infrastructure and a high number of construction projects that are left without being completed. Fletcher and Vyakarnam (2013, p.53) believe that the main opportunities to construction development in developing countries are related to market demand, language, firm age, management skills, resources, regulations, decision-making policies, experience, and timing.
In the developed countries, the construction industries have gone through a major growth. This has resulted in better infrastructure, the rise of many skyscrapers and better housing for the residents. However, these countries also have challenges like shortage of employees in the construction industry. This is forcing them to depend greatly on the immigration of people into these countries to provide for labor (Cheng and Li 2012, p.29).
The challenges that both the developing and developed countries are facing, encourages international construction. The developing countries look for skilled labor and finance from international construction companies (Le Hoai et al 2008, p. 26). The developing countries also get building materials that are not locally available, from foreign countries. On the other hand, the developed countries get the labor needed by construction companies from foreign countries. This need for more employees is caused by a large number of construction projects being carried out at the same time.
The developing countries provide the market needed by international companies. The developing countries depend on the construction industry to boost their economic growth (Izik et al 2010). Apart from that, providing good roads and better housing has become an urgent need in the developing countries. Most of these countries have tried to do away with informal settlements, especially in their urban areas. Lack of funding has led to projects being left without completion (Ameh, Soyingbe and Odusami 2010, p. 32).
Over the past few decades, many countries have revised their policies on international trade and construction. This has been made possible by the realization that the challenges being faced in different countries can be solved through international cooperation (Fellini, Ferro and Fullin 2007, p.77). These policies have ensured that these agreements are beneficial to both the host country and the international company. The international construction companies get to undertake projects in foreign countries; a chance to build their image by producing quality work as well as gaining profit from the construction projects undertaken (Park and Ghauri 2015, p. 47). Apart from that, the international construction companies gain a larger market.
The host countries also get benefits from these agreements. The international construction companies provide financing for the projects in the host countries. This ensures that projects are not left incomplete. The local construction companies also gain new knowledge and experience from working with international construction companies (Corkin 2012, p.17). This improves the skills of the locals, bridging the gap between the skilled labor required and the available labor. The competition brought by the presence of international construction companies challenges the local construction industries to raise their standards.
In Ukraine, International construction companies operating in Ukraine and, increasingly, local Ukrainian contractors are seeking to limit their liability and warranty undertakings, both in terms of the period of liability and the financial amount (Sood, Chua and Peng 2012). Much effort has been taken by the legislature over the past few years to foster investment into the construction industry by way of industry deregulation and thus to help keep the industry afloat (Chan 2009, p.36). In the U.K, there has been a functioning Society of Construction Law since 1983, and there is currently a European Society of Construction Law, and Societies of Construction Law in Australia, Hong Kong, Singapore, and the UAE. The Joint Contracts Tribunal deals with the most famous kind of standard development contracts and the most recent suite of agreements from the JCT are the 2016 releases (Carbon 2005, p.11). The type of agreement most supported by open bodies is the NEC contract suit (Hilland Bowen 2016, p.81). Albeit some observe Construction Law as another type of general contract law, it is a much-particular region and a great many people requiring exhortation on development law in the UK would look for counsel from development law authorities.
Over the last decade, the international construction industry has changed drastically in many ways from the terms of competition rules to delivery systems for the selection of contractors, financial resource diversity, leading contractors in the revenue rankings, the key products, and new emerging markets. There are various strategies that can be implemented to diversify the construction industry in both developed and developing countries. One of the strategies is collaborating with the local construction companies in both developed countries and developed countries (Van Doren 2016, p.56). The construction industries can experience setbacks if it does not collaborate with the local companies. Other companies can invade their market and take over the major construction projects.
In such situations, the locals do not benefit whatsoever in this kind of arrangement. This leads to the locals trying to find a way to do away with the international construction. This can manifest through the foreign laborers being attacked by the residents (Le-Hoai, Dai Lee and Lee 2008). For example, Singapore and Botswana are examples of nations where governments have energized nearby development firms, who were offered inclination, to work in joint endeavors with remote temporary workers meaning to profit by the innovation exchange through the execution of open tasks (Govender and Watermeyer, 2010, p. 8). Ofori et al. (2012, p. 86) communicated his worries in regards to the successful exchange of innovation, and trusted that joint endeavors do not really finish up such pointed outcomes; He referred to joint endeavor understandings in Ghana and preparing plans in Singapore to help his contention. In the United States, China needs to figure out how to adjust the economic, legal, social, and technological condition alongside changes achieved by contenders’ advances and new needs of clients. They also need to build up their capacity to survey the chances, to anchor their solid development, to survive, and achieve benefits.
This can be solved by involving with the credible and competent construction companies in the host countries. This is done by undertaking joint projects. The international construction companies should seek to familiarise themselves with the processes of negotiation that take place in the host country. The international construction companies should seek to employ more workers from the host countries rather than importing most or all the workers from their home country (Gertler and Trigari 2009, p.28). This will make the locals feel more involved apart from providing them with work experience. The local construction companies want a partnership with international construction companies, which will provide room for learning and sharing of knowledge. The benefit of international construction companies’ gain from such partnerships is that the local companies are more familiar with issues like availability of land and the construction regulations in their country.
There are numerous factors that can increase the development of construction industry both in the developing and developed countries. Firstly, the construction firm should have technical expertise which will give them the surety of providing quality work (Abdul-Rahman 2012, p. 23). Provision of quality work will give the construction firms in the developing countries a chance to participate in international construction. The quality of their completed works also greatly encourages the developed countries to be open to the international construction industries from developing countries (Bowers and Cohen 2009, p.37). Additionally, the ability to fund projects is another critical factor for the increased influx of international construction. Construction companies that have extended their services on the global scale will be at a better position to get funding from their countries.
Another factor that is increasing the increased influx of international construction is having better managerial expertise that can control projects, inputs, and logistic procurement and human resource management. Risk management involves access to insurance at reasonable rates and experience in anticipating and dealing with risks. The government in some countries do not control the number of companies moving in. This has played part in the influx of international construction companies. (Friedman 2010, p.79). On the other hand, investors also prefer foreign construction companies. This is because the local companies already have a record of poor performance in the past and poor quality of workmanship.
For example, a drastic demand for advancement worldwide has gained the interest of Malaysian development firms to extend into the global construction platform. Recognizing and examining significant determinants of the company’s interior and outer variables are critical to facilitate the complexities in worldwide market extension. from the responses received by thirty-one (31) Class An and Grade 7 Malaysian development firms enrolled with CIDB Malaysia in 2010, findings show that specialist expertise, international network, and good track record are influential factors for the organization to successfully compete in the global market.
There are various effects that will be noted if the construction firm from developing countries is allowed to engage with the construction firm in the developed countries. However, the effects may be either is positive or negative. The positive effects that will be experienced by construction firms in developing countries include improved quality of products, creating an international network, have an extensive supply of construction material and create more job opportunities.
The developed countries are known to produce high-quality construction works. Allowing the construction firms in developing countries to partner with them in the construction works will help to them improve in every aspect of construction. The construction firms have sophisticated equipment and machinery that they use in performing construction. This will give the construction firms in the developing countries an opportunity to learn as well as acquire skills which they use to improve the construction works.
The partnership of construction firms in developing countries with those in the developed countries will increase material supply for the construction projects. The construction firms in developed countries produce adequate materials needed for construction and allowing them to engage with construction firms in the developing countries will enable them to to be supplied or import the raw materials needed for construction projects. The construction firms in developing countries will be able to use the specified material as shown in the design drawings. Additionally, the construction firms in the developed countries provide cheaper rates for construction projects due to the availability of materials (Spencer 2008, p.90). Therefore, engaging the construction firms in the developing countries with this developed countries construction firms will enable them to offer cheaper rates.
Alongside cheaper rates in the construction projects, the construction firms in the developing countries will experience lesser time for project completion due to sufficient labor provided and use of machinery. The construction firm in the developing case will only concentrate on the construction while the construction firms in developed countries help them in funding the projects (Hassan et al. 2016, p.49). The delay of some construction projects is caused by the boycott of workers because of the failure of construction companies to pay them for the work done.
Giving a chance for construction firms in developing countries to engage with those in developed countries will also expand and further create job opportunities. The developing countries can provide labor for the construction firms in the developed countries to perform tasks that are involved in construction. A lot of skilled and unskilled labor is needed in the construction projects and the construction firms in developing countries will provide the same (Liang 2017 et al., p.23). The more the projects they undertake, the more the people needed for the labor required. The fact that employment opportunities are created by international construction companies is a positive outcome.
Allowing the construction firms in the developing a chance to engage with those in developed countries helps them to create an international network. This will allow them to work with experts from other foreign countries (Smith et al. 2011, p.45). The frequent meetings of contractors, architect, and engineers from other countries help the construction firms from developing to have a wide scope. The diverse origin of different professionals makes it a resourceful experience for local professionals. This engagement will create a strong network between foreign and local professionals. The contact will be maintained even after their contract is over. They will be able to update each other on various international opportunities in the construction sector.
The engagement between the construction firms in the developing countries with those in the developed countries will enable developing countries firms to incorporate new technologies in the construction sector. The technologies used by the construction firms in the developed countries will be transferred in the market of the developing countries. New technologies make construction projects less expensive as well as save time. The new technologies will make it possible to manufacture durable building materials in the shortest time possible (Azhar et al 2008, p. 51). The construction firms in developed countries will help construction firms in the developing countries to introduce construction software that allows better management of the projects.
The software also allows for documentation of the progress of a particular project. Computer-aided designs even allow for the designer to project how the project will look like even before ground is broken. There are also heavy machines that can do the lifting of heavy materials instead of risking human life to do the task of lifting. In most cases, some construction projects fail to be undertaken in a suitable manner because of the lack of skilled manpower needed. Therefore, giving the construction firms in the developing countries a chance will help them to import skilled labor required for the development of projects (Jung et al 2010, p.46). This will be beneficial for the construction firms in the developing countries because people from developing countries will work with skilled workers from the developed countries and learn those skills from them.
As much as the engagement of the construction firms in developed countries avails numerous benefits to developing countries, they further have negative effects on the international construction companies in the developed countries. The negative effects include importation of labor from the developing countries, discriminatory management, weaker competition in the host country and loss of market for some local industries. In some cases, the engagement may not be of mutual benefits between the constructions firms in developing countries and developed countries (Darko 2017, p.42). These developed countries construction companies prefer to import laborers from their own countries. The international construction companies from the developing countries may feel that the local laborers are not used to hard work. The international construction companies see this as a culture that delays the project (Ofori 2012). They prefer to work continuously until the deadlines are met.
Likewise, discriminatory management may result if the developing countries construction firms are given chance to engage with developed countries construction firms. The management of international construction industries is seen to only employ professionals from their countries in their top positions. The locals get the lowest possible employment positions, for example, the locals would just be employed as office messengers and people preparing tea even when these people have more qualifications for better jobs. This denies the local professionals from having a working experience with international construction companies even though they have qualifications. The fact that the international construction companies provide cheaper rates for construction, it is almost impossible for the developing countries construction industries to compete with them. The international construction companies, therefore, dominate the construction sector with little or no competition at all (Xue 2016, p.65). Lack of competition is not good because there is nothing to push for improvement or even better deals.
The engagement may result in the loss of the local market. This can be explained by an example of the brick making industry in the developing countries. In the developing industries, bricks are made manually. Many people are involved in the brick-making industry, especially in the case of a project of a large scope. The international construction companies bring with them brick making machines, which are faster and most probably only need one person to operate. This leads to a lack of market for the manual brick makers because the contractors will opt for the brick making machine which is much faster and cheaper. The engagement may also result in the competition between construction companies from foreign countries which results in lower costs of projects. This might lead to a retarded growth of the local construction companies (Latham 2011, p.101). This is because the local construction companies might not be in a position to compete with the international construction companies. The international companies benefit more from this competition as compared to the local construction companies.
There are many challenges that can emanate from the engagement between the construction firms in the developing countries and those in developed countries. One of the challenges is the language barrier. Effective communication in the language of the people is very important for the safety of the workers as well as high productivity in the progress of construction (Bu-Qammaz, Dikmen and Birgonul 2009, p.35). If effective communication cannot take place between members of a project team, the workers could be affected health-wise and their safety will not be assured. The international construction companies from developing countries should, therefore, obtain those skills from the developed countries by employing a local construction consultant who has a good understanding of the construction sites and trains the local workers to meet the high international standards (Ofori-Okai et al. 2012) The solution to this can be employing a project manager who understands the language of the people well and understands the foreign language of the people in the developed countries. When all the workers in a construction site understand each other well, the rate of productivity will be higher and accidents can be avoided.
Another challenge in the international construction sector is the issue of cultural difference. The major reasons that make cultural differences to be a challenge in the international construction industry are money and time. International construction projects of a large scope may employ many workers from different countries and different cultures (Diaz-Horta et al. 2012). For example, a project might have joint companies from Canada, Malaysia, Britain, France, South Africa, and India. Forming an approach of teamwork across different cultures can be a very challenging task for the construction manager (Harris et al 2013, p.17). This is because every individual has his own beliefs and values. This affects the amount of time taken to complete a project as compared to if the workers had the same values which would encourage teamwork.
Bureaucracy is another challenge that comes with international construction. The international construction may have little or no understanding of the bureaucracy in the host country. This may make it a little harder for them to operate. A good example is in Brazil where a company takes a period of 469 days in order for them to acquire their permits for construction projects. That is a length of more than one year just to get a permit before commencing construction. Some of the bureaucratic hurdles in the host countries can be quite unreasonable and time-consuming (Deng, Pheng and Zhao 2014, p. 75).
Corruption has been one of the main challenges in the international construction sector. Corruption is a bad practice that is found almost everywhere in the world, with some countries having a higher percentage of corruption than others. In a corrupt country, the international construction companies can have a harder time getting construction projects from the government without bribing the officials in charge. There is also a case of favoring local companies because of corruption even when the international construction companies qualify more to undertake a particular project.
For instance, in China, a tendering committee that decides on the companies eligible for the tender is formed. The committee call companies for the tender, select companies that will submit their bid, releases the project design drawings and the documents for tendering. They further develop criteria for evaluation of the companies, open the tender, evaluate the bids that have been submitted and finally decide on the company that should be given the tender (Egan 2012, p.31). The construction companies are graded according to their performance in past construction projects they have done, the extent to which the companies are able to finance the project and the assets of the companies. The policies on tendering address the issues of fairness to all the companies participating, transparency, probity and ensuring a consistent tendering process. In this regard, all companies that are interested in a particular project are allowed to participate.
The companies, be it local or international are given a chance to get the necessary tendering documents. Each company places a bid, which is checked against the bids of every other company and against an expected cost (Giang and Pheng et al 2011, p.14). The best company with the cheapest bid is given a chance to explain how realistic the bid price is. In most cases, the cheapest bidder gets the tender. In cases where the cheap bid price is not realistic, the bid that is closest to the expected cost is chosen. This tendering process shows that even the international construction companies are able to place their bids for projects in their host country. Their bid is analyzed with the same fairness as that would be used to analyze bids from construction companies in the host country.
The impact of the international construction industry in improving standards of local construction companies is caused mainly by the high competition. The local construction companies have to raise their standards to meet those of the international construction companies so that they also have a chance of winning some contracts. If the construction companies from the developing countries get a chance to carry out a project, it will be an opportunity to create a good image of the company (Ofori 2012). They will make sure to have a quality outcome of the construction project undertaken. They would also ensure to complete within the stipulated time and cost. This can be possible especially when these construction companies have had chances to work together with other international construction companies and have gained the experience required.
Conclusion
International construction should be encouraged even more in both developing and developed countries. This is because is improving the construction sector in various countries leading to growth. International construction companies need to put into use the strategies for diversifying their engagement with the local construction companies.
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