- International competitiveness is
the degree to which a country can, under free and fair market conditions, meet the test of
international markets, while simultaneously maintaining and expanding the real incomes of
- A nations competitiveness
depends primarily on keeping productivity growth rates equal to or greater than those of
its major competitors. Productivity growth rate is directly related to a nations
rate of investment on innovation (i.e. R & D).
FACTORS OF COMPETITIVENESS
- Project price
- Continues to be a major factor, particularly for conventional projects in civil sector.
- May be affected by (a) low labor cost, (b) low material cost, (c) low-cost financing,
(d) low transportation cost (equipment, personnel, material), (e) superior productivity.
- Contractors try to keep costs as
low possible by using local materials and labor, wherever possible. Host governments also
encourage the use of local resources.
- Government support programs can
also influence the competitiveness on contract bids by offering risk insurance, tax
subsidies, and reimbursing bid preparation costs.
Technological and management
- Firms usually require outside financing for international projects. Governments are a
major source of financing. The Export-Import Bank of the United States, for example,
provide loans and guarantees to assist export of construction services.
- Many firms benefit from commercial targeting of official development assistance funds.
These funds may be disbursed to the host country either in the form of grants or low
interest loans. A high percentage of official assistance offered by some nations (i.e.
Japan) to the developing countries are utilized through the multinational corporations.
- Cost of capital tends to be relatively low in nations with high savings rate, growing
economies, stable governments, and legal systems that provide for the enforcement of
contracts. Japanese contractors have benefited from the access to capital they have
enjoyed as a result of Japan's position as a major creditor nation.
- Innovation is a key element to improving the performance and competitiveness of the
building and construction industry. The design, development, commercialization
effective diffusion of new building products, systems and services are key drivers for the
growth of the industry. Advanced construction technologies are advantageous in
competing on projects that require special expertise.
Some facilities the owners need are becoming increasingly complex that require greater
technological sophistication to build them (i.e. new systems for communications and data
transfer, better water treatment facilities, clean rooms, etc.). Technological issues are
therefore becoming principal drivers of competition.
Major innovations are often generated by changes to materials and equipment arising from
research and development (R&D) or significant improvements to design, engineering and
The quality of construction services offered may be an overriding competitive factor for
complex projects. Large-scale projects require substantial management skills.
- IT has opened international
business opportunities and thereby is considered as a major factor in competitiveness. It
is reported that a company called Starnet International won a contract for designing and
building a large dome in Beirut by developing a virtual reality video. McGraw-Hill (1995)
reports that the advanced communications technology is enabling contractors in the
industrialized nations to use lower-cost engineers and other personnel from outside their
home countries without compromising quality.
- IT may help to reduce the
disadvantage of small firms in competing in international markets.
Multilateral development bank
- Joint ventures with local firms is a requirement for many international projects.
Finding a right local company is a factor in competitiveness.
- Joint ventures, when properly used, allow pooling of resources and facilities and
spreading of risks.
- It is a "gestalt": the whole is bigger and stronger than the sum of the sizes
and strength of the parties who combine together to form it.
- A joint-venture relates only to single project.
- Multilateral development banks (MDB) provide credit to developing countries for
procurement of works. Since the credit amounts do not always cover the total cost of the
projects, the banks (i.e. WB, ADB, etc.) often seek co-financing for the works. Many
foreign firms seek to increase their chances of winning MDB bids by offering the host
country governments attractive export financing to supplement the MDB funds.
MEASURES OF COMPETITIVENESS
Coviello et. al (1997) have
examined some measures of international competitiveness in an extensive study. They
- Performance: Performance by a
company in comparison to others is considered to be a factor of competitiveness. The
performance measures include:
- Revenue earned by a company
- The company's market share and
- The degree of efficiency in
completion of construction projects
- The effectiveness (in terms of
scope, cost, and time) in completion of a construction project
- Potential: Potential of a company
in comparison to others plays a role in competitiveness. The measures of this variable
- The quality of project personnel
- Relationships with other
- Formal and informal contacts with
key construction markets
- Quality of services
- The degree of international
reputation of the company
- Process: The authors recognize
process as the third variable in measuring competitiveness. The measures of process
- The degree of international
commitment and focus of the company
- The degree of consistency in top
management over time
- The degree of the management's
commitment to and role in managing key international relationships
- The degree to which the firm's organizational structure and systems are geared toward
COMPETITIVENESS OF US
- US advantages
- Broad construction experience overseas
- High level of engineering technology, particularly for oil refineries, power plants,
large industrial process plants
- Effective project management skills
- Projects where price is the critical deciding factor
- Less generous government support compared to some other international competitors
- In case of MDB financed projects, lack of a good understanding of procurement and
BANK AND THE INTERNATIONAL MONETARY FUND
- Known collectively as the Bretton Woods Institutions after the
remote village in New Hampshire, U.S.A., where they were founded by the delegates of 44
nations in July 1944, the Bank and the International Monetary Fund (IMF) are twin
intergovernmental pillars supporting the structure of the world's economic and financial
- The Bank is primarily a development institution; the IMF is a
cooperative institution that seeks to maintain an orderly system of payments and receipts
THE WORLD BANK
- The World Bank offers loans, advice, and an array of customized
resources to more than 100 developing countries and countries in transition.
- The World Bank is the largest provider of development assistance,
committing about $20 billion in new loans each year. The Bank also plays a vital role in
coordinating with other organizations (private, government, multilateral, and
non-government) to ensure that resources are used to full effect in supporting a country's
WHAT DOES IT DO?
- The World Bank is helping countries to strengthen and sustain the
fundamental conditions they need to attract and retain private investment. With World Bank
support (financial and non-financial) governments are reforming their overall economies
and strengthening banking systems. They are investing in human resources, infrastructure,
and environmental protection which enhances the attractiveness and productivity of private
investment. Through World Bank guarantees, the MIGA's political risk insurance, and in
partnership with the IFC's equity investments, investors are minimizing their risks and
finding the comfort to invest in developing countries and countries undergoing transition
to market-based economies.
WHERE DOES THE MONEY GO?
- The World Bank raises money for development at the lowest rates by
tapping the worlds capital markets, and, in the case of the IDA, through
contributions from wealthier member governments.
WHO OWNS THE BANK?
- The World Bank is owned by more than 180 member countries whose
views and interests are represented by a Board of Governors and a Washington-based Board
THE INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA)
- IDA is the World Banks window for lending on very soft
terms. The credits, provided to countries with less than $925 per capita income, are
interest free. They are very long-term (35 to 40 years, including 10 years grace),
carrying only an annual administrative charge of 0.75 per cent.
- IDA lends, on average, about $5-6 billion dollars per year for
different types of development projects. Most of the projects include components of
physical development that require the engagement of consultant, contractor, or both.
THE INTERNATIONAL BANK FOR RECONSTRUCTION AND
- The IBRD provides loans to developing countries that are capable
of paying near-market interest rates. It accounts for about three-fourths of the Banks
annual lending. It raises almost all its money in financial markets by selling bonds and
debt securities to pension funds, insurance companies, corporations, banks, and
individuals around the world. Loans have to be repaid in 15 to 20 years. There is a grace
period of three to five years before the payment of principal begins.
MULTILATERAL INVESTMENT GUARANTEE AGENCY (MIGA)
- Affiliated with the World Bank, the objective of the agency is to
supplement national and private agencies supporting direct investment through their own
investment programs. It encourages investment by providing viable alternatives in
investment insurance against non-commercial (political) risks in developing countries.
- The agency provides insurance of investment in countries
restricted or excluded by the policies of other national insurers or through specific
policies adopted by governments.
THE INTERNATIONAL FINANCE CORPORATION (IFC)
- The IFC is the source of loan and equity financing for private
sector projects in the developing world. It participates in investments only when it can
make a special contribution that complements the role of market operators.
- IFC charges market rates for its products and does not accept
- IFC finances projects in all types of industries, from
agribusiness to mining, from manufacturing to tourism. To be eligible for IFC financing,
projects must be profitable for investors, benefit the economy of the host country, and
comply with stringent environmental guidelines.
THE INTERNATIONAL CENTER FOR SETTLEMENT OF
INVESTMENT DISPUTES (ICSID)
- It is an autonomous organization with close links to the World
Bank. The center provides facilities for the conciliation and arbitration of disputes
between member countries and investors who qualify as nationals of other member countries.
Recourse to ICSID conciliation and arbitration is entirely voluntary. But once the parties
have consented to arbitration under the ICSID convention, neither can unilaterally
withdraw its consent.
- ICSID publications: Investment Laws and Investment Treaties.
GENERAL CONSIDERATIONS FOR PROCUREMENT USING
WORLD BANK FUNDS
- Economy and efficiency of implementation of projects
- Provide opportunities to the eligible bidders from all member
countries to compete for the works financed by the Bank
- Encourage the development of domestic contracting and
manufacturing industries in the borrowing country
- Maintain transparency in the procurement process
- Publication of procurement notice in UN Development Business in
order to notify the international community
- Pre-qualification of bidders
- Invitation to bid
- Selection of lowest responsive evaluated bid
- Award of contract
THE INTERNATIONAL MONETARY FUND (IMF)
- The IMF was created to promote international monetary cooperation;
to facilitate the expansion and balanced growth of international trade; to promote
exchange stability; to assist in the establishment of a multilateral system of payments;
to make its general resources temporarily available to its members experiencing balance of
payments difficulties under adequate safeguards; and to shorten the duration and lessen
the degree of disequilibrium in the international balances of payments of members.
Coviello, N. E., Ghauri, P. N., & Martin, K. A-M. (1997).
International competitiveness: Empirical findings from SME service firms. Journal of
International Marketing, 6(2), pp. 8-27.
McGraw-Hill (1995). ENR (August 28), pp. 32-34.