The present international construction scenario is in a state of flux. There is intense competition amongst the big giants due to the reduced size of the global construction market which was estimated to be around $225 billion during 1985-90 annually by a World Bank Study. The avenues for development activities are many but the financial constraints have posed big, limitation on the underdeveloped counties to implement execution of even those projects which are absolutely necessary for developing the infrastructure facilities. On the other hand, the western construction companies are in a position to offer finances at very nominal interest rates. Some of the international companies belonging the developed countries like Japan, the USA, the UK, France and Germany have increased their competitive strengths extending their business operations in multifarious activities such as manufacturing of material, equipment, shipping etc., which enabled these companies to undertake turnkey jobs and earn high overall profit. The Indian construction companies, however have a small financial base and have to depend on a number of other firms for the supply of material and equipment which in turn reduce their competitive strength. At the same time Indian firms are not in a position to offer financial packages.
Another factor which does not favor Indian companies in the international scenario is that the Indian consultancy firms have not developed much. Consultants who are forerunners of the project have a dominant role to play for the award of contacts as well as for laying down specifications for the materials to be used in the projects etc. It is usually observed that these consultants lay down specifications and terms and conditions which are mostly to the advantage of contractors belonging to the developed countries. Many times Indian contractors though having adequate experience do not either get pre-qualified or are unable to offer competitive bids due to these reasons.
Despite such disadvantages, the Indian construction companies have been able to make headway in the overseas markets due to the following reasons:
The main source of competitive strength of Indian construction companies has been the availability of competitive and cheap labor from India. Of course, of late, China has also entered the international construction market and the Chinese labor is comparatively much cheaper. This is a big threat the Indian firms. However, with the improved construction technology acquired in the recent years, the Indian companies are still in a position to offer competitive bids of many projects.
Another factor which goes to the advantage of Indian companies is that they are able to operate with intermediate technology. India’s own experience in developing the infrastructure facilities with comparatively less utilization of technology has better appeal to the developing countries.
Socio political relations have also been a favorable factor for Indian construction companies it get the construction projects. Iraq is an example in this context the award of construction of three hotel projects by the USSR to two Indian firms is another example.
Import of Commodities & Link Deals:
Another factor which has been instrumental in getting construction projects in overseas countries is that import of commodities from the countries which offer potential for the construction projects. It has now become a general practice to negotiate the construction projects under the link deals The Indian construction companies have been able to secure construction projects such as Steel Bridges and Railways, Rehabilitation Projects in Malaysia against the import of palm oil.
Growth in Project Exports:
The Export Import Bank has analyzed the growth of India’s project exports during the period 1975-91.
It is observed that in terms of both value and number project exports showed a positive trend during the period 1975-76 to 1980-81. The post 1981 period was of rapid decline and the performance in 1990-91 in the terms of the value of contracts won has hardly 56 per cent of the corresponding value in 1980-81. The success ratio has also declined from 40 per cent n 1975-76 to only 22 per in 1989-90.
In a comprehensive study on export bids over a decade (1982-92) published recently, the Export Import Bank found that in this decade 1,394 bids valued at Rs 36,969 crore were submitted by Indian companies, both public and private.
Out of these, 429 bids valued at Rs 5,568 crore were known to have been secured as of end August 1992, reflecting success rate of 32 per cent by number and 17 per cent by value. This rate companies favorably to the global bid success rate of 15 per cent in value terms.