Protectionism in the construction and engineering services industries

Nature

Governments, particularly in developing countries, increasingly require some form of cooperation with local enterprises by foreign firms providing construction and engineering services. Thus, foreign firms may have to engage in joint ventures with local enterprises or conduct their transactions through local subsidiaries or affiliates, which act as their representatives in the host countries.

Background

Protectionism in the construction and engineering services industries emerged as a significant global concern in the late 20th century, when multinational firms began encountering restrictive regulations and discriminatory practices in foreign markets. The issue gained prominence during international trade negotiations, such as the Uruguay Round (1986–1994), where barriers to market entry and unfair procurement policies were increasingly recognized as impediments to competition, innovation, and cross-border collaboration within these vital sectors.

Incidence

Protectionism in the construction and engineering services industries is a persistent issue affecting both developed and developing economies. Many countries impose restrictive regulations, local content requirements, and discriminatory procurement practices that limit foreign firms’ market access. This has led to reduced competition, higher project costs, and delays in infrastructure development on a global scale, impacting cross-border investment and technology transfer in major public and private projects.
In 2022, the European Union raised concerns over Indonesia’s local content rules in its construction sector, which favored domestic firms over foreign competitors. This dispute was brought before the World Trade Organization, highlighting ongoing global tensions.

Claim

Protectionism in the construction and engineering services industries is a critical problem that stifles innovation, inflates costs, and limits access to world-class expertise. By shielding domestic firms from healthy competition, protectionist policies undermine quality, efficiency, and progress. This not only hampers economic growth but also deprives communities of safer, more sustainable infrastructure. Urgent action is needed to dismantle these barriers and foster a truly competitive, dynamic global marketplace.

Counter-claim

Concerns about protectionism in the construction and engineering services industries are vastly overstated. Local regulations and standards exist to ensure safety, quality, and fair competition—not to stifle international participation. The supposed “problem” of protectionism is a distraction from real industry challenges like skills shortages and infrastructure needs. Prioritizing local expertise strengthens communities and economies. Frankly, protectionism in these sectors is not an important problem and deserves far less attention than it receives.