Ministry of Commerce And Supplies - Enhanced Integrated ...

N T I S2010Under mode 4 (presence of natural persons), individual consultants working abroad have already shown theircapability of handling larger construction projects. Some Nepalese engineering firms have started providingengineering services related to construction in countries such as Bhutan, Afghanistan, Tajikistan and severalAfrican countries, which mainly means that they send some of their engineers to these countries withoutestablishing a commercial presence there. According to respondents from the industry, the entry to India isdifficult because Indian engineers are very capable themselves and also because of the intensity of competitionin that market.A large number of individual engineers are known to have left the country for foreign employment, though theavailable data is scattered. 130 It is estimated that the brain drain of government engineers has reached morethan 300 hundred in the last two years. 131 Most engineers going abroad are also known to work as engineersthere.There is no evidence of exports in the field of industrial engineering.Imports of Engineering Services: Large-scale construction projects in Nepal usually involve foreign firms.Nepal has made some commitments in GATS after joining the WTO in 2004. There are no restrictions on thisservice under modes 1 and 2. Under mode 3, however, physical presence of foreign firms is allowed with onlyup to 66 per cent foreign equity capital to firms incorporated in Nepal. Regarding mode 4, there is a restrictionas in the case of all other services (horizontal commitments), i.e. the number of foreign employees in Nepalcannot exceed 15 per cent of the number of local employees.Index 2: World Market ConditionsThe global market for engineering and construction services is estimated by the WTO to have reached a sizeof US$4.7 trillion in 2007 132 , but most of these services are not traded internationally. Global spending onengineering services alone, which includes not only engineering for construction but also enginerring formanufacturing (e.g. automotive industry, telecom, aerospace), is estimated to be US$750 billion per year andto reach US$1 trillion in 2020, but with only US$10-15 billion offshored (Nasscom, 2006).Official BOP statistics give an incomplete picture of the global trade in engineering services, but there is a clearupward trend. Exports of ‘architectural, engineering, and other technical consultancy services’ have doubledbetween 2003 and 2007 and reached US$13.7 billion. India is the second largest exporter and importer forthis category of services, after Germany. But many countries, including China, do not report this data.ENR publishes an annual list of the top 225 international contractors. 133 The industry is dominated by Europeanand US firms, with a few Chinese companies emerging as major players. None of the top 225 is from Nepal,and only two are from India. But India is one of the fastest-growing markets in terms of construction spending,with annual growth of 8 per cent (WTO).A study by the Indian IT and BPO industry association, Nasscom and Booz Allen Hamilton (‘Globalization ofEngineering Services: The next frontier for India’., Nasscom 2006) is very optimistic about the outlook for Indiaas an exporter of engineering services, with a potential for 2020 of US$50 billion (which is equal to today’sexport revenue in IT and BPO services), but it is expected that the potential can be fulfilled only if engineering130According to an interview with Foreign Employment Association, out of total migrants, the percentage of skilled labour is around 2.5 per cent,which includes engineers and surveyors as well.131See Nagarik daily, 31 December, 2009, www.nagariknews.com .132See http://www.wto.org/english/tratop_e/serv_e/construction_e/construction_e.htm133See http://www.wto.org/english/tratop_e/serv_e/construction_e/construction_e.htmNEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT115