Export of Technical and Engineering Services

The importance of exporting technical and engineering services and its impact on employing the workforce — especially university graduates — and generating foreign currency revenue has been repeatedly emphasized by officials as a solution to the problem of unemployment in society. In this article, I will attempt to enumerate the obstacles to exporting these services, so that any measures for paving the way might benefit future groups.

The scope of services I address in this article begins with consulting services in the construction sector and concludes with contracting project execution. The geographic scope covers the Arab countries of the Persian Gulf coast, which constitute one of the largest markets for technical and engineering services in the world. Given the short distance from Iran and the existence of cultural and historical ties, this is a fertile arena for exporting services.

Perhaps the points I will mention seem very simple and trivial. However, my claim is that the greatest damages are caused precisely by failing to observe these seemingly simple rules. We resemble an athlete who, despite physical fitness, is ignorant of the rules of the game — and needless to say, such an athlete cannot expect success.

Access to Preliminary Information

It is obvious that success in any field requires study and the utilization of relevant information. The major problems of this area can be categorized as follows:

Receiving invitations to participate in tenders, which are usually published through journals and recently through internet websites, is the first challenge. The information in most invitations is so vague and incomplete that no action can be taken based on it. Gathering information and conducting preliminary negotiations with the client at this stage plays an important role. The commercial sections of many embassies undertake the pursuit of this task, at least in the initial stages. Another model is the activity of representative offices of company consortiums that may have been operating for years with the task of collecting information and following up on related matters in other countries. Usually the workforce employed in these offices does not exceed a manager, a secretary, and a maintenance worker. In any case, winning a tender without possessing essential information and local support is extremely difficult.

Another part of the preliminary information concerns the working and contractual regulations operative in each country. This can be easily collected, compiled, and codified through commercial representative offices, even before planning to participate in a specific tender. This information is essential for preliminary readiness to participate in tenders.

Administrative and Legal Problems

The problems in this area are very significant and can sometimes prevent the work from being carried out. The ambiguity is such that no insurance company is willing, even at double the international rate, to guarantee the standard services, capital, and expected profits.

Obtaining short-term visas required for receiving project proposals wastes the initial time for site visits and negotiations with the client. More time for familiarity increases the chances of success. Preparing visas and suitable reception arrangements for senior officials — employers, including those in Arab or multinational companies who are often British or American — is another problem. In many cases, winning tenders is contingent upon the client visiting the company's facilities and completed local projects.

Obtaining bank guarantees with the text and conditions requested by the client is a difficult task. The active bank in this field is currently the Export Development Bank, and it offers services that clients often do not accept. Usually the client wants to receive the guarantee from a local bank or a reputable international bank under their specified conditions, which are provided to the contractor before the completion of tender documents. I witnessed a case where, due to the absence of an intermediary and a discrepancy in the drafting of the guarantee text, an important project was lost. One can imagine what losses the contractor must bear in the absence of an intermediary.

Transferring the money and liquidity needed for project commencement abroad through the banking system is either impossible or so lengthy that it amounts to a remedy after the fact. Bringing money from abroad into the country through the banking system is yet another problem. Even with an account at a foreign currency branch, this sometimes takes more than a week — while the same procedure at an international bank takes one or two hours, and interestingly, their service charge is lower than that of domestic banks.

The lack of readiness of the banking system to participate in such projects — or fundamentally not believing in such endeavors as an economic activity — and consequently the failure to provide initial liquidity until receipt of the advance payment and first installments is another problem. The success of Turkish companies in Central Asia, thanks to banking system support for the export of services, is a good example. Erroneous and fanciful estimates and the shortage of necessary liquidity drive many projects to confiscation at the mobilization stage. There is abundant evidence of this.

It should be noted that insurance companies face fewer problems in issuing the required policies for these projects, as opposed to investment insurance. Customs regulations regarding the export of special materials and machinery, and the return of equipment used at the project site, are also among the problems facing contractors. By contrast, the clearance of goods in the Persian Gulf countries is completed within less than half a day upon presentation of a seller's invoice, and crossing between member countries is possible simply by showing an identification card — not even a passport.

Government and embassy support for service exporters is also very important. Unfortunately, on some occasions, instead of supporting the export of services, we witness the presence of government companies as competitors exploiting special privileges — a regrettable situation.

Other Administrative and Legal Problems

Banks are not involved in all projects — especially small ones — and what replaces initial liquidity is the credit of companies. I will explain this with a common model.

Every company, upon receiving tender documents and based on the appended Bill of Quantities, divides the required services into various sections. After separating its own share — that is, the portion it can perform at a lower cost (because a company may be capable of performing an activity but achieve a lower finished cost by outsourcing it) — it sends the rest, along with technical documents, to related companies and delegates the pricing to them. The credibility of pricing must follow the main tender. After collecting and compiling the information, the final tender estimate and completion of documents becomes possible. In this process, several price inquiries may be sent to different companies for each work package, and the manner of compiling and selecting the best prices and conditions is the special art of the main company.

The winning company, if it has a suitable track record of cooperation with others, need not make any payment at the project's outset, nor even sign a contract or exchange a memorandum of agreement. It merely confirms the purchase of services by sending a Local Purchase Order. Based on payment conditions — usually 60, 90, or 120 days after completion of work, approval of the invoice by the client, or by post-dated check — cooperation begins. In truth, by following this model, the main contractor completes a major portion of operations without the slightest capital investment. In case of delayed payment, the law protects the creditor firmly and swiftly — in many cases, the problem is resolved simply by visiting the police station, not the judiciary. Naturally, a company with a poor payment record faces credibility problems in future transactions.

Technical and Administrative Communications

Participation in any game requires knowing the rules of that game. By knowing the rules of volleyball, one cannot expect victory in a basketball match. The rules and models operative in free markets are more or less uniform and standardized, but they differ significantly from what is currently operative in our country. Some of these rules can be found in the manner of communication:

Knowledge of a foreign language — English is the working language of the region — is the first necessity. This does not mean that anyone with technical knowledge who speaks the language can be sent; one must know the specific technical language. I have witnessed Iranian expert groups attempting to communicate through hired translators, which has been mostly futile.

Observance of correspondence rules in sending faxes, letters, and emails is also of great importance. In some administrative systems, correspondence outside these standards is set aside as incomplete. Observance of official etiquette — which in many countries has been codified into protocols — is also important. Clients receiving senior guests consider it their duty to observe defined customs of venue, attire, and reception, and expect similar conduct in return. Simple matters such as punctuality, carrying business cards and necessary documents, readiness to follow up on meeting topics, and appropriate grooming and attire all matter.

The practice of documenting and recording matters in writing is essential: every technical action must be based on the relevant work order, and contractors request confirmation of verbal instructions via a workflow form. This prevents future disputes. The model for maintaining documents in technical and financial archives, and ease of access to them, is also noteworthy. Following up on matters based on written documents is straightforward; reminding people of verbal promises is not.

Observance of hierarchy is of great importance. In the common model, the workforce starts from the helper level, rising through worker and technician to foreman. The foreman links the workforce with planning and executive management, and technical document preparation and coordination with the project's technical office falls mainly to him. The interesting point in this hierarchical system is that personal tasks are not delegated to lower ranks. Each group prepares and carries their own supplies. If you see a worker fetching drinking water for a master craftsman, or an engineer arranging a schedule for a master craftsman, have no doubt about their being Iranian.

Technical and Expert Knowledge

My experience confirms the excellent quality of Iranian specialists' technical knowledge. However, certain points make this knowledge marketable internationally:

Respecting the client's taste in design is very important and usually does not correspond with what we have learned in universities. Studying what has been built in the region can guide designers. Construction regulations, standards, and various design codes are also critical. Fire safety regulations are matters we usually neglect, yet they can easily cause the rejection of a project.

Our project management is such that execution schedules are connected in a chain; changing one part can affect the whole. The speed of execution expected is usually inconceivable for those trained domestically. Due to the absence of certain academic disciplines in Iran, specialists in related fields are naturally scarce. Perhaps the most important is the Quantity Surveyor — essentially responsible for contracts and accounting. This interdisciplinary specialty combines law and engineering.

The speed of response to project and client requests differs vastly from our country. Usually receiving a response in more than 24 hours is surprising, and executive actions are followed up on a 24-hour basis from the moment of notification. Observance of worksite and safety regulations — from wearing helmets and boots to carrying identification cards — is taken very seriously.

In tender documents, the organizational positions and required competencies are defined in a few lines. Interestingly, no university degree is commonly requested; the ability to perform the work suffices. Unfortunately, sometimes Iranian companies send relatives and acquaintances instead of capable individuals. The client expects the contracted services, and upon any breach, requests replacement of the unsuitable person — changes that adversely affect the project's progress.

Many managers of large projects I have encountered lacked university degrees, having risen through the British system from the trades of carpentry or masonry to general management through on-site promotion. Familiarity with current regional technology and knowledge of materials in use is another important point. I recall a case where, after completing structural calculations for a large project, the Iranian consultant realized that the proposed steel sections were unknown to the client — the operative standard in the region was entirely different. Such familiarity can significantly affect the finished cost, especially since most projects in the region are tendered on a turnkey basis for detail design and construction.

Workforce

Perhaps the most important factor encouraging construction companies to employ non-Iranian labor, exempt from Iranian labor law, is the complex regulations of the Iranian model and its major differences from other labor-exporting countries. I will note some points, reminding that my purpose is to emphasize the necessity of devising measures to reduce project costs — not to impinge on workers' rights.

Standard working hours are nine hours a day over six working days, usually in two shifts with approximately a two-hour break for lunch and rest. The workday therefore ends after sunset, which Iranians usually find disagreeable and exhausting. Annual leave in the first three years is 15 days, given every two years proportionate to work volume; if the employer agrees, 15 to 20 days of unpaid leave may also be granted. Worker insurance is mostly limited to accident compensation or outpatient treatment, with an annual premium of approximately 25 US dollars. The most common approach to sick workers is termination. Annual holidays usually do not exceed five days, while Iranians are accustomed to four or five times that amount. No bonuses or gifts accrue to personnel. Upon completion of assignment, the contract is terminated, and if no new position exists, the person must return home with no additional payment. Emergency leave is rarely granted.

Residential Problems and Work Habits

Anything affecting workforce efficiency impacts the finished project cost. Several non-technical issues deserve attention:

Disorderliness is perhaps the most conspicuous bad work habit among Iranian workers. In standard practice, for each section of work, the main workforce meets briefly to discuss how it should be done. The technician writes a Method Statement — like a school essay — specifying execution time, coordination with other groups, required equipment, and each person's responsibilities. A copy goes to the client for archival. Iranian workers are typically unprepared for such a plan, beginning to think about execution only at the start time, then realizing they need certain tools, or worse, that items should have been brought from Iran.

At every worksite entrance, mandatory regulations are displayed in writing with illustrations. These are explained by the Safety Officer at the start of work, and signatures are obtained from workers. Regulations cover work attire, fire response, incident reporting, and especially no smoking — the latter being an internal regulation at many companies from the time of hiring. Unfortunately, excessive smoking among Iranian personnel leads to problems. Some leniency may be shown, but with regard to narcotics, not the slightest tolerance is exercised.

For workers, language knowledge is not critical, yet they must be familiar enough to write their name and address, complete passport and customs forms, and understand safety warnings in English. Personal hygiene is especially important in communal worker camps. Indian and Pakistani workers, perhaps out of habit, bathe twice daily — once after each shift — and take care of their dormitory cleanliness. The spread of contagious diseases among Iranians stems partly from inadequate care with personal utensils and dishes. Worker accommodation is usually four persons per room, but the congregation of Iranians in groups of more than four or five invariably causes many problems and sometimes altercations.

Considering all the points mentioned, I find it unlikely that an Iranian company currently possesses competitive strength in the free market. Therefore, measures must be devised that lead to the empowerment of Iranian work groups. In my opinion, the most important step is delegating the issue for comprehensive study to relevant professional bodies — such as the Society of Consulting Engineers and the Syndicate of Construction Companies — which can freely and without the constraints of the governmental system address the matter and propose appropriate solutions. Such solutions will have different dimensions and will ultimately require the cooperation of various bodies.

The author, along with the consulting engineers of Arg-e Bam Kerman, hopes to witness the success of the country's workforce and specialists in the field of exporting services in the near future.