The importance of the export of technical and engineering services and their effect on the employment of the country's job-seeking workforce — particularly its graduates — and on the earning of foreign exchange has repeatedly been cited by officials as a workable solution to the country's unemployment problem. In this writing, I shall try to enumerate the difficulties that face the export of services, since any hasty action in this matter, before all-round investigation, can lead to major losses and to closing the road for future groups.
The scope of services I have in mind here begins with consulting in the building sector and ends with the carrying out of contracting projects. The geographic area covers the Arab countries of the Persian Gulf rim, which form one of the world's largest markets for technical and engineering work and, by virtue of their short distance from Iran and existing cultural and historical ties, are a fertile arena for Iranians.
Some of the points I shall raise may seem very simple and trivial, but my claim is that the greatest damage is caused by the failure to observe these apparently simple rules; we then resemble an athlete who, despite physical fitness, is unaware of the rules of the game — and such an athlete cannot, without question, expect success.
Acquiring preliminary information
It is obvious that for success in any field one needs studies and the use of relevant information. The principal difficulties in this section can be grouped as follows. The receipt of an invitation to tender1, which is most often issued through periodicals and lately through internet sites: the information given in the invitation is so often vague and incomplete that one cannot, on its basis alone, take action. The collection of information and preliminary discussion with the client at this stage plays an important role. The commercial section of many embassies undertake this task, at least in the early stages. Another model of activity is the agency offices of company consortia, which may have worked for years in other countries with the duty of gathering information and following up related matters. Usually the manpower in these offices does not go beyond a manager, a secretary, and an attendant. In any event, winning a tender, without the necessary information and local support, looks unlikely.
Another part of preliminary information concerns the working and contractual rules in force in each country, which can readily — even before planning to enter a particular tender — be collected, distilled, and codified through the commercial agency offices. Such information is essential for initial preparation to participate in a tender.
Administrative and legal difficulties
These are very serious and can sometimes prevent the work from being done. The ambiguity of the matter is such that no insurance company is willing — even at twice the international rate for usual services — to underwrite the capital and expected profit. Traces of these difficulties can also be found under other headings of this writing. Some of them are listed below:
— The time required for obtaining a visa eats into the time available for visiting the project and meeting the client; more time for competitors increases their chance of success.
— Securing visas and suitable hospitality arrangements for the client's senior representatives — in many cases winning the tender is conditional on the client's visit to the company's local facilities and completed projects.
— Obtaining a bank guarantee, with the wording and conditions the client demands — especially with the changing regulations and policies of the country — is difficult. The bank active in this field at present is the 'Export Development Bank', whose services the client most often does not accept. The client usually wishes to receive the guarantee from a local bank or a reputable international bank, in conditions that are usually placed in the contractor's hands before the completion of the tender documents. I have witnessed a case where, owing to the absence of an intermediary and to a flaw in the wording of the guarantee, an important project was lost — and one can imagine, in the absence of an intermediary, what loss the contractor must bear.
— Transferring the cash needed to start a project abroad through the existing banking system is impossible, or so prolonged that it is like the antidote arriving after Sohrab's death.
— Bringing money in from abroad through the banking system is another peculiar problem. Even with a foreign-currency-branch account, this can take more than a week — whereas the same operation with an international bank takes one or two hours, and notably their fee is lower than that of domestic banks.
— The unreadiness of the banking system to take part in such projects, or the basic disbelief that they can serve as economic activity, and the consequent failure to provide initial cash flow. The Turkish companies in Central Asia, with the support of their banking systems for the export-of-services sector, are a good example. Erroneous and fanciful estimates and the shortage of necessary cash drag many projects to dispossession at the site-mobilisation stage; there is much evidence of this.
It should be noted that insurance companies — issuing the project's required policies, and not investing in an engineering activity — encounter fewer problems.
Customs regulations on the export of special materials and machinery, and their later return to Iran, certainly create a problem for service exporters. Usually, the clearance of goods and materials in the Persian Gulf countries (members of the Cooperation Council) is done in less than half a day, simply on the seller's invoice (not the manufacturer's), and the entry of nationals of those countries through the Arab border is possible by showing an identity card (not even a passport).
Government and embassy support for service exporters is also very important. Unfortunately, at times, instead of supporting the export of services, we see state-owned companies appearing as competitors with their special privileges; and it is regrettable that they, often unable to fulfil their commitments, also destroy the field of activity for others by absorbing the loss.
Continued — administrative and legal
It is necessary to note that banks in all projects (especially large ones) only extend credit to the client; for this reason, secondary partners who participate in the work as second-tier contractors do not see themselves as obliged to obtain a guarantee from the principal contractor. I shall try to explain this through a common pattern.
Each company, on receiving the tender documents, divides the required services on the basis of the attached bill of quantities2 into different sections; after separating its own share of executive operations — the part it can execute itself, and more cheaply (so as to reach a lower final cost) — it sends the technical documents and other information for pricing of the rest, perhaps to a larger entity than the principal tenderer. After the collection and consolidation of the various pieces of information, the final tender estimate and document completion become possible. In this process, several enquiries4 may be sent to different companies for each work package3, and the manner of consolidating and presenting the best prices and conditions is, in fact, the principal company's special art.
The winning company, where it has a satisfactory record of cooperation with others, has no need to pay any sum at the start of the project — even at contract signature or the exchange of an agreement — and merely by sending a Local Purchase Order5, confirms the purchase of services from the next company; cooperation begins on the basis of the conditions specified for the time of payment (usually 60, 90, or 120 days after the work is completed or invoiced and approved by the client6, or upon the receipt of the related invoice from the client7, or by post-dated cheque8).
By following such a model, the principal contractor in fact completes a major part of the executive activity without the slightest initial investment. It should be noted that, in case of non-payment to subcontractors as set out in the purchase order, the law decisively and quickly supports the creditor; in many cases, the matter is resolved merely by approaching the police (not the judicial body). Naturally, a delinquent company will face credit problems in subsequent transactions.
Technical and administrative communications
Taking part in any game requires knowing its rules. In other words, knowing the rules of football one cannot expect to win at basketball. Generally, the rules and patterns in use in the open markets are more or less uniform and standardised; they have, however, a major difference from what currently prevails in our country. Part of these rules can be sought in the manner of communication, in person or in writing:
— Knowing a foreign language (English is the working language of the regional countries) is the first necessity. This does not mean, however, that anyone with the requisite technical knowledge and command of English can hold a technical and expert meeting; one must know the special technical language. I have witnessed Iranian expert teams trying to engage their counterparts through hired interpreters, with most attempts proving futile.
— Observing the rules for correspondence in faxes, letters, and electronic mail, and their standard format, is also of great importance. Some administrative systems set aside correspondence outside these rules as incomplete, awaiting completion.
— Observing formal etiquette — which in many countries has been codified into a protocol and made the basis of action — also matters. Clients, in receiving senior guests, regard themselves as bound to observe defined manners — including the place of reception, the choice of dress, and the manner of hospitality — and expect the same of the other party. In other words, simple matters such as punctuality at appointments, having business cards and other necessary documents, full preparation to follow up the meeting's items, and appropriate appearance and dress, all matter; without these, success is unlikely.
— Recording everything in writing — in the sense that any technical action is necessarily based on a corresponding work order, and even contractors request the confirmation of verbal instructions through a Confirmation-of-Verbal-Instruction form9 — prevents future disputes about project accounts. The model of keeping technical and financial documents and archives, and the ease of access and use, is also worth attention. Following matters up on the basis of written documents is as easy as it is hard to do so by recalling verbal undertakings and related promises.
— Observing the chain of command in the conduct of work is also of great importance. In the prevailing model used in large projects, the workforce begins with the helper10, and proceeds in the next ranks to worker11, technician12, and finally foreman13. The foreman is in fact the link between the workforce and the project's planning and executive management; the preparation of technical documents and coordination with the project's technical office is largely his task, and he must accordingly possess capabilities suited to it. A point of interest in this hierarchical system is that more or less personal duties of individuals are not transferred to lower ranks. As an example, each group prepares, packs, and carries its own water, food, and tools. In other words, if you see, on a site, a worker carrying drinking-water for the master craftsman, or an engineer arranging the master craftsman's working schedule, do not doubt that the team is Iranian.
Technical knowledge and expertise
A few points make this technical knowledge effective and presentable in the international market:
— Observing the client's taste in design is very important and usually has little correspondence with what we have learned in the universities. Studying what has been built in the region can guide designers. Building regulations and the observance of various design codes are likewise very important. Safety and fire-safety codes are matters we usually do not address, and these can readily lead to the rejection of a design or project.
— Generally, the time-schedules of our project management are such that they are upset by the slightest breeze, and naturally, in a large project where executive actions form a chain, a change in one part can affect the whole. The pace of execution is, generally, unacceptable for those trained inside the country.
— Owing to the absence of certain disciplines in Iran, naturally graduates and specialists in those areas are also scarce. Perhaps the most important is the Quantity Surveyor14, who is in fact the one in charge of contracts and accounts. This is an interdisciplinary speciality combining law and engineering. The accounting and completion of project financial documents and the verification of payments are carried out by specialists in this field. Hence the contracting body must also be armed with this expertise to be able to defend its rights.
— The speed of response to the project's and the client's requests is, compared with what now prevails in Iran, astonishing — especially up to the time of sample preparation or work commencement, instructions are followed up at the moment they are issued, on a 24-hour basis.
— The observance of site rules and safety, from wearing a helmet and safety shoes to the affixing of an identity card and passing through a checkpoint, is treated very seriously.
Tender documents usually announce the contractor's organisational posts and the technical capability of the holder of each post, along with descriptions of the responsibilities and duties of each post. A point of interest is that for none of the named responsibilities is a specific academic qualification demanded; the bare ability to do the work suffices. Unfortunately, Iranian companies — private or state-owned — often, instead of seeking and dispatching a capable person to follow up the project, send their relatives and acquaintances, which inevitably causes many problems in the executive stages of the work. In any case, the client awaits the receipt of the service stipulated in the contract, and any difficulty creates a knock-on effect on the project.
It is worth noting an important point: many of the managers of large projects I have met have no university education, and have been raised, on the English system of advancement at the workplace, from the two trades of carpentry and bricklaying to general management.
Familiarity with the technology current in the region, and with the materials in use there, is also worth noting. I recall that, after the structural calculations of a major project were completed, an Iranian consultant realised that the steel sections he had proposed were entirely unknown to the client — for the system in use in the region is wholly different and based on another standard. In some cases, this familiarity can greatly affect the final cost of the work, especially since most current projects are tendered on a combined detailed-design-and-build basis, and the drawings received from the consultant give only the broad lines and main ideas.
Manpower
Perhaps the most important factor in dissuading construction companies from engaging an Iranian workforce — outside Iran's own labour code — is the complex regulations of the Iranian model and their major difference from the workforce-exporting nations. I shall list a few points here, while reminding the reader that my point is purely the necessity of finding ways to lower project costs, not the violation of workers' rights.
— The customary working hours are 9 full hours over a six-day week, generally divided in two with a roughly 2-hour break for lunch and rest. Work therefore ends after sunset, which Iranians generally find unwelcome and tiring.
— The overtime coefficient is 1.2 — less than the rate set in Iran's laws.
— Annual leave in the first three years of employment is equivalent to 15 days, given once every two years and proportional to the workload. Of course, where the employer is satisfied with the requester, leave of 15 to 30 days without pay is generally also granted.
— Workers' insurance largely covers compensation when an accident occurs, or at most outpatient treatment. The annual premium for these services is roughly US$25, and one can readily judge the quality of services obtainable for that sum. The most common way of dealing with sick workers is dismissal.
— Annual holidays generally do not exceed five days, while Iranians are accustomed to four or five times that number.
— On completion of an individual's task, the related contract is cancelled, and if no new job position exists, the named individual is required to return to his country, with no extra payment.
— Save in very exceptional cases, emergency leave or permission to leave work is not granted.
Residency and working-habit issues
It is obvious that any matter affecting the productivity of the workforce and its associated costs will reflect in the final estimate. Hence very minor and non-technical matters can, in tight competitive arenas, decide whether the project is performed or not. I list a few:
— Disorderliness: perhaps the most evident bad working habit among the Iranian workforce is disorderliness. Generally, for each section of work, the principal workforce takes part in a brief meeting and discusses how to do the job. The relevant technician, summing up the points, sets out the pattern of execution on paper as in a school essay; on this basis he sets the time of work, coordination with other working groups, the equipment required, and the responsibility of each individual15. Such a meeting usually takes place at the end of the working hours, and even in the open; depending on the site's management system, a copy is also given to the client for archiving. The Iranian workforce is generally not prepared for such a programme, and only when work begins does it think how to do the job — then remembers it needs this or that tool, that the other thing should have been bought, or, worse, brought from Iran.
— Observance of site rules: usually, at every site entrance, the principal mandatory rules are shown in writing and pictorially. These rules are also explained to individuals at the start of work by the safety officer16; observance covers work clothing and its type, action in case of fire, the way of reporting unforeseen events, and especially not smoking — the last being treated, in many companies, as an internal regulation observed from the time of recruitment. Unfortunately, Iranian personnel's excess in smoking and drinking creates problems in the course of work. In the said matters there is sometimes leniency, but in dealing with narcotics there is none, and the sensitivity to narcotics is, in principle, beyond Iranians' imagination.
— Knowledge of English: for workers, knowing the language is not very important; nevertheless, it is necessary that they can write their name and address, fill in passport and customs forms, and at least understand safety warnings in English.
— Personal hygiene: this matters greatly given the conditions of communal life in workers' camps. Perhaps it is on the basis of a working habit that Indian and Pakistani workers bathe twice a day — at the end of each shift and before entering the communal rest area — and pay due attention to the cleanliness of their dormitory. One reason for the spread of contagious illnesses among Iranians is precisely this, and the lack of attention to the cleanliness of personal effects and utensils.
— The breadth of Iranian taste: the variety of taste of the Iranian workforce in everything, from the food programme to the choice of TV channel, is troublesome and gives rise to disharmony, debate, and sometimes argument. Workers' dormitories are generally for 24 persons, while the gathering of Iranians in groups of more than four or five always gives rise to many problems.
Given the points raised, I do not think a single Iranian company is in a position to compete on the cheap-labour markets. One must therefore find ways that empower Iranian working teams. In my view, the most important step would be to refer the matter to the relevant professional bodies — such as the Society of Consulting Engineers and the Syndicate of Construction Companies — for an all-round study and the finding of suitable solutions, with full authority and free from the difficulties and dependencies of the state apparatus, so that they may propose appropriate solutions. These solutions will doubtless have different dimensions and will, in the end, require the cooperation of the related bodies.
The author, and the consulting engineers of Arg-e Bam Kerman, hope that, in the near future, we shall witness the success of our country's working force and specialists in the field of service exports.
Footnotes
1. Tender Invitation 2. BOQ / Bill Of Quantity 3. Working Package 4. Enquiry 5. LPO / Local Purchase Order 6. Certification of Invoice 7. Back to Back 8. PDC / Post-Dated Cheque 9. CVI / Confirmation of Verbal Instruction 10. Helper 11. Worker 12. Technician 13. Foreman 14. Quantity Surveyor 15. Method Statement 16. Safety Officer