The economic risk analysis in international construction markets

International construction markets have changed dramatically within the last decade. The markets used to be centred in developing countries, but there has now been a shift from the developing regions to the developed regions of the EC, North America and Asia Pacific. The Middle East market is stagnant, and there is a little action in the Latin American market and the African market. The markets of the developed EC, North America and the newly industrialised economies in Asia Pacific are different from the technology-hungry Middle East markets. As economic activities between the developed countries are more integrated, the market competition has been intensified. The risk environment for international construction has changed. The economic and financial risks in developed countries are more apparent than the political and legal instabilities, which are mainly concerned in developing countries. The realisation of the changing international construction markets forces international construction companies, who want to win in the competition, to reconsider their overseas strategies and to assess the new risk features in international construction markets. Some existing risk assessment systems for overseas contracting, such as those operated by the UK Export Credits Guarantee Department, rank countries by using mainly GNP per capita. It is reasonable to suppose that financial and political risks are greater in those developing countries with a low GNP per capita. However, such a GNP per capita ranking is no longer applicable for the construction markets in developed countries, because these countries have all reached the level at which it is not meaningful to differentiate them by using the single variable. New systems for assessing the risks in international construction markets are required. This research investigates the new features and the associated economic risks in international construction markets. Risk factors in international construction are assessed globally, i.e. from the level of general economy situation, construction market, international construction companies' performance and construction projects' characteristics. 20 countries and nearly 80 large construction companies in these markets have been surveyed. This research presents a new method for risk assessment of international construction markets. This risk assessment method can take account of a number of factors, from the macro-economic level to the micro construction project level. It is also designed to be able to combine both descriptive and quantitative risk assessments. A computer assisted model is developed in order to be helpful in practice for international contractors to manage the risks in their overseas construction businesses.