International construction financing strategies: Influential factors and decision-making

Many international engineering and construction firms, as well as local construction companies, are unfamiliar with, or reluctant to deal with innovative financing techniques such as countertrade and project finance. These two techniques have become popular and desirable, compared with traditional financing, with foreign projects' owners worldwide. In this research, a Data Interpretation and Analysis Model, DIAM (statistical model), and a Multicriteria Decision Making Model, MDM (based on the Analytic Hierarchy Process, AHP), were developed. Based on DIAM, data were collected from the top international contractors worldwide to assess the extent and spatial distribution of these new financing techniques, and the obstacles that may contribute to contractors' decisions not to attempt to use these techniques. However, the main goal of this research is to develop the MDM and apply it to explore the points of view of two groups: professionals financing experts and experienced chief financing officers at the international construction companies, with respect to financing international construction. The research extracted their knowledge and judgments in this regard. The group-decision making model (GDM), was developed to solve the issue of long questionnaires and to provide consistent judgments. The questionnaires demonstrate the state of art in obtaining best judgments of group decision-making at different locations. This information is then used to analyze and evaluate the two financing techniques, stated above, compared with the traditional financing method via MDM. Using MDM, two ranking and analysis sets were developed utilizing the Expert Choice software package. The decision making tool ranks and analyzes these new financing techniques with respect to traditional financing. The ranking and analysis were based on several criteria and sub-criteria, presented in MDM's hierarchy structure, which compose the characteristics of the project. The study revealed the importance of the political and economic stability in the project location and emphasized the role of the project's owner in the contractor's decision to engage in the new financing techniques. This role is in terms of the project's owner creditworthiness and his assistance to the contractor. Marketing and operating experience is also an influential factor in the financing strategy. The contractor's decision also was influenced by issues such as the availability of joint venture, tightness of credit, and the facility site risk. Moreover, the study disclosed that despite the fact that the countries of Eastern Europe and the developing world have great demand for the new financing techniques projects, these countries' contractors have almost no participation in the construction of these kind of projects.