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Regulations for Local Construction Industry and Market Changes Caused by International Trade Agreements

  • Journal of Regulation Studies
  • 2011, 20(1), pp.89-112
  • Publisher : 한국규제학회
  • Research Area : Social Science > Public Administration

Kim, Myeongsoo 1

1가톨릭대학교

Accredited

ABSTRACT

It is very important for regional economy whether local construction firms participate local construction projects, because construction industry has usually greater impact on employment and inducing production activities. Korea has special policies for local construction firms, that is ‘Limited bidding for local firm' and ‘Compulsory Joint receiving with local firms'. Lowering threshold value of construction services in GPA (Government Procurement Agreement) and FTAs would have direct effects on local construction activities. The current threshold values of construction services of Korea, as a member of GPA of WTO, are 5 million SDR in the government delivers and 15 million SDR in the local government or the public institution deliver. The main purpose of this study is to analyze the regional effects of lowering threshold value of construction service which have been agenda repeatedly in the international agreements such as WTO and FTA. Lowering threshold value of construction services would decrease the volume of local construction enterprises' receiving. The effects of construction firms in Seoul with those of other regions are compared and implications are derived. Empirical results shows that lower threshold value of 15 million SDR in local government or the public institution deliver to 5million SDR causes a decrease in local firm's receiving order. The receiving of construction firms in Seoul decreases 6.6%, whereas that of most of other regions 10% to 20%. Especially, in joint receiving, Seoul firms shrink 13.6%, however the other local firms 30%s up to 70%s. The most important fact is that Seoul firms will receive far more than the other local firms. The reason is that construction firms in Seoul receives 20% to 30% of other region's ordering whereas construction firms in other local area can receive very little (less than 5%). This will have negative effects on regional economy and the balanced regional development.

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