Are Regulatory Barriers Holding Back Architectural Exports?

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Thursday, February 4th, 2016
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With the London based Construction Intelligence Centre expecting the worldwide market in building and construction to reach $US10.3 trillion by 2020 (up from an estimated $8.5 trillion today), the degree of opportunity for Australian architecture and design practices in overseas markets cannot be understated.

This is especially the case in emerging markets in places like Asia and the Middle East, where billions of dollars are being spent building airports, rail lines, sports stadiums and more.

Yet for those who choose to venture overseas, regulatory barriers can be substantial.

In almost every jurisdiction, those who do not undertake the often arduous process of becoming registered architects within the relevant jurisdiction typically require local partners to sign off on drawings. Mutual recognition agreements help, but for now Australia has such agreements in place with a handful of countries only (Japan, Singapore, Canada and New Zealand). Barriers to registration in overseas jurisdictions such as residency requirements can be onerous, though such requirements are not necessarily unreasonable.

Setting up operations can be challenging. Take, for example, the United Arab Emirates. In order to set up business there, you first need sponsorship from another party. Depending on the scale of the operation, architecture firms are not able to set up solely as stand-alone architecture practices but instead must hire one or more engineers and set up instead as multi-disciplinary outfits. Once registered, there are a number of different ‘grades’ to pass though, and license structures vary across different emirates within the federation.

Insurance can be problematic. Nations such as France employ a complex system of professional indemnity insurance which is decennial and based around individual projects rather than the practice as a whole. Countries such as the UAE and Oman require insurance to be sourced locally.

Various forms of withholding tax also pose challenges. In Qatar, for example, you have to have 10 per cent of your fee locked away in a bond until a year after the project is deemed to be complete. In places like Taiwan and China, retrieving withholding taxes applied to offshore work performed in Australia can be complex. In China, merely getting payment for services per se can be problematic as some government entities are not able to convert currency into Australian or American dollars.

Though intellectual property is less of an issue, Cox Architecture told a Productivity Commission inquiry into barriers to service exports last year that it had seen CDs of its drawings available for purchase on Shanghai streets, while there had been instances of its designs being used by clients in China and Malaysia without permission or payment. The Cox name, too, had been used illegally in China.

While acknowledging that some forms of regulation are necessary and justified, Cox director John Richardson says barriers in some areas do make operating on an international scale more challenging.

In particular, barriers regarding registration and setting up businesses in overseas jurisdictions had led to Cox performing the majority of its international work from Australia and working with local partners rather than setting up production studios offshore. This arrangement worked well, but Richardson says the firm might well be doing more work internationally were this not to be the case.

“I think the point is that if you want to set up a business overseas, it’s quite a complex issue,” Richardson said, when asked about dealing with regulatory barriers. “Much of it is exactly the same if you want to set a business here in Australia coming from overseas. It’s a two-way thing – it isn’t particularly the fact that one group is better or worse than another.”

When looking at export barriers in architecture, questions must be asked about any steps which can be taken at the Australian government end to address regulatory barriers to export opportunities within the services sector as a whole. In its final report resulting from its inquiry on this topic released last December, the Productivity Commission concluded that such barriers at an international level included restrictions on setting up commercial premises abroad, overly restrictive licensing requirements and limitations on the ability to move data effectively across borders. Amongst a raft of other measures, it recommended the government do more to facilitate the development of mutual recognition arrangements.

Australian Institute of Architects president elect and Sydney University professor of practice – architectural studies Ken Maher said barriers surrounding recognition were arguably the most critical issue.

He says work is being done in this area through APEC, while free trade agreements – an excellent area of opportunity to deal also with barriers to setting up business in foreign countries – need to be followed through with mutual recognition arrangements.

“That’s probably the big one,” Maher said. “There are other issues with regard to taxation, security of payments, withholding taxes and insurance, etc. which could follow from that.

“But really, (the priority is about) getting the recognition more than the commercial barriers dealt with in a more effective way than is currently the case.”

Outside of mutual recognition, Maher says there are a number of practical steps the government can put in place. In collaboration with industry, there could be more assistance with regard to raising awareness about the skills of Australian architects and architectural groups on an international scale through mechanisms such as focus groups and trade shows. In terms of Security of Payments, a register of clients who are considered to be good payers may help, he says, while the idea of the government assisting with a form of trust fund could also be considered.

Aside from that, more could be done locally to help raise awareness amongst both current practices and university students in Australia about the commercial aspects of operating in overseas jurisdictions, Maher says.

He says the opportunities are significant, and with only around nine per cent of local architecture firms having an international presence, potential for growth is strong.

Richardson says along with the mutual recognition issue, it would also be useful if we had more common standards internationally with regard to areas such as professional indemnity insurance and contract law.

He says addressing barriers in some areas is not easy, but any help the government could give would be welcome.

“It is quite complex setting up businesses in other countries,” he said. “If anything can be done to simplify the way that you do business in other countries – and indeed, to simplify the way those coming to Australia from overseas can set up business – that would be better for everybody.”

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