黑洞社区

Never has the phrase 鈥渆astern promise鈥� been more pertinent. The opportunity for UK construction companies to win work in Asia in 2012 and beyond could be a game changer. But it鈥檚 going to mean some savvy manoeuvring on your part.

While the European markets falter, economies across the Far East remain strong. China and India in particular continue to grow rapidly. China is expected to take a 21% share of GDP by 2020, up from 15% this year. The Indian economy has been largely unaffected by the global economic slowdown thanks to domestic consumption and services growth. Its GDP is expected to increase by 9% this year alone. For UK construction firms looking for opportunities in markets that are easier to penetrate, fast urbanisation and strong economies in Malaysia and Indonesia are becoming increasingly attractive.

Why now?

Asia has been on most firms鈥� radar since the initial 2008 downturn. But now, more than ever, the East is beckoning. Since this summer, firms including BDP, Make and Broadway Malayan have reported project wins across Asia; design consultancy Aedas announced it would boost its presence in China by 50% this year and consultant Cyril Sweett revealed it would be moving another 70 staff out to its China office.

One of the main drivers behind the recent flurry of consultant consolidations has been the desire to secure or improve access to these Asian markets. Speaking to 黑洞社区 in October, Harrie Noy who heads global engineer Arcadis, said this was one of the attractions of the EC Harris purchase: 鈥淲e see Asia and the Middle East, where EC Harris has strength, as strong markets in the future.鈥�

Alex Leong, Aecom鈥檚 vice-president of business development in Asia, explains the obsession with the region: 鈥淭he strong economic growth and a tremendous movement towards urbanisation across the majority of Asia makes this a key market now,鈥� he says. 鈥淭here is a need across the whole continent for infrastructure, residential and commercial buildings and not just in the biggest cities like Shanghai, Beijing and Mumbai. Levels of development are huge in the second tier cities too - they are growing from maybe one million inhabitants to five million and more.鈥�

Ken Shuttleworth, founder of architectural firm Make, adds: 鈥淎nyone who is not looking at Asia, and China in particular, should be. Most Asian countries are great places to live. It鈥檚 an excellent opportunity and good fun, not least because when you are there you actually see things getting built. Things happen very fast. There is not a huge gap between designing and building as there is in London and the UK at the moment.鈥�

The opportunities

According to a CIBC World Markets study, Asia is expected to spend $400bn on infrastructure annually from 2012. This is more than double the estimated investment in Europe and North America. Everything from power supply, airports, bridges, electricity and water supplies are required across the continent, with India providing the most opportunities thanks to its fast urbanising population and a marked lack of existing infrastructure to support this movement.

There are plans in India to open 50,000km of new roads by 2015 and the country has a real estate sector worth over 拢30bn. According to UK Trade and Investment (UKTI), India is likely to need nearly 25 million new homes by 2015. This alone will require a 拢10bn investment. India needs new roads, airports, railways and social infrastructure buildings including schools and hospitals. UKTI predicts that India will need around 拢650bn investment in total to meet its infrastructure requirements. UK expertise in sustainable building is welcomed in India.

In China, an estimated $16bn will be invested in five new railway projects in Hong Kong alone and, according to the National Development and Reform Commission, some 18,462 projects started in China in the first two months of this year. Meanwhile, there were 92,870 projects under construction in China in the first two months of 2011, a year on year increase of 14,171.

The right approach

Knowing the market inside out is crucial for anyone wanting to secure work in an already competitive field. But it can be done. Andrew Ogorzalek, director of PCKO Architects, which set up an office in Shanghai last month and is working on a multimillion-pound, 90-hectare housing development near Chongqing in China, says that an unimposing yet firm approach to design that complements the natural environment is the method the practice has used to win work: 鈥淭he Chinese market wants foreign architects to come with their own ideas and match them up to the Chinese landscape. They can worry that a UK take on the local environment could look like a pastiche鈥� he says. 鈥淚t鈥檚 about making sure you don鈥檛 enforce your ideas on a market which is already well established, but being firm and clear about what will work best.鈥�

But Ogorzalek says things are getting tougher: 鈥淚t has got more competitive out there. Our main problem is finding good local staff as they are all in such high demand. And without a good team of local staff, it鈥檚 very difficult to win work.鈥�

But work there certainly is. Over the 10 years from 2010 to 2020, China鈥檚 motorways will have been extended from 74,000km to 100,000km. The number of commercial airports in the country is expected to increase from 175 today to 244 in eight years鈥� time and its high-speed rail track of 8,358km - already more than the rest of the world combined - will increase to 13,000km by the end of 2012.

On top of an increasing number of commercial, residential and infrastructure projects emerging in China as a result of rapid urbanisation, there are mega schemes on the horizon such as the Sustainable Cities mission. This programme is scheduled to start in 2011 and will last for a decade. According to UKTI, opportunities for UK firms will include sustainable construction processes, masterplanning and urban regeneration, energy and water saving technologies, waste water treatment, and air quality and air pollution reduction systems.

Meanwhile in Japan, the devastating earthquake and tsunami that hit in March this year has meant a huge cleaning-up operation. There are opportunities for UK firms to get involved with rebuilding homes, commercial buildings and infrastructure systems, as well as offering technologies and innovations to help build a network of new 鈥渆co-friendly鈥� cities.

Malaysia and Indonesia are less developed markets but worth considering: 鈥淚ndonesia and Malaysia are politically stable at the moment,鈥� says Leong. 鈥淓conomically, they have been behind the curve and so are now catching up. Indonesia in particular has natural resources and it is really beginning to hit its oil, gas and mining resources.鈥�

The challenges

The opportunities are certainly there, but it鈥檚 not as simple as catching the next East-bound flight and picking up the jobs on arrival. China and India are difficult to infiltrate for a British newcomer. And across Asia, much of the government-funded infrastructure work is given to local firms. The most effective answer to this problem, especially for firms without longstanding relationships in the region already, will be to partner up with local firms.

鈥淓ntering into joint venture agreements with local firms is one option,鈥� says Leong. 鈥淭hey will then need to bring something new, something different - innovations and technologies, cutting-edge experience that Asian companies might not have. Green and sustainable building is a good example.

鈥淭he main piece of advice when it comes to breaking into this market is that UK firms should know not to take one single approach. It鈥檚 not a case of one-size-fits-all. Each country has a different culture, different way of doing business and a different set of challenges. India is India; China is China and so on. You can鈥檛 lump them together and expect things to work out the same.鈥�

There are also concerns about doing business in these areas and getting paid. The advice is to know your clients inside out and to make sure you have the financial wherewithal to wait longer for payment than you would have to in the UK.

鈥淚t鈥檚 10 times more challenging and complex to work in China than over here,鈥� says PCKO鈥檚 Ogorzalek. 鈥淔or a long time we didn鈥檛 get paid over there. But it wasn鈥檛 because we had bad clients, it was the bureaucracy. We were told to always ask for the money up front but you can鈥檛 really do that if you want to work in China on a long term basis. It鈥檚 seen as an insult, a lack of faith. And relationships are very important in China. Take your lead from how hard the client works alongside you. If they have done their research, know you as a company and are prepared to support you throughout the process then you just need to put your faith in them.鈥�