L2 International Zambian Construction.ppt

A look at the construction industry, locally and internationally, with special reference to Zambia

1. By D. Chiponde

2. INTRODUCTION – International
Construction
With globalization, many firms are exploring
International markets and consequently creating
a necessity for the construction industry to
provide building facilities and other
infrastructure related products.
Such as roads, industrial, offices blocks, airports,
residential, transport and energy facilities.
However, as much as the international industry
seems lucrative, challenges exist.

3. International Construction -
Challenges
Culture
Complex projects, large in size and technology
Huge capital needed
Political influence
Many stakeholders involved
Usually take long time and fast paced
Human resource management
Inflation and exchange rates
Competition from local and international firms

4. Trends and issues in
International Construction
Speed of innovation within the sector:
Historically, innovation in the construction
sector has not been rapid. Greater
internationalism, greater competition, and
greater integration in the supply chain could
improve this.
Demographics: E.g. the UK’s ageing
demographic profile suggests that special
measures will be needed to maintain sufficient
numbers of new recruits into the industry.

5. Trends and issues in
International Construction
Health and Safety: It is probable that the drive to
improve health and safety in construction will
continue to a degree.
Information and Communication Technology
(ICT): The current trends towards greater use of
integrated information systems seem likely to
continue, that are innovative and dynamic.
Modern Methods of Construction (MMC): MMC is
a generic term for a variety of construction methods
that are generally new, and often have a significant
off-site component.

6. New (Smart) materials: There is a wide range of
actual and potential new construction materials, but
most of these remain within the scope of existing
methods of application or installation.
CO2 emission reduction and energy conservation:
Most views of the future suggest continued pressure
to reduce the energy consumption of buildings.
Other sustainability issues: Increased government
and cost pressures to reduce water usage and waste
would generate the need for some new activities and
skills.

7. Characteristics of the
International Market
Rapid innovation and domination of major
projects by international contractors
Increasing use of off-site construction with more
ICT-intensive buildings
Strong new housing demand, particularly private
sector, but affordability issues
More commercial & infrastructure construction
Heavy investment in renewable energy/resource
efficiency, recycling and in new ecoefficient/low
carbon and high-tech business opportunities.

8. Characteristics of the
International Market
Stronger regulation and planning controls, with
much greater emphasis on whole-life thinking
and design
Relatively strong public sector building and
infrastructure
Major public and private investment in both new
housing and refurbishment of existing stock.

9. Heathrow T2 & London
Olympic Pack

10. Global Construction Outlook
The US is the largest market, accounting for one-sixth
of global construction output.
China is rapidly catching up with the US. We estimate
China is 13.7% of the global total this year, and it
continues to be one of the fastest-growing markets.
Although Japan is the third largest global
construction market it is less than half the size of the
US construction market.
The fourth to seventh ranked construction markets
include Germany, Spain, France and Italy. They are
all estimated to be $260bn-305bn in size this year.

11. Global Construction Outlook
Continued
Together they total more than $1,100bn, 15% of
global construction output.
It is estimated that India is the ninth-largest
construction market globally, fractionally larger
than the UK.
Although it is growing rapidly like China, the
Indian construction market is still less than a
quarter of the size of the Chinese market.

12. CONSTRUCTION GLOBAL MARKETS
Country Market Share in
2009 (USD bn)
World Market
Share 2009
Predicted Top
10 in 2020
1 USA 1,132 17.4% China
2 China 1,034 13.7% USA
3 Japan 592 7.9% India
4 Germany 303 4% Japan
5 Spain 292 3.9% South Korea
6 France 270 3.6% Germany
7 Italy 262 3.5% Spain
8 South Korea 248 3.3% Russia
9 India 247 3.3% UK
10 UK 243 3.2% Canada
Source: Global Construction 2020 Report, Cited in Wath, 2011

13. Global Construction Outlook
Continued
Marked slowdown in global rate of growth to
0.8% pa in 2005-09.
The slowdown has been concentrated in
developed countries, where there has been an
average 2.9% pa decline.
Growth has only slowed slightly in emerging
markets, to an average of 6.7% pa.
We expect a return to growth in global
construction of between 4% and 5% pa growth
over the next decade to 2020.

14. WHY THE FOCUS ON CHINA?
It is projected that by 2020, China will over take the USA
as leading construction economy by accounting for
almost one fifth (20%) of the worlds construction out put
China’s growth has been consistent and the economy
grew by over 8%
A huge local market in China itself with a population of
1.3 billion.
Chinese laws concerning foreign investments have been
significantly eased.
Manufacturing Prowess - China is the largest global
producer of toys, textiles, cameras, computers and many
machines, thus creating demand for infrastructure
needed for the manufacture and supply of these items

15. Sector Performance
Sector Percentage Growth Rate
Non Residential 52% 17.0%
Infrastructure 27% 14.1%
Residential
Construction
21% 16.3%
(Source: ISH Global Insight Construction Report 2009).

16. Chinese Construction Drivers

17. DRIVERS OF THE CONSTRUCTION
SECTOR – 12
th
Five Year Plan
Government is the key driver of the Chinese industry
through its implementation of the Fiver Year Plan
Currently the 12
th
Five year plan focuses on
sustainability and economic equality through
1)Focus on scientific development
2)Government support for seven strategic
emerging industries
3)Construction of transportation and energy facilities
4)Construction of affordable housing- Urbanization
of 350 million people by 2025.
Spending in such will consequently breed
opportunities for construction firms such as;

18. 12
th
Five Year Plan Niche
Opportunities

19. Challenges in Operating in China
According to BDO 2010, amongst the G20, China has
been ranked to be
18
th
Dealing with construction permits
14
th
with ease of doing business
12
th
in business transparency
With such rankings, as much as the Chinese market
is lucrative, it is highly characterised with challenges
in terms of executing construction works and
organisation operations.
Source: BDO Report China Inbound Construction Barriers and Opportunities 2010. Available
on http://bdo.scripthandler.com/g20/pdfs/China.pdf

20. Challenges Continued
Qualification and licences – Huge capital needed
for foreign firms to set up a business and the
processes is tedious.
Governments interference
Culture – Guanxi and language barriers
Competition from other big foreign and local
firms
Corruption and bribery

21. China’s Weakness
Poor management skills
Registration processes is long and tedious.
Luck of quality assurance and control
Poor health and safety – The construction
industry is considered as the second most
dangerous industry to coal mining in the country
with a fatal accident rate of 6.92 per 10 billion
production value in 2003
(Zou et al. 2007).

22. Shanghai Tower & Abu Dhabi
mixed use Developement

23. How do we explore the
international market?
Contributing to improving the home country’s;
Employment and Welfare of the indigenous workers
Minimizing harm or zero harm to the environment in the
area of operations.
Secure the financial viability of the company.
Maximise the company’s market share through quality
and client satisfaction.
Continued improvement of service delivery through
research and development and innovation in technology
and materials.
Establish long working relationships and partnerships
through transparency and mutual benefits.

24. COMPANY CASE STUDY - ARUP

25. Arup Continued
Arup – London listed engineering firm
Over 600 projects in China including 2008 Beijing Olympic
Stadium and China Central Television Headquarters.
Success Factor - Breadth of expertise enables it to perform
varying roles; Project Manager, Design such as structural,
architectural and building services
Long standing relationships with the Chinese enables it to usher
in foreign firms – UK’s Forster and Partners
Encourages UK firms to engage Chinese students studying in UK
universities
Partnering with Chinese large firms since they are expanding to
other parts of the world – Asia, Africa
Challenges in licensing foreign professionals

26. Mode Gakuen Cocoon Tower
Location
Tokyo
Completed
October 2008
Height
204 Meters/50 Storey
ARCITECTS
TSANGE ASSOCIATES
STRUCTURAL ENGINEERS
ARUP
AWARD
EMPORIS SKYCRAPER AWARD 2008 - Best new
skyscraper for design and functionality
2
nd
Tallest Learning institution building

27. GLOBAL OUTLOOK IN THE NEXT
DECADE
According to the Global Construction Perspective Report
(2009) between now and 2020 we expect higher rates of
growth in construction output to be concentrated in the
emerging markets.
It is estimated that the average rate of growth in
construction volumes will exceed 9% pa in Nigeria and
India, and will average 8% pa in China.
We expect the construction market in China will overtake
the US as the largest construction market globally in 2018.
By 2020 construction output in China will account for
19.1% of global construction output, up from 13.7% in
2009.

28. We also expect India to rapidly increase its
importance from being the ninth largest
construction market this year to the third largest
in 2020.
Conversely, we expect the relative importance of
European construction markets will decline as
will the percentage of construction output
accounted for by the largest 15 construction
markets.

29. Largest Construction Markets in
2020E

30. Forecast highest growth
markets 2009E-2020E

31. CONCLUSION
Key to our success in international construction rests in;
Understanding respective national culture, business
and political environment especially in matters of
organisation structuring and human resource
management.
Take an agile approach and review periodically to
cater for any anticipated and unanticipated changes
due to the dynamic nature of the social, economic and
political environments
Be able to manage interpersonal relationships –
Negotiation and bargaining.

32. The End
Thank You