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View from the Peak

Scott Wilson (Hong Kong) chairman Ron Rakusen gives an on the spot account of the Hong Kong construction market.

Ayear or so on from the British handover to China Hong Kong is changing in many subtle ways, but it remains an appealing place in which to live and work. On the work front, British expatriates now need residence/work permits on first arrival along with everyone else; but obtaining permits whatever a person's nationality is no more difficult now than it ever was. Many of our long term expatriate staff can now enjoy the advantages of 'unconditional stay' permits compared to the 'right to land' permits they used to get after seven years in the Territory.

There has been a reduction in the frenetic activity which for many years made Hong Kong an engineer's dream. The change in sovereignty and recent completion of the Airport Core Programme projects have both contributed to this.

Part of the problem has been the reluctance of the authorities to continue forward planning of projects 'across the handover'. This has now led to a catch-up rush, boosted by chief executive Tung Chee-wah's declared aim of hiking the housing output target from 35,000 to 85,000 housing units per annum to cater for the projected increase in population.

The shortage of suitable infrastructure for this quickly became obvious and the rush is now on to form the land plus provide transport links and other necessary services. This has meant the commissioning of a flood of feasibility and planning studies which will eventually lead to detailed design and construction, but only from 1999 onwards.

Until these major schemes reach that stage, consultants are bidding fiercely for each study - to the detriment of their cashflow and possibly their own viability. For contractors, the position has been a serious one for some time, with the ACP work reaching its conclusion.

Many staff have had to be laid off as sites closed, and this has also affected consultants' resident site staff, many of whom have had to return home or seek pastures new.

Scott Wilson's long term presence in Hong Kong clearly helps it win work, but the government's level playing field approach means that everyone, whether from Britain or any other country, has a good chance of winning consultancy contracts.

However, concentration on fee competition over the last few years has led to some internal problems starting to appear within the consultancy profession.

Although firm commitment to the US$/HK$ 'peg' means that the risks of working in Hong Kong are significantly reduced, inflation and the housing component of pay to both local and expatriate staff are so significant that firms are constantly looking for ways to outsource work to cheaper countries.

As a result, Hong Kong engineers are seldom price competitive for any project in the region unless they have skills that are unobtainable elsewhere.

China itself remains the ultimate goal for most firms, particularly those committed to a presence in Hong Kong. Whatever the future growth in Hong Kong, it must level off simply because of the limited land available. Scott Wilson has now opened offices in Beijing, Nanjing and Guangzhou.

However, each province in China is bigger than most European countries and the potential market there for engineered infrastructure is vast. Obviously the Chinese have their own capable engineers and will only accept outsiders that can add value to their work. For us in Hong Kong, here lies the opportunity for the long term.

Ron Rakusen was born in Hong Kong and has practised there as an engineer since 1981. He has been chairman of Scott Wilson (Hong Kong) since 1996.

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