The Hong Kong construction industry can be confident of bulging order books for at least the a decade as the current boom continues according to leading construction firmGammon Construction.
“In the coming ten years, we think it should be a golden decade,” Chief Executive Thomas Ho said in an exclusive interview with Construction Post.
Ho pointed to the current and previous HKSAR government rolling out public works contracts for the 10 major infrastructure projects as well as those from the private sector.
Government spending alone on public works was now running at HK$70-80 billion annually compared with about HK$22 billion a few years ago.
The major public works include the Hong Kong-Zhuhai-Macao Bridge and the various railway links such as the West Island Line and Express Rail Link being built by the MTRC (0066).
Private developers were now actively realizing the plans approved earlier by Buildings Department for private residential projects that could still enjoy concessions on gross floor area before the government further restricted such concessions in 2011.
Last December, Gammon, in a joint venture with Kaden Construction, bagged the MTRC’s Hung Hom North Approach Tunnels contract for the Shatin to Central Link worth HK$3.4 billion.
Gammon is owned by UK construction giant Balfour Beatty and conglomerate Jardine Matheson each with 50 percent stake.
Ho expected the peak period to be at the end of 2013 as the infrastructure projects especially from the MTRC go full steam.
Despite the feel-good atmosphere, the industry was facing a major challenge, that of manpower.
“At the end of this year, the demand for workers will be at its highest,” Ho said.
A survey done by the Hong Kong Construction Association last November showed there was a shortfall of about 8,000 to 10,000 trained workers, representing about 15 percent of the current workforce of 70,000 workers.
Contractors were now paying high wages to retain workers especially in certain trades.
According to Ho formwork carpenters were now paid HK$2,200 a day while concreters were on HK$1,700 a day.
“Some papers have said carpenters’ wages are better than that of an AO (government Administrative Officer). This is true,” Ho laughed.
“If we don’t want to affect quality and progress, during the next 10 to 12 months, with the help of the government and others, we need to train workers,” Ho said.
In his thirty odd years in the industry, Ho, in his mid fifties, said the demand for workers was now “unprecedented”, far exceeding that of the last boom during construction for the new airport in the 1990s.
This was partly because human resources general had to achieve higher standards of work.
For a trade such as carpenter, he would have work on site and be properly monitored to make sure standards were met.
“It would take a whole year to do it,” Ho said.
In addition to workers, professional staff such as engineers, architects, geotechnical engineers and quantity surveyors are also in high demand.
A cursory glance through the jobs pages such as Classified post over the past year or two showed contractors and consultants continually advertising for staff.
Asked about materials costs, Ho said the effect of rising costs has been milder.
“There have been increases but it is stable. Labour costs have risen dramatically,” Ho said.
Part of the reason for this was demand for materials was down in the US and Europe with only Asia continuing to see demand thereby resulting in relatively stable prices.
“Especially in China where GDP growth slowed last year,” Ho said.
According to latest statistics from China’s National Bureau of Statistics, China’s GDP grew by 7.8 percent in 2012, the slowest rate since
Statistics from the HKSAR’s Census and Statistics Department show increases in cost have leveled off somewhat.
In the first ten months of 2012, the index figure for materials used on public contracts for Portland cement rose a mere 2.6 percent compared to a jump of 12.2 percent in 2011.
For steel reinforcement, the index figure dropped 10.8 percent during the first 10 months of 2012.
In 2010 steel costs jumped 30.3 percent according to the index.
As regards recent issues that affect business, such as the minimum wage which came into effect in May 2011, given the high wages being offered by the industry to attract and retain workers, “there was absolutely no effect” according to Ho.
The proposal for minimum working hours, however, was another matter given that construction sites worked a six day week from 8am to 6pm while staff in the head offices of companies worked normal office hours on five day or five and half day weeks.
“This will need further discussion as this not only affects the construction industry but all of Hong Kong,” Ho said.
Given the increased workload and the continuing shortage of workers, it was expected that some workers would have to do shift work to maintain progress.
The HKCA, of which Ho is currently president, has not written to the government yet on working hours.
However it is done, Ho hoped that it would be an orderly implementation.
“This will allow forecasting of costs into tenders,” Ho said, agreeing that sudden implementation would be disastrous for companies who have just submitted tenders.
In the meantime, while it would continue to carefully consider undertaking overseas projects in South East Asia, Gammon is preferring to stay put in Hong Kong.
“This is our home, Hong Kong. There is no reason, during this golden decade to go someplace else,” said Ho.