Issues: If They Can Build It, They Will Come
Foreign companies continue to feel shut out of opportunities in the construction business.
The Taiwan government has announced that its Challenge 2008 Six-year Development Plan will transform the nation into a "green silicon island." The scheme includes a promise to spend US$75 billion in four major investment areas -- cultivation of Taiwan's knowledge-based workforce, R&D and innovation, international logistics, and a high-quality living environment.
Achieving these laudable goals would require major improvements to the existing public infrastructure, which is widely considered to be sorely inadequate. But international construction companies have learned from long experience that a wide gap often exists between what is promised to them and what is delivered. Indeed, Challenge 2008 is only the latest in a series of similar plans that the government has announced over the past decade, and the latest version has so far created little excitement among overseas construction firms.
The first of these recent development schemes, undertaken in the 1990s, was similarly ambitious, encompassing massive infrastructure projects and attracting the attention of construction firms worldwide. They were impressed with the perceived business potential of projects such as the Taipei Mass Rapid Transit System (which was then only on the drawing board), major highway projects, and other planned infrastructure programs.
But most foreign companies felt that the Taiwan government failed to follow through on its pledges to welcome international participation. Instead, the companies encountered a series of delays and a lack of transparency, not to mention language-related ambiguity, when dealing with the public sector.
Many of these firms responded by voting with their feet, leaving the country entirely, while those still here are finding little business potential in new public sector projects. To be fair, the difficulty is due in part to the nature of public construction, in which the professional services and added value that foreign experts can provide may appear less attractive than the lower costs local firms can promise.
The bottom line, however, is that many public projects are simply not granted to foreigners, and how they are awarded is not always very clear. In fact, many of these issues are similar to those faced by foreign companies -- including Taiwanese firms -- that have entered the China construction market, notes Ron McGhie, Taiwan country manager at Bovis Lend Lease. The difference -- one that has enabled China to hold the attention of multinational construction firms -- is the sheer size of the mainland market.
"Frankly, there are more opportunities in China," notes McGhie. "If there were more real opportunities here, then more foreign companies would be here." While it is perhaps unfair to compare Taiwan's market with China's vast potential, there are plenty of areas in which Taiwan could improve its construction environment. Says McGhie: "Obstacles such as requiring non-technical managers to hold a Taiwan Professional Engineering license, contract terms and conditions that are inconsistent with accepted international practice, and the focus on lowest bid without considering final cost or best value severely limit the real public sector opportunities as perceived by foreign contractors and consultants."
If the Taiwan government is really serious this time about building a world-class infrastructure, perhaps it must first open itself to the world-class expertise that foreign construction firms can bring.
The Taiwan government has announced that its Challenge 2008 Six-year Development Plan will transform the nation into a "green silicon island." The scheme includes a promise to spend US$75 billion in four major investment areas -- cultivation of Taiwan's knowledge-based workforce, R&D and innovation, international logistics, and a high-quality living environment.
Achieving these laudable goals would require major improvements to the existing public infrastructure, which is widely considered to be sorely inadequate. But international construction companies have learned from long experience that a wide gap often exists between what is promised to them and what is delivered. Indeed, Challenge 2008 is only the latest in a series of similar plans that the government has announced over the past decade, and the latest version has so far created little excitement among overseas construction firms.
The first of these recent development schemes, undertaken in the 1990s, was similarly ambitious, encompassing massive infrastructure projects and attracting the attention of construction firms worldwide. They were impressed with the perceived business potential of projects such as the Taipei Mass Rapid Transit System (which was then only on the drawing board), major highway projects, and other planned infrastructure programs.
But most foreign companies felt that the Taiwan government failed to follow through on its pledges to welcome international participation. Instead, the companies encountered a series of delays and a lack of transparency, not to mention language-related ambiguity, when dealing with the public sector.
Many of these firms responded by voting with their feet, leaving the country entirely, while those still here are finding little business potential in new public sector projects. To be fair, the difficulty is due in part to the nature of public construction, in which the professional services and added value that foreign experts can provide may appear less attractive than the lower costs local firms can promise.
The bottom line, however, is that many public projects are simply not granted to foreigners, and how they are awarded is not always very clear. In fact, many of these issues are similar to those faced by foreign companies -- including Taiwanese firms -- that have entered the China construction market, notes Ron McGhie, Taiwan country manager at Bovis Lend Lease. The difference -- one that has enabled China to hold the attention of multinational construction firms -- is the sheer size of the mainland market.
"Frankly, there are more opportunities in China," notes McGhie. "If there were more real opportunities here, then more foreign companies would be here." While it is perhaps unfair to compare Taiwan's market with China's vast potential, there are plenty of areas in which Taiwan could improve its construction environment. Says McGhie: "Obstacles such as requiring non-technical managers to hold a Taiwan Professional Engineering license, contract terms and conditions that are inconsistent with accepted international practice, and the focus on lowest bid without considering final cost or best value severely limit the real public sector opportunities as perceived by foreign contractors and consultants."
If the Taiwan government is really serious this time about building a world-class infrastructure, perhaps it must first open itself to the world-class expertise that foreign construction firms can bring.
