Opportunities for Infrastructure Sector

Building for the future

It's not an overstatement to say that infrastructure is the lifeblood of economic growth. At a recent seminar sponsored by HSBC Commercial Banking – Building for the Future: Opportunities for Hong Kong’s Infrastructure Sector – speakers from the bank, alongside industry leaders, exchanged insights and new ideas about how the city’s corporates could tap into the growing opportunities offered by domestic and overseas infrastructure projects.

Infrastructure facilitates the flow of people and goods, creating new business opportunities. It is also the driver behind the stellar rise of countries such as China and Singapore, commented by George Leung, Advisor, Asia-Pacific, HSBC.

“The priority for Hong Kong is to build more infrastructure, including the Guangdong-Shenzhen-Hong Kong Express Rail Link that connects with the mainland and the Third Runway that links the city with other parts of the world,” Leung said. “Hong Kong needs to leverage its proximity to China, as our close competitor Singapore has already eclipsed us in areas such as import of labour and per-capita GDP. Singapore is also expanding its airport capacity, which will surpass Hong Kong in 2020.”

For years, infrastructure spending has been one of the major drivers of Hong Kong’s economic growth. The construction of the Hong Kong-Zhuhai-Macau Bridge, the Shatin to Central Link and the Hong Kong Section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link is reaching an advanced stage in all cases. Early-stage reclamation works have now started for the long-awaited three-runway system at Hong Kong International Airport. Plans are also under way to remodel old districts as low-carbon smart neighbourhoods.

Opportunities abound for local corporates, whether they are small start-ups or multinational conglomerates. The city’s spending on domestic infrastructure is expected to exceed HKD240 billion per year over the next decade, according to Albert Chan, HSBC’s Head of Commercial Banking, Hong Kong.

Chan also observed that adding to that optimistic domestic outlook are the new opportunities arising from China’s Belt and Road Initiative. Abundant opportunities will arise in the next three years or so as projects in these countries kick off. Hong Kong is best positioned as a ‘super-connector’, or even to take a lead role in some cases, for outbound mainland Chinese firms.

Chan also expressed that Hong Kong firms can play an indispensable role in the Belt and Road Initiative, because they understand and are able to meet high international standards, something their mainland Chinese counterparts are not always able to match.

Belt and Road Initiative

During the seminar, many industry leaders shared their experiences of how to play up Hong Kong’s strengths, particularly in the context of successful projects that have taken place along the Belt and Road countries.

MTR Corporation is one of the city’s forerunners when it comes to expanding abroad. The railways it operates overseas are already four times the length of those it runs in Hong Kong.

Jacob Kam, the Corporation’s Managing Director - Operations and Mainland Business, told the audience that MTR’s strengths are in railway operations, and finance, contract and rail asset management. These qualities are highly sought after by mainland Chinese firms, as well as by overseas partners.

Design and build services firm Fruit Design & Build Limited (FDB) is one of the few Hong Kong firms to have already participated in the Belt and Road projects. Back in 2015, the company was appointed by China’s Ministry of Commerce to be the supervisor of the Nepal Armed Police Force Academy, overseeing the procurement of equipment and materials, vetting construction plans and monitoring work quality. 

“We believe overseas experiences are very valuable and must be developed gradually over time. In addition, our professional experiences were something our Chinese partners lacked. Based on this, we decided to seize this opportunity,” said FDB’s Director Wallace Lai.

Industry practitioners and leaders also shared some of their lessons and tips with an audience interest in securing a share of the growing Belt and Road markets.

The speakers shared their experience on overseas projects and opportunities arising from the Belt and Road Initiative.

Tapping into this experience and insight at the event, the following are five useful tips for corporates which are looking for ‘overseas’ business opportunities:

1: Focus on what you are best at and create value by offering expertise that your clients or partners lack.

hpa, a seasoned architectural, engineering and property development consultancy in Hong Kong, has for years been involved in numerous similar projects in Southeast Asia. “We are very clear about our strengths and advantages, and we focus on doing what our partners cannot do and creating value for them,” said the firm’s Deputy Managing Director Nicholas Ho.

2: Avoid entering new markets alone.

Ho said that as many Hong Kong firms have accumulated a wealth of experience bidding for and managing overseas projects, they are potentially the best partners for those with less experience.

“If you can’t find a partner and must go it alone, don’t invest too much upfront. You can test the new market by trying smaller projects and teaming up with different local partners. The key is to gather experience at this stage,” added Ho.

3: Understand the local business environment and build trust with stakeholders.

In every new market, said MTR’s Jacab Kam, the company prioritises understanding the business environment, such as local legal and tax systems. “An infrastructure contract could be 10 or even 30 years long. Trust and understanding are the foundations for such a long-term venture,” he said.

James Law, Founder & CEO of Cybertecture International Holdings Limited, added that his staff would even try to learn the local language. “Cultural differences don’t have to be eliminated. In fact, such differences bring in business opportunities and inspire good design. For instance, we built a futuristic-looking building in India that incorporates elements of Feng Shui,” said Law.

4: Be prepared to adapt to the unexpected.

When FDB was supervising the construction of the Nepali police school in 2015, a massive, deadly earthquake interrupted the project.

“Our project was suspended for three weeks following the earthquake. But the overall experience, for me, wasn’t negative. We actually learnt a lot, especially in terms of project management,” Wallace said.

Ho from hpa also recalled how a sharp swing in the value of the Malaysian ringgit led to unexpected foreign-exchange losses for the firm. “That was a painful and costly lesson,” he said. What the firm learnt as a result was to diversify its ‘baskets’, so that currency losses in some countries could be offset by gains in other regions.

5: Be bold and grab the opportunities that come along.

“I believe people in Hong Kong have an entrepreneurial spirit, vast experiences, talent and creativity. We just need to be more brave and adventurous to rise to the next level,” said Law from Cybertecture.

Important notes:

  • The Hongkong and Shanghai Banking Corporation Limited (the "Bank") neither endorses nor is responsible for the accuracy or reliability of, and under no circumstances will the Bank be liable for any loss or damage caused by reliance on, any opinion, advice or statement made in this video.
  • The opinions expressed are those of the featured speakers, and except where a speaker is specifically identified as a representative of the Bank, do not represent the Bank's views. The opinions are subject to change without notice and should not be construed as a recommendation of any individual holdings or market sectors.
  • Investment involves risks. Past performance is no guide to future performance. Investors must refer to the offering documents for further details and the risks involved. The information contained within this video is general and should not be construed as personal advice, given it has been prepared without taking account of the objectives, financial situation or needs of any particular investor. Accordingly, investors should, before acting on it, consider the appropriateness of the information, having regard to their objectives, financial situation and needs. If necessary, seek professional investment and tax advice.

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