The building and construction industry has become the new thriving export sector. This billion dollar industry has been fuelled by a surge in global demand combined with Australia’s reputation to deliver successfully. So if you have found a product or service that’s sure to turn heads, now is the time to jump in and take advantage of this hungry market.
The term ‘building and construction’ brings to mind a worksite of men in hard hats and of large scrolls of paper, but the sector is a lot broader than those oversized paper sheets. Covering fields that you would expect, such as architecture, engineering, and trades like plumbing and electrical, the service aspect of the construction industry also receives environmental, technological, and consulting input in a variety of forms.
According to Tim Harcourt, chief economist at Austrade, the building and construction industry generates $48 billion a year and almost 10 percent of that is export—$3.7 billion for products and $720 million for services. However, he believes the service figure could be significantly understated because transactions are difficult to track. The official breakdown estimates that technical services such as project management, engineering and architectural services, contribute 80 percent to the export tally. “Construction services, at around $144 million, make up the remainder,” says Harcourt.
Building materials, such as timber and steel, and manufactured products such as water tanks, have provided steady income for exporters, outstripping wool and on par with wheat in terms of export value. Our biggest customers in this regard are the US and countries in the Asia-Pacific region such as New Zealand, China, South Korea, and Japan.
However, the past few years have seen a significant rise in the export value for building and construction services. This is due to a global increase in demand combined with Australia’s reputation for delivering projects successfully. Building services usually receive the most business from customers in South East Asia and the Middle East.
Austrade senior export adviser, Garry Mahlberg, says Australia is well positioned to increase building activity overseas due to a range of factors. “The combination of Australia’s high building standards, a highly educated population, and unique climate conditions has led to the development of products and services which Australia now supplies to the world,” he explains.
Even within the services sector, things are starting to change. Residential construction used to be the export breadwinner, but engineering contracts, consultancy work and project management are emerging as strong exports in their own right. “Firms such as Thiess, John Holland, Sinclair Knight Merz and Connell Wagner are all exporters,” says Mahlberg. “They provide a range of services such as project design and management and feasibility and environmental studies.”
A significant volume of service exports also comes from Australian construction contractors. “They have specialised skills and a reputation for quality, efficiency and ability to deliver on time. Well-known international construction companies include Leighton Holdings, Bovis Lend Lease, and Multiplex.”
The surge in demand from Australian construction services follows our success in the architectural realm. “Among the world’s 60 largest architect firms, there are seven Australian companies. Per capita, Australia has produced more global architectural players than the US, Canada, Germany, Japan, India, and China,” says Mahlberg.
He mentions the Watercube National Aquatics Centre, designed for the 2008 Beijing Olympics by PTW Architects, which has already become an icon before the main event. Constructions like the Watercube enhance Australia’s international reputation because both the structure and the event are famous.
Because of the relationship between different disciplines, success generally has a flow-on effect when one sector does well. For example, an architectural firm with a winning tender will subcontract different aspects of the project, from engineering and consultancy work, to the physical elements of construction such as building and interior design. Although Australian architects won’t necessarily use Australian products and services throughout the entire project, a company’s access to well-known architectural firms certainly has advantages. This method, called ‘piggybacking’, allows firms with an established reputation to help newer companies export their products and services and increase their international exposure.
Bill Mansell, managing director of roof specialist Chadwick Technology, says his company uses Australian products and services wherever possible. Even as subcontractors themselves, they have some influence over the products and services used.
“We’ve used CSR plasterboard throughout the interior lining on the Dubai International Air Terminal,” he recalls. “A lot of the steelwork is from BlueScope. Our fasteners—and fasteners are a major item on these jobs, they run into millions of dollars—came from a Victorian company, Powers Fasteners.”
Chadwick Technology also uses Australian services–for example, partnering with engineering company Taylor Thomson Whitting. “Because of our quality assurance requirements, everything has to be secondary checked and Taylor Thomson Whitting provide the service, so we provide a lot of work for them,” says Mansell. “We’ve also used the National Acoustic Laboratory for sound-testing, and the CSIRO.”
Projects on the ground also involve a number of Australian staff. Some countries have laws requiring foreign companies to derive a number of staff from the local employment pool, but Mansell’s management team is mainly comprised of Australians.
“The Aussie supervisor or manager has a very substantial reputation in both South East Asia and the Middle East. That’s why we get work over there, we’re known for getting things done,” he explains. “But we do have a mixture of staff in Dubai, we have quite a few Indians and Filipinos working for us in various roles, such as IT, admin, and on the ground.”
Opportunities in Disaster Areas
Recent events have also boosted Australian exports in this sector. Reconstruction efforts in disaster areas, such as those hit by the 2004 Indian Ocean tsunami and the US Gulf area affected by Hurricane Katrina in 2005, have provided excellent export opportunities for Australian companies.
Mahlberg says that even the Australia Indonesia Partnership for Reconstruction and Development, a bilateral aid agreement initiated by the Federal Government following the 2004 tsunami, provides export opportunities because companies still have to tender for work.
“Other projects are funded by the World Bank and the Asian Development Bank and the bids are open to member countries. Australia is a member of both those banks, so Australian companies can bid for contracts,” says Mahlberg. “The governments themselves will also put up money. For example, the Thai Government is funding their reconstruction for tsunami-affected areas, as is the US Government following Katrina.”
Non-government organisations (NGOs) are also important customers in post-disaster situations. “There are NGOs who provide relief and they will buy Australian products like water tanks and housing kits,” says Mahlberg. “NGOs like the Red Cross are sometimes given money to fund reconstruction, so there are even opportunities to export through them.”
Reconstruction allows companies to leverage their involvement in post-disaster areas which have already received considerable media coverage, and foster relationships on the ground with local companies. “It’s the classic market entry,” says Mahlberg. “This way, Australian companies can network with local implementation agencies so they’ll be well-based for future dealings.”
Smaller Australian companies in particular have been quick to find and service infant markets. Mahlberg observes that many smaller suppliers provide a huge range of innovative products. “Australian SMEs are on the cutting edge, providing faster, cheaper construction which is of a high quality and with better safety standards.”
Another movement affecting exports in the construction industry is the growing emphasis on environmentally friendly building products and design, both of which are popular Australian exports. “An emerging trend for Australia is the drive in growth in sustainable ‘green’ design by Australian planning authorities, industry bodies, architects, and developers,” notes Mahlberg. “And an increasing number of Australian companies now supply energy and water efficient building products.”
The main difference between exporting in this industry compared with others, however, is the way contracts are paid, making cash flow an important part of business. Potential exporters should take note that due to differing laws, contracts vary from region to region, even country to country within a region.
Mansell says that Chadwick Technology have encountered a few problems navigating the red tape to get paid. “While I’m a technical person, I spend a third of my life doing cash flow planning because payment to our suppliers very much depends on us getting paid,” he says. “Commercially, you have to be very astute. It’s a whole area of commercial negotiation which is secondary to the job but if it’s not done properly, you don’t get the job.”
Both Austrade and the Export Finance and Insurance Corporation (EFIC) have assisted Chadwick throughout their export experience. Over the years, Austrade helped with finding new markets, while Chadwick still use EFIC’s services to review contracts and provide finance such as working capital advances and performance bonds that enable the company to take on new work. Mansell advises companies to do some research with regard to how things work in the country you wish to deal with, recommending Austrade and EFIC as a start.
“There are certain geographical areas where you know you will get paid on time. There are other areas where you know it’s going to be a major problem,” he warns. “It’s the same with contracts. With some nationalities, once you sign a contract, they honour it. You sign a contract with a Japanese company and they will run it to the letter. There are some others where you sign a contract and you’re quite certain that all they want to do from then on is alter it.”
Mansell lists a few things that companies should look out for. “One, make certain you can get the appropriate labour. Two, make sure you have the appropriate technical management. Three, make sure your contract clearly defines what’s expected of you and how you’re going to get paid. If you’ve covered those, you’ve covered the major areas,” he says.
So, if you’ve found a place for your product or service overseas and you’ve done your homework, now is the time to jump in while the market is hungry. Go forth and build.
United Arab Emirates Ideal for Construction Work
Rich from the 1970s oil boom, this small middle eastern country is reinventing itself as a foreign investment magnet and a travel hub, attracting tourists, shoppers and, er, sandboarders. Generous tax laws, such as the absence of personal and corporate levies, means there’s plenty of money to go round to build new things, such as the Burj Dubai which, when complete, will be the world’s tallest tower.
The UAE is a federation of seven principalities called emirates, the best known being the capital Abu Dhabi and the highly populated Dubai. Although these two cities initiate the bulk of the construction, other emirates have also started developing their urban areas.
Austrade senior export adviser, Garry Mahlberg, mentions design studio Woods Bagot and urban consulting firm Urbis JHD as examples of Australian companies that have made an impression in the UAE. Woods Bagot have a permanent office in Dubai with some100 staff, and Urbis JHD last year completed an urban framework plan for the emirate of Um Al Quwain, which is currently under implementation by the local government.
In addition to its healthy financial status, the UAE is also ideally located for construction work, attracting tenders from both east and west and providing work for people in nearby developing countries, such as India.
Chadwick Technology managing director, Bill Mansell, adds that freedom to hire is also a favourable aspect of the UAE. “Certainly in Thailand and Malaysia there’s a strong obligation to have a very large percentage of local people in your workforce. In the Middle East that’s not the case,” he explains. “Dubai, for example, has a population of about three million people and only about 200,000 of those are locals—you can’t hire locals if they’re all fully occupied.”
Australians already have a good reputation in the UAE and a number of companies are well established and willing to help others establish themselves there. The only thing a prospective construction company needs to know is that although there’s plenty of work, there’s also plenty of competition. But that’s all part of building a piece of the east.
Chadwick Technology’s Growing Reputation
It was a chance meeting that led roofing specialists Chadwick Technology to their first international job. A Singaporean company importing the same product out of New Zealand as Chadwick, invited them to have a look at some projects in Singapore.
Managing director, Bill Mansell, says that invitation led to a roofing contract for the Singapore Indoor Stadium, a complex job with a reasonable profile. Their reputation in the region grew through word-of-mouth and Austrade’s efforts, after which they were invited to tender for more projects. Chadwick then moved on to other major jobs in South East Asia, such as the Kuala Lumpur International Air Terminal.
The problem with a growing reputation, observes Mansell, is handling the number of jobs. “We only take on one major project at a time. People resources and financial resources don’t allow us to undertake too many major projects at a time,” he says. “The aim is to do one properly instead of half a dozen and maybe have problems.”
At the moment they are finishing work on the Dubai International Air Terminal. Mansell says it was never their intention to set up in the Middle East, but four years ago a construction company called Al Abbar asked if they were interested in becoming subcontractors, having seen Chadwick’s work in Kuala Lumpur and on other airports in Hong Kong and Thailand.
“We had a factory built there on site, we had to move plant equipment in and we had to assemble our staff,” says Mansell of Dubai. The company also picked up interior work after they had finished the roof. “Our total billings on that job will probably be about $65-70 million.”
Chadwick Technology operates entirely offshore while the Chadwick Group, its parent company, has 50-60 percent of its operations overseas. And it seems the international theme continues to run through airport contracts, with the company recently being approached by architects on the New Delhi International Air Terminal.
“It seems that they follow us,” laughs Mansell. “I don’t know where the New Delhi contract will lead but we’re bidding for another one in Dubai at the moment, and from a resources point of view we can’t overstretch ourselves.”
