Self-sufficient Chinatowns like this have been seen before in the Middle East. ‘Chinese contractors first established a reputation in the first oil boom on some huge projects in Iraq and Kuwait,’ says a Gulf-based Chinese diplomat. A long hiatus followed, then a few years ago settlements like the Merowe camp began to spring up in Jordan and Yemen. In the last 12 months, they have mushroomed again in the Gulf. ‘Now you have the second big construction boom, and against this background a lot of Chinese companies, from big state-owned companies to small private firms, are looking to exploit any avenue they can find. They are beginning to establish a strong reputation again.’
Leading the charge is the Hong Kong branch of China State Construction Engineering Corporation, which has picked up more than $500 million worth of contracts in the UAE alone in the last eight months. The Beijing branch has meanwhile won building work on the Palm, while in Doha, Sinohydro recently took a site preparation contract on the Lusail development worth $440 million. Surprising as it sounds, these contracts were cheap at the price.
‘A Chinese project manager will cost about AED 10,000 [$2,720] a month all in, which can be less than half of what other nationalities demand,’ says a Gulf-based Chinese contractor. ‘Chinese labour is more expensive than Indian labour… I would say it is 30-50 per cent more, but it is twice as effective. The Chinese rationalise the use of their labour far better.’
In particular, the use of subcontracted labour and tight productivity targets – paying labourers per square metre of finished work, for example, rather than by the hour – has given the newcomers an edge. According to Simon Jenson, chief executive officer of Italian cement equipment supplier, some Chinese contractors and equipment suppliers are able to carry out turnkey projects 20-30 per cent cheaper than their competitors: ‘We were sleeping, and didn’t see them coming.’
Besides competitive pricing and practice, many firms have greater experience than their limited Middle East portfolios suggest. ‘The Hong Kong companies have good experience of high-rise construction over the last 20-25 years, which is the major market here right now,’ says the Gulf-based contractor. ‘Mainland Chinese companies are now developing the same capabilities in cities such as Shanghai.’
Chinese companies have also been moving into more specialist fields, particularly in the oil sector. The progress of Sinopec is a case in point. Until recently, the state-owned behemoth ha grazed on subcontracts in Saudi Arabia. But it made its first big break last September when, in joint venture with Norway’s Aker Kvaerner, it won the contract to build a petrochemicals complex for Yanbu National Petrochemicals Company (YanSab). The deal was the first major breakthrough for a Chinese contractor in the GCC process plant construction sector. But the real test is yet to come.
A Sinopec-led consortium is close to signing a $1,500 million contract to upgrade Arak refinery in Iran. This time, the Chinese team will stand alone.
There are limits to the reach of Chinese contractors, however. Poor language skills are still cited