A slice in a pie

As mainland Chinese contractors dominate large-scale public works here such as cross-border infrastructure projects, there is a call for more opportunities for local builders

After the government pledged to boost investments in public works to spike domestic demand amid the pandemic-induced economic downturn, including an expected total value of about MOP18.5 billion in public infrastructure projects to be launched this year, all eyes are now on how this pie will be shared among local construction firms and those across the border.

This issue has lately come under the spotlight following a direct grant of MOP2-billion (US$250-million) contract for building a new type of rental public housing project for senior citizens in the Areia Preta district to China Construction and Engineering (Macau) Co Ltd (CCEMC), a local subsidiary of state-run China State Construction, last November. This decision made without holding a public bidding process has irked the local construction sector. The Government explained that it skipped the bidding procedure due to the urgency of the project and the lack of expertise among local firms to employ the prefabricated construction method, using components made in a factory and assembling them to build a structure on the construction site, to speed up the process —

In an ensuing press conference held by six prominent local associations in the sector, including the Macau Association of Building Contractors and Developers and the Architects Association of Macau, Fernando Tse noted that the local segment had discussed the matter with the government and expressed its dissatisfaction with this direct grant, which they described as a “disruptive market practice”.

“If the government has to award a public works contract without a bidding process due to a tight timeline, [it] should prioritise local construction firms to avoid oligopoly,” said the vice chairman of the Association of Macau Engineering Consultant Companies at the time. Though Mr. Tse had some reservation, the oligopoly he refers to pinpoints those Mainland Chinese builders, particularly state-owned firms, in the market.

– MOP7.12 bil vs MOP21.41 bil
Value of contracts won by Macau builders vs Mainland Chinese firms in past 50 major public works

Tour de force

This month, four months after the grant for the Elderly Housing project, the administration directly awarded a MOP 3.5-billion contract to state-owned Nam Kwong (Group) Co Ltd allowing them to build the Hengqin extension line of the Light Rapid Transit (LRT) railway. The government claimed this was due to the complexity of the project, involving the jurisdictions of both the Mainland and Macau — a common rationale for direct grants in recent years such as the one awarded to state-owned Guangdong Nam Yue (Group) Co Ltd (nearly MOP 1.5 billion) for constructing a major infrastructure in the new Qingmao border terminal, which could be ready this year.

“About 90 percent of small-to-mid-scale public infrastructure projects in the city have been undertaken by local constructors and builders,” says Lo Kai Jone, honorary chairman of the Macau Construction Association. “Local firms are also eager to undertake large-scale projects, but whether they are assigned them really depends on [how the government] decides to award the grants.”

According to figures from the Infrastructure Development Office, a government department that is in charge of rolling out major public works, Mainland Chinese builders also remain in competition even for projects awarded with a bidding process. In the most recent 50 infrastructure projects approved by the Office through a tender process between 2015 and 2021 so far, 26 went to local builders while 24 were won by Mainland firms and their subsidiaries or consortiums with companies from across the border. The total value of the 26 projects seized by local firms amounted to MOP 7.12 billion, or MOP 274 million per project, government figures show, while the 24 projects assigned to Mainland builders totalled MOP 21.41 billion, or MOP 892.58 million per project. 

Among the 50 projects, six projects were valued over MOP 1 billion each, including the MOP 1.18-billion athlete training centre and the MOP 1.18-billion central laboratory building in the future Islands Hospital awarded to Macau contractors, and the MOP 7.35-billion major complex in the future Islands Hospital, the MOP 5.27-billion Fourth Macau-Taipa Bridge, the MOP 1.54-billion reclamation work for newly-reclaimed Zone D, and the MOP 1.18-billion LRT Barra station.

“About 90 percent of small-to-mid-scale public infrastructure projects in the city have been undertaken by local constructors and builders,” says Lo Kai Jone, honorary chairman of the Macau Construction Association. “For large-scale projects, local firms are also eager to undertake, but whether they are awarded really depends on [how the government] grants the projects.”

Breaking down

While Macau builders might still be less experienced and competitive than their Mainland counterparts when it comes to large-scale infrastructure projects, they are catching up. “Infrastructure projects worth MOP 10 million were rarities before the handover [in 1999], but local builders have accumulated a lot of experiences in the past two decades, riding the construction boom wave here,” says Mr. Lo from the Macau Construction Association. “Local companies have learned enough techniques and have accumulated enough management experiences to be able to carry out any large-scale public projects for the development of Macau… [and we hope the government] will be willing to create more favourable conditions for local firms in the bidding process.”

Another local construction figure anonymously suggests that the government could try breaking down some projects into smaller phases and parts, so that local firms could be competitive in the bidding process: “For instance, only Mainland firms and a very few number of local builders have enough resources and technologies to take on projects worth MOP 1 billion or more, so breaking them down could also provide more choices for the authorities to pick.” 

“The administration has tried this approach, but it has been less inclined to do so in recent times because it would be more complex to supervise and more expensive, as more than one contractor is involved,” the anonymous source continues, suggesting that creating consortia that would share a certain local presence could also be considered as one of the eligible criteria for some projects. “Local firms could also be prioritised for smaller projects.”

“The mainland firms also have a higher proportion of imported employees for their projects than local builders…. creating unfair competition for local companies,” legislator Jose Pereira Coutinho alleges

Imported workers

Legislator José Pereira Coutinho is also concerned about the dominance of Mainland contractors, and has recently enquired the government about how it could facilitate a bigger engagement for local builders, particularly small- and medium-sized enterprises (SMEs), in public works. “Given the lack of local expertise and personnel for large-scale projects in the early stage of SAR after the handover, Mainland constructors have helped the city by introducing advanced construction technologies during the construction boom,” the lawmaker says. 

“But some Mainland builders have caused vicious competition in recent years over winning government contracts and works from the six gaming operators with low costs…,” Mr. Coutinho claims. “The Mainland firms also have more imported employees than local builders for their projects…creating unfair competition for local companies.”

According to the latest figures from the Labour Affairs Bureau, among the top five firms in the construction sector hiring the most number of imported workers in the third quarter of last year, two were Mainland builders (a subsidiary of Nam Yue and CCEMC), one had a Hong Kong background (PYM Construction (Macau) Ltd, an affiliate of Hong Kong-based Paul Y. Engineering), and two were local firms (In Rich Construction Co Ltd, an affiliate of Yoho Group that developed Macau Roosevelt Hotel on the Macau Jockey Club land plot, and Galaxy Cotai Project Management Ltd, a subsidiary of gaming operator Galaxy Entertainment Group). Nam Yue had the most lopsided ratio of resident to non-resident workers in the third quarter among the top five, with only 2 resident employees but 982 imported workers, or a ratio of 1:491. PYM Macau trailed behind with 1,036 non-resident workers at a ratio of 1:23.5, followed by Galaxy Cotai Project Management with 3,275 non-resident employees at 1:9.4. In Rich Construction had 881 non-local staff or a ratio of 1:5.2, and CCEMC had 2,286 imported workers or a ratio of 1:5.1.

Local employment

In response to the legislator’s enquiry, the government stated: “Macau is a highly open and free economy…. The SAR Government has paid close attention to the development of various industries here, and strived to maintain an open and just business environment.” The authorities added that contractors of public infrastructure projects are required to prioritise local workers, and that the quota of non-resident workers is approved in a case-by-case approach in consideration of the complexity and scale of infrastructure projects, local labour demand, and other factors. “Some positions in large-scale public works and infrastructure projects require more professional skills, which residents do not have at the moment, so [the authorities] have still approved an imported labour quota for these positions in accordance with the actual situation,” the authorities added, without, however, specifically addressing whether the number of non-resident workers is higher than that of Mainland builders.

“Though the government has pledged to increase investment in public works in the next few years to create job opportunities for locals… Mainland contractors [here] mostly charge a large number of imported workers to undertake projects,” says legislator Leong Sun Iok, as there are relatively less job opportunities for local construction workers.

“Given their smaller scale, local construction companies are less competitive than their Mainland counterparts in the bidding process,” adds Mr. Leong, also vice president of the Macau Federation of Trade Unions, the city’s largest labour group. “Thus, the government should mull conditions to provide more opportunities for local firms to join public works, offering more job opportunities to locals.”