Nice work, if you can get it

When tribal fighting broke out on the Ghanaian border earlier this year, thousands of people became embroiled in bloody fighting on a large scale for several weeks.

There were village massacres and widespread mayhem before the army was able to restore order.

Many hundreds of people were slaughtered in the unrest. But the news hardly warranted a mention in the UK press. Horrors in the former Yugoslavia and carnage in Rwanda relegated the Ghanaian problems to no more than a minor disturbance.

To Taysec Construction, a subsidiary of Taylor Wood row, the border problems were big news.

The contractor is building the Kintampo- Tamale road, a massive operation in northern Ghana.

But the tribal disturbances became sufficiently serious that the company had to pull all its staff off the site while order was restored. Some staff talk of local site workers being embroiled in battles near the road as work ground to a halt amid scenes of mayhem.

The Taysec staff retreated to the capital Accra, where they waited for clearance to return and order to be restored. It was disruption that they could all do without.

Although an extreme case, Taysec's Ghanaian experience was a classic example of the headaches of working outside the UK.



Operations boost

Political unrest, payment problems and demands for high value bonds all make overseas work tricky. But despite this, contractors are looking increasingly to boost their overseas operations, and they will tell you that there has rarely been a better time to go east, or west, to find new markets.

But with all the difficulties why do UK contractors work abroad? And why are they actively seeking to increase their overseas markets?

Like most major British contractors, Laing is working in many markets worldwide and is particularly eying up some of the former republics of the Soviet Union as potential markets, despite likely difficulties with local customs, local laws, politics and payments.

Bruce Boys is Laing International's managing dir ector. Not surprisingly, he spends much of his time flying across the world monitoring Laing's projects. He explained the attraction of overseas work.

'The overseas market allows you to smooth the flow of your work over a period and protects you from having all your eggs in one basket. Economic cycles in different countries are out of step with the UK. So when the domestic market goes into recession, if you have work in other countries the pain is not so great. When there is a recession at home, your minds become that bit more concentrated on carrying out overseas work.'

Smoothing out workload is a major attraction to any business. The contractors are also keen to get established in countries ready for any upturn in work so they are not coming in cold when things pick up.

After the Middle East oil-led construction boom of the 1970s, many firms elected to back out of overseas work as the going got tough in many markets. Couple this with the boom of the 1980s in the UK, and overseas work reduced in importance.

But the long home recession has encouraged everyone to look abroad for work again - be they a self employed bricklayer or the md of a massive industrial group.

This drive to go abroad has happily coincided with markets opening up all around the globe as the political map changes dramatically. The combination of a world open for business and Britain's recession has underlined the importance of overseas work.

Geoff Haley, partner at City law firm SJ Berwin & Co, is a consultant to foreign governments, contractors and clients on contracting.

He says that the overseas market is beginning to look brighter day by day.

'I have five times as many inquiries for work on my desk now than I did last October, so things are definitely looking up as countries start to emerge from recession. There is plenty of work overseas for UK contractors with the right approach,' he says.

Haley believes the right approach is to go along the build, own, operate and transfer (BOOT) route, in which private finance is raised, but with public guarantees and public contribution.



European prospects

'There are new European guidelines on funding,' he says. 'Instead of giving a project a standard 70% grant, the EU will wait to see how much private finance is raised and make up the shortfall. This reduces the amount of public money spent, which can then be put towards other schemes and therefore there is more work.'

Europe certainly seems to be a burgeoning market. Outside the EU money is being raised to build eastern Europe, with eastern Germany, Poland and Hungary all beginning to pick up, along with the former Soviet republics.

Poland alone is expected to have a construction market growing at 9% a year every year until 2000. And in the EU, budgets have just been settled for the next five years which will establish where billions of pounds of infrastructure spending will be directed. The poorest countries - Italy, Greece, Spain and Portugal - are destined to benefit most.

The former republics of the Soviet Union promise to be ripe new markets and already firms such as Wimpey and Laing have begun forays into countries such as Kazakhstan and Turkmanistan. Earlier this month Housing Minister George Young led a construction delegation to Kazakhstan and Kyrgyzstan in central Asia to seek ways of helping British contractors win work.

With the exception of Bovis and Trafalgar House where the figure is nearer 75%, the Contract Journal survey of the biggest firms found that overseas work now makes up about20% to 30% their total turnover. But without exception the contractors are looking to boost that figure.

Costain's corporate strategy is to increase the volume of international work to 50% of turnover within the next few years, from around 28% in 1993.

'The emphasis remains on building up our international business, particularly in our favoured markets of the Middle East, Asia and the Pacific Rim,' says Costain chairman Sir Christopher Benson. 'Margins remain pitifully low in the UK building sector.'

And there is the rub. Despite the obvious headaches of working abroad, virtually all the contractors surveyed on their overseas operations cited decent margins as their driving force. Something that is difficult to establish at home.

But to earn these margins contractors have to suffer a range of frustrations inherent in working away from home.

Boys says: 'Getting paid is the biggest problem - and making sure you get paid on time. We would not work somewhere if we thought there was a risk we would not get paid. As you cannot work everywhere, we tend to avoid South America and central Africa.

'Political change is the other worry - take the Malaysia ban. It was nothing to do with us but it affects our work,' he adds.

They all add up to uncertainty and that equals risk. So the higher risk attracts higher margins as you would expect.

Recent problems between the UK and Malaysia have underlined the dangers of the overseas market.

No contractor is keen to talk about the situation in Malaysia, and this is not altogether surprising considering that it was newspaper reports that upset the Malaysian prime minister in the first place.

But the boycott of British companies has hit hard, especially in light of Malaysia's booming construction market which rose 15% last year and is led by the massive Kuala Lumpur airport contract.

Most of the big contractors are in Malaysia. Some are lucky enough to have work under way already. But for contractors expecting to win airport work the ban has been disastrous.

Relations seem to be thawing between the countries and millions of pounds of work may soon be made available to British contractors again.

There is no easy way around these problems, but it helps to work with the right partners. On the largest projects, UK firms combine with companies which offer complementary skills to share the burden of work. But often it is the selection of a local partner that is the key,and many firms set up overseas subsidiaries to smooth the path to success in a tricky market.

Another taboo subject is the methods of winning work overseas. But one engineer working for a major contractor in Africa after stints in the Middle and Far East stressed that there was often only one way to work abroad - and that was through bribes.

'You often have to buy work overseas. The money is not called a bribe - it can be a donation to the local mayor or police force, or a contribution to administration for the client. But it is an accepted part of life,' he says.



Careful negotiation

Diplomacy and political nous are often a vital consideration when building in far corners of the world. And these are skills that project managers must hone to a fine point.

On a road construction job in Oman some years ago, a UK contractor's site team found itself working in territory dominated by an armed tribe which had established itself as the law in the area.

It was clearly unwise to upset these people, and many hours were spent by the project manager and his senior staff paying courtesy calls to the local chief to smooth the path of the work.

Gifts were often exchanged, and many were the times that the contractor's staff were seen trying to control the fierce kicking hooves of a baby goat donated for dinner as a gesture of goodwill. And a gift such as that is not refused.

Much diplomacy is required in the Far East, as the Malaysian dispute has illustrated. But despite the Malaysia situation, contractors are still setting their sights firmly on the Far East, where huge projects are under way or planned.

Haley says: 'Far Eastern countries are experiencing a massive growth in population and GNP and there is a demand for big projects such as power stations, transportation systems and new water treatment works.'

Thailand, Indonesia, China and Vietnam also all now offer opportunities to contractors as the countries begin to develop. All contractors see the Far East as the boom area for the future, replacing the Middle East.

And the Far Eastern countries are already taking up the private/public initiative. In Malaysia on the North-South Expressway, Thailand on its second stage expressway and on China's Shajiao power station, private enterprise took on the work under BOOT arrangements, but backed with safety nets and favourable loans from their governments to take some of the risk.

Such projects are proving successful and would be worth examining for the UK market if the Government's private finance initiative is not to fail.

If you want to win work in the burgeoning markets of the Middle and Far East, you need top staff with experience, diplomacy and the willingness to work long hours.

David Knowles, md of recruitment consultant PRS, is keen to stress that while there may be work to be won overseas, it is not easy to get it.

'It's not like the old days when you could send a bunch of duffers to the Middle East to shout at a few locals and get the work done,' he says. 'You need the right staff in the right place. Particularly in Hong Kong, where if you have got the wrong people you are in trouble.'

Knowles has spent 25 years in international recruitment and knows his markets. The Far East, he says, is developing, but margins can be very tight and the competition is tough. Hong Kong is intense with arduous contract conditions.

'It is not place for fresh faces,' he warns. 'You need experience.

The Middle East is peaking but is quite buoyant. Tender prices are beginning to get tighter, but Dubai is starting to look at environmental issues to boost tourism, so there are opportunities there.'

PRS has begun looking at the German market and consultant recruitment as Europe starts to pick up.

And the message is - there is work, but you need to be the best to win it.