BMI's Executive Summary

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Hong Kong is one of the most competitive construction markets in South-east Asia and a showcase for international innovation in design and engineering. After a five-year slump, new government projects as well as other infrastructure development have provided the necessary impetus to Hong Kong's construction industry which has also benefited from the boost in construction activity in Macau and China. The focus of the government is now on transport, ports, housing, tourism-related developments, hospitals, and improvements to the environment. This report forecasts that the construction industry is likely to log an average annual growth rate of 0.82%, and traverse a low-flat trajectory over the 2008- 2012 period. The industry is expected to be valued at US$5.35bn in 2012.

During the last few years, Hong Kong's construction industry has not received significant state-led investment. However the scenario is expected to improve. Around 93 projects worth HKD24.19bn (US$3.09bn) are expected to be undertaken in 2007. Major investments have been initiated for the development of railways in the region. These include the US$4.6bn Shatin to Central rail link, the US$1.28bn Kowloon Southern Link and the US$1.28bn railway link to Lok Ma Chau Spur Line. The US$3.3bn development of the West Kowloon Cultural District and the recently commissioned Shenzhen Bay Bridge are some of the other major projects.

With minimal barriers to entry, Hong Kong's construction market is renowned for being extremely competitive. Low tax rates, a stable political environment as well as its strategic location make Hong Kong an attractive investment destination. The Special Administrative Region (SAR) is also known for its relatively low levels of corruption.

A large number of international contractors operate in Hong Kong, while local players are relatively small and mostly undertake sub-contracted work. Land and labour costs in Hong Kong are among the highest in Asia. The consequent migration of the region's manufacturing base to other Asian nations, specifically China, has prevented Hong Kong from becoming a major manufacturing hub. Moreover, the SAR economy is closely tied to that of China, making it vulnerable to any major fluctuations in the latter. BMI's view is that overall economic momentum in Hong Kong will lead to some trickle-down effect for domestic construction activity. The focus on infrastructure projects and the increased allocation for public work contracts over 2007-2008 is expected to provide some boost to construction activity.

Contents

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Chapter 1 – Industry Trends And Developments

Market Overview

Hong Kong's Economy In 2006

Hong Kong's Construction Industry In 2006

Major Companies

Some Recent Investment Initiatives

Chapter 2 – Key Projects

Transport

Utilities

Tourism

Residential And Commercial Construction

Table: Hong Kong — Major Infrastructure Projects

Chapter 3 – Business Environment

Table: Asia Business Attractiveness Ranking

Business Attractiveness Rankings — Methodology

Regional Overview

Hong Kong: Business Environment Ranking

Economics — Long–Term Risk

Politics — Long–Term Risk

Construction Growth

Competitive Environment

Anticipated Potential

Chapter 4 – SWOT Analysis

Hong Kong Economic SWOT

Hong Kong Political SWOT

Hong Kong Business Environment SWOT

Chapter 5 – Industry Forecast Scenario

Table: Economic And Construction Data Table

Table: Economic And Construction Data Table (continued)

Chapter 6 – Macroeconomic Outlook

Table: Population And Output

Chapter 7 – Competitive Landscape

Table: Key Players

Chapter 8 – Company Monitor

Paul Y ITC–Construction Holdings

Gammon Skanska Group

AMEC Asia–Pacific

Hsin Chong Construction Group

Chun Wo Holdings

Chapter 9 – BMI Forecast Modelling

How We Generate Our Industry Forecasts

Construction Industry

Sources

Competitive Landscape for Asia Infrastructure Reports: Sample of Companies Ranked

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Comparative company analyses and rankings by sales, % market share, employees, registration date and ownership structure. Company profiles include fully researched senior executives and contact details, business activity and leading products and services. SWOT (strengths, weaknesses, opportunities, threats) of the state’s business environment, infrastructure sector, politics and economics, which carefully evaluates the short- and medium-term issues facing the industry.

Network of Asian Infrastructure Sources

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BMI's Asian Infrastructure Reports are based on an extensive network of multilateral organisations, government departments, infrastructure industry associations, chambers of commerce and company reports. Information sources include: