Annual Report of the Construction Industry of China Hong Kong 2007-2008 Essay Example

Annual Report of the Construction Industry of China Hong Kong 2007 Annual Report of the Construction Industry of China Hong Kong 2007-2008 Essay Annual Report of the Construction Industry of China Hong Kong 2007-2008 Essay An Annual Report of the Construction Industry of China Hong Kong 2007-2008 prepared by AsiaConstruct Team Research Centre for Construction and Real Estate Economics Hong Kong Polytechnic University (www. bre. polyu. edu. hk) for The 14th AsiaConstruct Conference 23rd – 24th October 2008 Tokyo, Japan. AsiaConstruct14 Team: Michael Anson1, YH Chiang2, Eddie CM Hui2, Patrick TI Lam 2, Stephen WK Mak2, HY Ng2 and Eva XT Yin2, 1 Professor Emeritus, Faculty of Construction and Land Use, The Hong Kong Polytechnic University. 2 Department of Building and Real Estate, The Hong Kong Polytechnic University. About the Research Centre for Construction and Real Estate Economics (RCCREE): The RCCREE is the Hong Kong Polytechnic University Centre for solution oriented research and consultancy in construction and real estate economics. It undertakes internationally relevant multi-disciplinary research that supports the advancement of the construction and real estate industries in the following areas: Economic Policy and Institutional Analysis, Real Estate Economics, Construction Economics, Housing, Human Behaviour in Economic Decision making, and Value Management and Facilities Performance. For further information, please contact Professor Francis K. W. Wong, Director of RCCREE ([emailprotected] edu. hk) or Professor Eddie C. M. Hui, Deputy Director ([emailprotected] edu. hk). October 2008 1 COUNTRY REPORT [As at October 2008, ? 1,000 = HK$ 73. 14; HK$1 = ? 13. 67; US$ 1 = HK$ 7. 76] 1. EXECUTIVE SUMMARY Hong Kong enjoyed a high growth rate in GDP in 2007 (6. 4%), with a per capita GDP of US$29,914. While the service sector saw the highest growth (7. 4%), the growth rate of the construction sector was 0. 4%. The construction sector recorded a positive growth rate since 1997. The Economics outlook for the first half of 2008 was still optimistic. However, the consequences following the collapse of the property market in US, the bankruptcy of Lehman Brothers and the bail out of other financial institutions (e. g. AIG, Freddie Mae and Fannie Mae) by the US government, together with the slump of the stock markets, people are becoming pessimistic towards the latter half of 20 08 and next year. While the slowdown in growth of advanced economies in Europe and the US will have some impact on the economies of emerging markets and the Mainland, the sustained rapid economic growth of the Mainland and its increasingly intensified economic integration with Hong Kong will to a limited extent help the economic development and cushion the impact of the slowdown on Hong Kong. With respect to the labour market, the unemployment rate has hit an all-time low at around 4%. The unemployment rate of construction sector kept decreasing in these consecutive as there were more job vacancies created by the major projects, e. g. Hong Kong West and Tsuen Wan drainage tunnel, rebuilt the Lo Wu Correctional Institution etc. Construction Cost has picked up after it hit a bottom in 2003. It is more or less in parity of 1997 when the construction cost was at its peak. The high construction cost can be reflected from the increase in construction materials. The prices of major construction materials such as hardwood and steel products have risen by as much as 50% over 4 years. While there was no published wages for construction workers, the wages have not risen in par with the rise in living standard as reflected from the many demonstrations of the construction workers and 40-day strike by the bar benders in Hong Kong, which has led to a near stand-still of the construction industry. The salaries of ATPC have risen by an average of 9-13% over 2 years, with the exception of project managers and safety officers. There is no institutional or legal entry barrier to the construction market in Hong Kong. Foreign firms are required to fulfil the same set of criteria as local firms to get listed with the authority. Hence, the import of construction services does not appear to be very active and has consistently stayed at less than 4% of the total construction volume. Most of the import and export services are carried out within the Asian region, with the Chinese Mainland taking the highest percentage. The major services were project management, contracting and engineering consulting. Export of construction services to regions outside Asia is negligible. The outlook of the construction industry looks promising in the next 10-15 years as the government has outlined a series of infrastructural projects, many of which are cross-border such as the bridge linking Hong Kong, Macau and Zhuhai. It is envisaged at least HK$250 billion public money will be spent and 250,000 job vacancies will be created. The extent to which these projects will benefit the construction labour market remains to be seen. 2 2. 2. 1 MACRO ECONOMIC REVIEW AND OUTLOOK MAIN MACROECONOMIC INDICATORS 2000 2001 1,131,880 1,299,218 0. 5 1,177 1. 4 59,760 -11. 7 1,076,998 -0. 2 57,167 -7. 9 2002 2003 GDP and Components 1,152,718 1,277,314 1. 8 1,138 -3. 3 51,396 -14. 0 1,079,476 0. 2 51,534 1,187,369 1,234,761 3 940 -17. 4 44,403 -13. 6 1,062,714 -1. 5 44,910 40,376 -10. 1 6,797,700 0. 5 3,515,900 1. 3 6. 8 2004 1,287,900 1,291,923 8. 5 958 1. 9 44,455 0. 1 1,119,304 2005 1,139,110 1,382,590 7. 1 947 -1. 1 45,547 2. 5 1,207,873 7. 9 38,538 -4. 6 6,837,800 0. 6 3,538,100 0. 6 5. 6 2006 1,475,910 1,475,910 7 942 -0. 5 45,761 0. 4 1,297,545 7. 4 38,688 0. 04 6,909,500 1. 0 3,581,400 1. 2 4. 8 2007 1,569,890 1,616,215 6. 4 n. a. n,a, n. a. n. a. n. a. n. a. n. a. n. . 6,963,100 0. 8 3,640,500 1. 6 4 GDP in chained(2006) dollars (HK$ million) GDP at current market price (HK$ million) GDP growth (%) Primary sector (HK$ million) % growth Manufacturing sector (HK$ million) % growth Services sector (HK$ million) % growth Construction sector (HK$ million) % growth Population Population growth rate (%) Total labour force Labour force growth rate (%) Unemployment rate (not seasonally adjusted) Changes in consumer price index (%) Changes in GDP deflator (%) Short term interest rate* (%) Long term interest rate**(%) Annual average exchange rate with $US (HK$) ,126,279 1,317,650 8 1,161 -21. 4 67,646 6. 8 1,077,256 4. 7 62,054 -5. 3 6,711,500 1. 1 3,374,200 1. 6 4. 9 -9. 9 -12. 9 Demographic Indicators 6,730,300 6,725,800 6,764,200 0. 3 -0. 1 0. 6 3,425,900 3,474,0 00 3,472,500 1. 5 5. 1 1. 4 7. 3 0 7. 9 Financial Indicators -3. 8 -3. 6 6. 21 7. 48 7. 791 -1. 6 -1. 9 3. 45 6. 37 7. 799 -3. 0 -3. 5 1. 60 5. 40 7. 799 -2. 6 -6. 2 0. 81 3. 93 7. 787 -0. 4 -3. 5 0. 25 4. 59 7. 788 1. 0 -0. 1 2. 88 3. 55 7. 777 2. 0 0. 3 4. 05 4. 83 7. 768 2. 0 3 2. 33 3. 58 7. 803 Notes n. a. data not available * yield of 91-day Exchange Fund Bills (mid-year) **yield of 10-year Exchange Fund Notes (mid-year) Sources: GDP, Demographic and Financial Indicators: Government of the HKSAR web-page at censtatd. gov. hk/hong_kong_statistics Short and long term interest rates: Monthly Statistical Bulletin, Hong Kong Monetary Authority. Table 2. 1 – Macro-Economic Indicators 3 2. 1. 1 Overview of National Economy According to the Economic Analysis and Business Facilitation Unit (2007) of the Hong Kong Government, growth in GDP was 6. 4% in 2007. The years of 2004, 2005, 2006 and 2007 marked the largest growth in any four consecutive years since 1988. GDP per capita was HK$215,006 (US$27,565), which represented a 5. 9% year-on-year growth rate. The growth rate of the services sector was the highest (7. 4%) among all sectors. The growth rate of the construction sector was 0. 04% in 2007. The construction sector recorded a position growth rate since 1997. The reviving economic performance was greatly attributed to the steady global economic growth and Mainland’s policies in favour of Hong Kong, such as the Closer Economic Partnership and Individual Travel Policy. Stock prices and market turnover surged to a high record in October 2007, before the global financial market turbulence affected which caused some pull-back. The property market improved distinctly further, especially in the latter part of 2007, with a marked pick up in both sale prices and transactions under a favourable interest rate environment and the persistent strength in the economy. The labour market improved due to the sustained economic expansion. The unemployment rate fell to 4% and the seasonally adjusted unemployment rate fell to 3. 4% in the fourth quarter of 2007, which was the lowest in almost 10 years. The consumer price index only increased 2%, which suggested a moderate inflation in 2007, although there was significant increase of imported foodstuffs and consumer goods due to the weakening purchase power of Hong Kong dollars and the global food inflation. 2. 2. 2 Economy off First Half of 2008 Hong Kong’s economy continued to experience a substantial growth rate in the first half of 2008. The real GDP increased by 7. 1% compared with a year earlier. According to the First Quarter Economic Report 2008, the economy extended the run of distinctly above-trend growth to 18 quarters. The performance of the financial sector was particularly spectacular, a manifestation of the significant benefits brought about by the financial integration between the Mainland and Hong Kong. Although there was a global credit market turmoil caused by the US sub-prime mortgage problem, the Hong Kong economy still held up well in recent period with our motherland’s economy growing robustly. By the vibrant performance of Mainland and other emerging economies and the further expansion of the EU market, there was a further notable growth of 8. 3% in real terms in the first quarter. The exports of services also grew rapidly further by 10. % in real terms on the back of a continued surge in financial services. According to The Global Enabling Trade Report 2008 released by the World Economic Forum, Hong Kong ranked the top in the Enabling Trade Index ranking. Domestic demand continued to display strength and inflation remained mild. The labour market continued to improve with the un employment rate reached record low at 3. 4% since mid1998. 4 3. 3. 1 OVERVIEW OF THE CONSTRUCTION INDUSTRY CONSTRUCTION INVESTMENTS The total gross value of construction works performed by main contractors increased by 8% in nominal terms, from a year earlier, to HK$48. billion in the first 2 quarters of 2008. After discounting price changes, the total gross value of construction work performed by main contractors increased by 5. 1% in real terms over the same period. Analysed by type of construction work, the gross value of construction work performed at private sector sites totalled HK$93 billion in 2007, up by 2. 9% in nominal terms from a year earlier. The increase was mainly associated with the progressive stepping up of works at some large commercial building sites. The gross value of construction work performed at public sector sites decreased by 3. 9% in nominal terms from a year earlier to HK$7. 6 billion in the 2 quarters of 2008. The decrease was mainly due to completion of works on some large transportation projects. The outlook for the next years and thereafter is promising as the Chief Executive of Hong Kong has outlined 10 major investment plans including: 1. South Island Line 2. Shatin to Central Link 3. Tuen Mun Western Bypass and Tuen Mun-Chek Lap Kok Link 4. Guangzhou-Shenzhen-Hong Kong Express Link 5. Hong Kong-Zhuhai-Macau Bridge 6. Hong Kong-Shenzhen Airport Co-operation 7. Hong Kong-Shenzhen Joint Development of the Lok Ma Chau Loop 8. West Kowloon Cultural District 9. Kai Tak Development Plan 10. New Development Areas (NDAs) It is envisaged that over HK$250 billion will be invested in the next decade. These projects are estimated to bring more than $100 billion added value annually from the commissioning to mature stage. And, about 250,000 additional jobs would be created by these projects. Type of Investment (HK$ Million) Private Sector Public Sector Repair and Maintenance Total 2003 35,187 32,378 31,468 99,032 2004 28,021 28,533 36,618 93,171 2005 26,356 22,334 42,160 90,851 2006 24,855 17,135 48,240 90,230 2007 28,973 14,503 49,390 92,866 2008-10 (Q1-Q2) 16,113 7,563 25,181 48,856 Table 3. 1 Construction Investment by Sector (in nominal terms) 5 3. 2 CONSTRUCTION COMPANIES The latest published statistics from the Census and Statistics Department shows that the number of establishments engaged in building and civil engineering industries is 19,057 as of 2006 whereas the number of persons directly engaged in these industries is135,337. The following table shows the three year trend from 2003 to 2006. 2003 Number of Establishments Number of Persons directly engaged 19,520 124,933 2004 18,302 122,077 2005 17,985 122,870 2006 19,057 135,337 Table 3. 2 – Number of establishments, and of persons directly engaged 3. 3 3. 3. 1 EMPLOYEES AND CONSTRUCTION LABOR (NUMBER OF CONSTRUCTION WORKERS BY JOB TYPE) Principal Jobs Job Levels Professional/Technologist Technician Skilled Semi-Skilled worker General Worker Total May 2007 16 012 27 002 34 822 12 881 90 717 Source: Manpower Survey Reports on the Building and Civil Engineering Industry, Building and Civil Engineering Industry Training Board, Vocational Training Council, bi-annual issue of 2006. Table 3. 3. 1 Number of workers employed in principal jobs of construction, building and civil engineering and related disciplines 6 3. 3. 2 Persons in Establishments 2003 3 932 31 694 9 471 21 856 57 982 124 933 2004 4 341 (10. 4%) 28 478 (-10. 1%) 6 305 (-33. 4%) 25 117 (14. 9%) 57 836 (-0. 3%) 122 077 (-2. 3%) 2005 2 004 (-53. 8%) 29 786 (4. 6%) 7 274 (15. 4%) 21 282 (-15. 3%) 62 524 (8. 1%) 122 870 (0. 6%) 2006 1790 (-10. 7%) 29 976 (-9. 4%) 9 746 (34%) 24 688 (16%) 72 137 (15. 4%) 135 337 (10. 1%) Main industry group New construction works – Pre-erection works at construction sites New construction works – Architectural and civil engineering works at construction sites New construction works – Miscellaneous new construction works Decoration, repair and maintenance Special Trades – Erection and general finishing, electrical and mechanical fitting, gas and water fitting and miscellaneous All construction activities Source: The Report on 2006 Annual Survey of Building, Construction and Real Estate Sectors, The Census and Statistics Department, Hong Kong Special Administrative Region. Table 3. 3. 2 Number of persons directly engaged in the building and civil engineering establishments 3. 3. 3 Site Workers The following table reveals that the number of manual workers engaged at construction sites has been decreasing over time in Hong Kong. The phenomenon of reduction of manual workers is twofold: 1) advanced technology or technique greatly simplifies the construction process and reduce the number of people directly required; and 2) the number of construction projects, no matter in the private or public sector, has been dwindling year by year. Year 2008 2007 Qtr 1 1 2 3 4 Public 18965 20569 19232 18762 18521 20014 20485 19569 21147 22586 24306 26454 28704 25525 26668 27824 26034 % change 2. 4% -2. 77% -6. 5% -2. 44% -1. 3% -2. 30% 4. 68% -7. 46% -6. 37% -7. 08% -8. 12% -7. 84% 12. 45% -4. 29% -4. 15% 6. 88% -0. 88% Private 31576 29797 31866 30411 31582 30990 32801 32704 33750 31870 32540 33547 37057 33426 35814 38741 36727 % change Building % change Civil Engg. % c hange 0. 01% -3. 85% 6. 9% -4. 57% 3. 85% -5. 52% 0. 30% -3. 10% 5. 90% -2. 06% -3. 0% -9. 47% 10. 86% -6. 67% -7. 56% 5. 48% 2. 27% 38410 36517 37667 36133 37712 36406 38849 38819 40468 38769 41250 41293 45449 39097 42830 47081 45428 1. 85% 0. 30% 3. 15% -4. 07% 4. 37% -6. 29% 0. 08% -4. 07% 4. 38% -6. 01% -0. 10% -9. 14% 16. 25% -8. 72% -9. 03% 3. 64% 2. 90% 12131 13849 13431 13040 12391 14598 14437 13454 14429 15687 15596 18708 20312 19854 19652 19484 17333 -2. 1% -5. 13% -3. 02% -2. 91% -4. 98% 1. 12% 7. 31% -6. 76% -8. 02% 0. 58% -16. 63% -7. 90% 2. 31% 1. 03% 0. 86% 12. 41% -3. 87% Total 50541 50366 51098 49173 50103 51004 53286 52273 54897 54456 56846 60001 65761 58951 62482 66565 62761 % change 0. 87% -1. 25% 1. 45% -3. 77% 1. 89% -4. 28% 1. 94% -4. 78% 0. 81% -4. 20% -5. 26% -8. 76% 11. 55% -5. 65% -6. 13% 6. 06% 0. 94% 2006 1 2 3 4 2005 1 2 3 4 2004 1 2 3 4 Source: The Quarterly Report of Employment and Vacancies at Construction Sites, The Census and Statistics Department, Hong Kong Special Administrative Region. Table 3. 3. 3 Number of Manual Workers engaged at Construction Sites (analyzed by sector and type of project) 3. 3. 4 Unemployment rate of Construction Sector 2005 Unemployed (Thousands) Unemployment rate (%) 39 12. 9 2006 33. 8 11. 2 2007 25. 1 8. 3 2008Q1 21. 3 7. 5 Source: Hong Kong Monthly Digest of Statistics, The Census and statistics Department, Hong Kong Special Administrative Region Table 3. 3. 4 – Unemployed and Unemployment Rate of the Construction Sector The unemployment rate of construction sector was 7. 5% in the first quarter of 2008. More job vacancies were created by the major projects, e. g. Hong Kong West and Tsuen Wan drainage tunnel, the Lo Wu Correctional Institution, an extension block at the Prince of Wales Hospital etc. Although the unemployment kept decreasing in these consecutive years, the employment rate in the construction sector caused considerable concerns. 3. 4 3. 4. 1 PRODUCTIVITY Value-added per Employee Effective cost control increases the efficiency of each unit of resources engaged. The fairly remarkable observations are the positive figures of the value-added per construction workers in 2004 , 2005 and 2006, as shown in the following table. Main industry group New construction works – Pre-erection works at construction sites New construction works – Architectural and civil engineering works at construction sites New construction works – Miscellaneous new construction works Decoration, repair and maintenance Special Trades – Erection and general finishing, electrical and mechanical fitting, gas and water fitting and miscellaneous All construction activities 2004 41% 19% 37% 28% 36% 26% 2005 28% 21% 33% 28% 36% 28% 2006 26% 21% 30% 28% 43% 29% Source: The Census and Statistics Department, Hong Kong Special Administrative Region. Table 3. 4. 1 Value added as percentage of gross output for all building and civil engineering establishments: 9 3. 4. 2 Physical Measurement of Construction Production (Unit: `000 sq. m. *) End use of building Private residential premises+ Office buildings Hotels and boarding houses Multi-purpose commercial premises Total 2003 9 563 596 590 1 385 12 646 2004 8 169 (-14. 6%) ** (**) 654 (10. 8%) 1 471 (6. 2%) 10 964 (-13. 3%) 2005 6 591 (-19. 3%) ** (**) 794 (21. 4%) 1 303 (-11. 4%) 9 502 (-13. 3%) 2006 6 068 (-7. 9%) 945 587 (-26. 1%) 890 (-31. 7%) 8 624 (-9. 2%) * Area (sq. ) refers to gross floor area of buildings when completed. + Includes buildings purely for residential purpose and combined residential and nonresidential buildings. Source: The Report on 2005 Annual Survey of Building, Construction and Real Estate Sectors, The Census and Statistics Department, Hong Kong Special Administrative Region. Table 3. 4. 2 Physical Measurement of Construction Production 10 3. 5. 3. 5. 1 CONSTRUCTION COST Unit Construction Cost Construction costs are compiled from average fixed price competitive tenders published by Davis Landon Seah, a leading cost consultancy firm in Hong Kong. After the peak in 1997, construction costs fell for 6 consecutive years until they reached the bottom in 2003, when Hong Kong was hit by SARS (Severe Acute Respiratory Syndrome). Afterwards, costs have gradually picked up following the recovery of the property and construction markets. The latest figures for 2008Q1 show that construction costs are now almost as well as they were in 1997. Indeed, 5-Star hotels cost more to build than they were in 1997, probably due to the diversion of resources to the hotel construction boom in Macau. Residential (High-Rise) Standard Luxurious 8,000-8,500 8,500-10,000 9,000-9,500 9,500-12,500 11,000-12,000 11,500-15,000 10,000-11,000 11,000-13,500 9,800-10,700 10,800-13,200 9,300-10,000 10,500-12,800 9,100-9,800 10,300-12,600 8,500-9,000 9,800-11,700 7,600-8,200 9,000-10,800 7,850-8,450 9,250-11,050 8,300-8,900 9,750-11,600 8,750-9,350 10,350-12,300 9,050-9,650, 10,650-12,700 9,450-10,100 11,100-13,250 10,100-10,800 11,800-14,100 10,000-10,700 11,700-14,000 10,600-11,400 12,550-14,850 Commercial office Standard Prestige 8,500-9,500 12,000 up 9,500-10,700 13,000 up 11,550-13,500 15,500 up 10,500-12,500 14,300 up 10,300-12,100 13,800 up 9,700-11,500 13,500 up 9,700-11,500 13,500 up 9,500-11,200 13,500 up 9,000-10,600 12,300 up 9,300-10,900 12,700 up 9,750-11,450 13,300 up 10,550-12,350 14,300 up 10,850-12,750 14,800 up 11,350-13,350 15,550 up 12,100-14,250 16,600 up 12,000-14,100 16,400 up 12,850-15,000 17,400 up (Unit: HK$/m2 CFA*) Industrial Hotel Light Heavy 5-Star 4,800-5,000 5, 300-6,300 14,000 up 5,400-5,700 6,100-7,200 16,000 up 6,500-7,000 7,100-8,500 19,500 up 5,600-6,200 6,300-7,500 18,000 up 5,500-6,100 6,200-7,100 17,500 up 5,500-6,000 6,000-6,900 17,500 up 5,500-6,000 6,000-6,800 17,500 up 5,400-5,800 5,900-6,600 17,200 up 4,900-5,500 5,300-6,100 16,300 up 5,250-5,850 5,650-6,450 16,700 up 5,550-6,150 5,950-6,800 17,500 up 5,900-6,550 6,350-7,250 18,700 up 6,100-6,750 6,550-7,450 19,250 up 6,400-7,100 6,900-7,850 20,200 up 6,800-7,600 7,350-8,400 21,500 up 6,750-7,500 7,250-8,300 21,300 up 7,350-8,150 7,900-9000 22,450 up 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 * The costs per square metre are based on Construction Floor Areas measured to the outside face of the external walls/ external perimeter including lift shafts, stairwells, balconies, plant rooms, water tanks and the like. The cost excludes site formation works, external works, land cost, professional fees, finance and legal expenses. 1995-2006 based on Quarterly data in Q4. 2007 Q1 is first quarter data and 2007 Q2 is second quarter data. Source: 1995-2004 Current building cost information data in Hong Kong. Davis Langdon Seah International. 2005-2007 Quarterly construction cost review, Hong Kong. Davis Langdon Seah. Table 3. 5. 1 – Unit Construction Costs 11 3. 5. 2 Average Wholesale Prices of Selected Building Materials As the general upward trend of construction costs shown in Section 5. 2 would foretell, costs of major building materials have been rising in the last 5 years. As the following table shows, some key materials, such as bitumen, diesel fuel for industrial use, sawn hardwood, homogeneous nonslip floor tiles, galvanised mild steel angles and steel plates, metal formwork, sand, mild steel round bars, high tensile steel bars and sawn hardwood timber formwork, have their latest unit costs increased by more than 50% when compared to 2004. The increasing trend of the costs of building materials is due to the inflation and the appreciation of Renminbi as most of the construction materials in Hong Kong are imported from China. This upsurge in material prices is believed to be more attributable to the general increase in prices of commodities around the globe recently, than to the slow recovery of the construction market in Hong Kong. 004 Aggregates (HK$ per tonne) Bitumen (HK$ per tonne) Concrete blocks, 100mm thick For industrial use (light) ($ per 200-litre drum) Diesel fuel For road use (HK$ per 100 litre) Glass Clear sheet glass, 5mm thick (HK$ p er square metre) White tiles, 108mm*108mm Glazed ceramic wall tiles Colour tiles, 200mm*200mm Sawn hardwood, 50*75 Hardwood mm column Non-slip tile, Homogeneous floor tiles 200mm*200mm Steel plates (HK$ per tonne) Steel angles Galvanised mild steel (HK$ per tonne) Steel flats (HK$ per tonne) Steel plate, 4mm thick Metal formwork (HK$ per tonne) Unglazed tiles, 18mm*18mm Glass tiles, 25mm*25mm Mosaic tiles ($ per square metre) Glazed tiles, 45mm*45mm Emulsion paint (HK$ per litre) Paint Acrylic paint (HK$ per litre) Portland cement (ordinary) (HK$ per tonne) 40 3800 45 1108 664 81 66 187 2284 69 6283 6203 6609 4438 52 25 58 32 34 491 2005 38 4200 42 1320 770 81 63 192 3072 72 6674 6568 7212 4881 44 27 55 35 35 511 2006 38 5400 42 1568 886 81 69 203 3218 86 6771 7404 9772 4588 37 22 58 35 34 517 2007 40 5400 43 1572 874 87 77 221 3474 98 7629 10047 8541 5059 47 27 61 35 34 516 March 2008 44 6467 57 1964 990 97 91 260 3607 131 10021 14713 9756 6979 50 29 73 37 36 524 12 Sand (HK$ per t onne) Mild steel round bars, 6mm to 20mm Steel reinforcement High tensile steel bars, 10mm to 40mm Plywood, formwork, 19mm thick Timber formwork Sawn hardwood, 25mm thick plank 20mm diameter pipes, uPVC lined GMS pipes 5. 5 long 32mm diameter pipes, uPVC pipes 4m long (HK$ per Note 1: Note 2: Source: 25 3815 3668 60 1504 166 42 27 4101 3764 67 2140 170 40 34 4237 3877 61 2023 170 41 56 5275 5183 64 2452 166 39 58 7896 8406 64 2666 n. a. 42 Prices from January 2005 onwards are not directly comparable to those published which included delivery charges. Prices are based on June data from 2004 to 2007 and in Hong Kong dollars. Average Wholesale Prices of Selected Building Materials, Census and Statistics Department, Hong Kong Special Administrative Region (Contact person: Miss Kwan, Telephone: 852-2805-6413). Web-site: censtatd. gov. hk (Products and Services Publications Commerce and Industry Average Wholesale Prices of Selected Building Materials). Table 3. 5. 2 Average Wholesale Prices of Selected Building Materials 3. 5. 3 Average Sectoral Wages per Month There is no data on the average monthly sectoral wages for the construction industry. In the following table, the FIRE (financing, insurance, real estate and business services) is used instead for comparison with the manufacturing and personal services sectors. 13 Unit: HK$ per month) Financing, insurance, real estate and business services 2001 Sept 2001 Dec 2002 Mar 2002 June 2002 Sept 2002 Dec 2003 Mar 2003 June 2003 Sept 2003 Dec 2004 Mar 2004 June 2004 Sept 2004 Dec 2005 Mar 2005 June 2005 Sept 2005 Dec 2006 Mar 2006 June 2006 Sept 2006 Dec 20 07 Mar 2007 June 2007 Sept 2007 Dec 10896 11845 10544 10557 10627 10564 10561 10985 10574 10446 10028 9918 9605 9786 9996 9472 9722 10039 10055 9946 10222 10702 10987 11430 11228 11155 Manufacturing 12175 12106 11837 11922 12243 11769 11433 11405 11648 11566 11548 11794 11173 11483 11486 12054 11254 11663 11867 11912 12079 12050 12003 11767 11828 11917 Personal services 6336 6183 6225 6247 6148 6089 6051 5971 5983 5897 5809 6033 6338 6071 5993 5917 5852 5963 5859 6021 6018 6120 6314 6521 6699 6746 Note 1: The average sectoral wages are extracted from the table of â€Å"Average Wage Rates by Industry Sector, Broad Occupational Group†. Note 2: All the average monthly salaries are extracted from â€Å"Supervisory, technical, lerical and miscellaneous non-production workers† sections under the FIRE, Manufacturing and Personal services groups. Source: Hong Kong Monthly Digest of Statistics, The Census and Statistics Department, Hong Kong Special Administrative Region. Table 3. 5. 3 Average Sectoral Wages Per Month 3. 5. 4 Construction Industry Salaries and Wages –Technicians and Unskilled Workers Whilst the material costs have been generally on their rising trend, the average monthly salary of technicians and the average daily wage of unskilled workers in the construction industry have not recovered to their levels in 2003. This lends further support to the argument in Section 5. that material cost increase has more to do with the global price increase in commodities than to the slow recovery of the home construction sector. 14 2003 June 2004 June 2005 June 2006 June 2007 June 2008 April n. a. : data not available Technicians Monthly Salary (HK$) 10985 9918 9472 9946 n. a. 11318 Unskilled Workers Daily Wage (HK$) 601. 1 584. 9 571. 7 565. 9 569. 9 570. 8 Unskilled Workers Daily Wage is extracted from â€Å"Average Daily Wages of Workers Engaged in Public Sector Construction Projects†. Figures are based on the data from â€Å"General Wo rkers†, which include labourers, excavators, concretors labourers, bricklayers labourers, plasterers labourers, heavy load labourers and drivers linesmen. Technicians Monthly Salary are extracted from â€Å"The Supervisory, technical, clerical and miscellaneous non-production workers section† of the â€Å"Average Wage Rates by Industry Sector Financing, insurance, real estate and business services† Sources: (for unskilled workers’ daily wage) Average Daily Wages of Workers Engaged in Public Sector Construction Projects. Census and Statistics Department, Hong Kong Special Administrative Region (Contact person: Miss Lam, Telephone: 852-2887-5207). (for technicians’ monthly salary) Hong Kong Monthly Digest of Statistics, Various issues. Table 3. 5. 4 Construction Industry Salaries And Wages – Technicians and Unskilled Workers 3. 5. 5 Construction Industry Salaries and Wages – Construction Professionals There were some wage increases for certain professionals, but in no way comparable with that of material prices. Between 2004 and 2007, only architects, electrical engineer and personnel manager/ human resources manager/ staff relations manager working in the industry have registered above 20% growth. Their monthly wages increased by 28. 3% over two years for the architects, by 24. 5% for the electrical engineer and by 31. 7% for the last. Administration officer/ executive officer, civil engineer and mechanical engineer also enjoyed a double digit growth in their salaries over the same 2-year period, which were 13. 4%, 14. 6% and 14. 2% separately, and followed by 5. 3% for building services engineers,7. 6% for safety officer and 3. 9% for I. T. / computer manager. Meanwhile, there was a reduction of 13. 8% for financial manager/accounting manager, 7. 5% project manager and 6. 7% for structural engineer. 15 (Unit: Median monthly salary in HK$) Professionals in Building and construction and related trades Accountant Administrative Officer / Executive Officer Architect Administration Manager/ Company Secretary/ Office Manager Building Services Engineer Civil Engineer Electrical Engineer Financial Manager/ Accounting Manager I. T. / Computer Manager Mechanical Engineer Personnel Manager/ Human Resources Manager/ Staff Relations Manager Project Manager Quantity Surveyor Safety Officer Structural Engineer n. a. data not available Source: Report of Salaries and Employee Benefits Statistics, Managerial and Professional Employees (Excluding Top Management), Wages and Labour Costs Statistics Section, Census and Statistics Department, Hong Kong Special Administrative Region. Web-site: censtatd. gov. hk (Hong Kong statistic- Statistical Tables-Subject-La bour Table 029). 2004 June 26900 14900 38500 23500 28500 28700 30200 n. a. n. a. 33200 n. a. 52200 28800 31600 26800 2005 June 22900 16900 41600 n. a. 29300 28000 30700 54500 n. a. 31900 n. a. 50900 28700 29800 21000 2006 June 26900 16900 42600 25600 30800 30900 32700 44600 35800 33800 35000 51300 29300 30300 27500 2007 June 30200 n. a. 49400 n. a. 30000 32900 37600 47000 37200 37900 46100 48300 28900 29200 25000 Table 5. 5 Construction Industry Salaries And Wages – Construction Professionals 3. . 6 Construction Industry Salaries and Wages – Skilled Workers The slow recovery of the construction industry seems to have benefited, if only marginally, some senior managers, architects and engineers only. Of all the 32 categories of workers listed below, only 1 of them had their average daily wages increased over 5 years. Only structural steel welders had the positive growth. However, the growth rate was 3. 5% over 5 years. The remaining 31 categories of skilled workers ha ve seen their wages go down by 4. 5% to 36. 5%. The hardest hit are the building services maintenance mechanics. Their average daily wages dipped by 36. 5% over 5 years. The categories of workers that suffered double-digit wage reduction over 5 years include nearly all the major trades: concretors, bricklayers, drainlayers, mason, bar benders and fixers, metal worker structural steel erectors, riggers/metal formwork erectors, formwork carpenters, joiners, plumbers, construction plant mechanics, rock-breaking drillers, asphalter, bamboo, plasterers, painters and decorators, leveller, marble workers, electrical fitter, mechanical fitters, refrigeration/AC/ventilation mechanic, fire services mechanic, lift and escalator mechanic and power cable jointer. It seems that the construction boom in Macau has not benefited much local construction workers. 16 Concretor Bricklayer Drainlayer Mason Bar bender and fixer Metal worker General welder Structural steel erector Structural steel welder Rigger/metal formwork erector Carpenter (formwork) Joiner Plumber Construction plant echanic Plant equipment operator (load shifting) Truck driver Rock-breaking driller As phalter (road construction) Bamboo scaffolder Diver Plasterer Glazier Painter and decorator Leveller Marble worker Electrical fitter (incl. electrician) Mechanical fitter Refrigeration/AC/ventilation mechanic Fire services mechanic Lift and escalator mechanic Building services maintenance mechanic Power cable jointer 2003 June 1072. 4 971. 9 955. 6 903. 7 1297. 4 890. 4 848. 9 1063. 1 879. 7 980. 7 1254. 0 1059. 2 986. 8 859. 8 809. 2 653. 1 889. 8 876. 6 1164. 6 1725. 2 976. 1 895. 5 907. 7 771. 0 1132. 7 794. 6 764. 2 675. 9 797. 6 769. 1 987. 2 575. 0 2004 June 1026. 3 961. 3 927. 5 849. 9 1225. 4 853. 1 790. 1 966. 2 939. 0 810. 4 1146. 9 1029. 4 933. 8 802. 7 784. 4 604. 6 821. 0 715. 3 1077. 3 1596. 4 934. 9 843. 2 878. 4 757. 9 1003. 2 763. 7 752. 685. 1 762. 7 785. 7 728. 9 725. 6 (Unit: Average daily wage in HK$) 2005 June 2006 June 2007 June 923. 5 940. 3 948. 2 886. 3 840. 1 841. 3 874. 7 861. 9 826. 5 853. 2 933. 6 925. 2 1159. 6 1154. 0 1142. 9 840. 9 822. 3 914. 2 783. 7 786. 6 778. 3 961. 8 884. 8 847. 5 946. 2 920. 2 970. 7 724. 1 777. 7 843. 4 1073. 7 1076. 9 993. 1 982. 1 953. 9 926. 7 903. 3 836. 8 798. 8 807. 6 816. 5 774. 3 765. 6 767. 0 761. 6 572. 5 613. 1 591. 7 851. 2 781. 7 774. 3 783. 9 756. 9 913. 9 1089. 1 1108. 3 1076. 7 1687. 4 1543. 3 1821. 1 883. 3 890. 3 829. 6 878. 2 770. 0 751. 9 853. 6 791. 2 753. 0 700. 3 726. 7 715. 4 969. 2 826. 1 866. 6 742. 0 715. 1 727. 705. 1 589. 1 666. 0 659. 3 595. 4 638. 4 758. 2 737. 8 788. 6 820. 8 815. 7 804. 5 852. 9 743. 7 537. 5 831. 3 600. 0 600. 0 2008 Mar 932. 8 816. 1 814. 7 714. 6 1067. 4 775. 2 783. 6 897. 7 911. 1 829. 9 986. 9 868 784 724. 6 737. 7 602. 6 796. 6 679. 2 1033. 5 1647. 8 802. 8 811. 7 740. 6 686. 2 942. 4 678. 8 683. 8 591. 4 710 655. 1 626. 4 479. 3 Source: Average Daily Wages of Workers Engaged in Public Sector Construction Projects, Census and Statistics Department, Hong Kong Special Administrative Region (Contact person: Miss Lam, Telephone: 852-28875207). Table 5. 6 Construction Industry Salaries And Wages –Skilled Workers 3. 6 3. 6. IMPORT AND EXPORT OF CONSTRUCTION SERVICES Annual Import/Export of Construction Services Latest statistics on import and export of services can be found on â€Å"Report on Hong Kong Trade in Services Statistics for 2006† which is freely downloadable from the government web-site ( statisticalbookstore. gov. hk/en/index. html). However, the construction sector is described as one of the sectors which have less significant amount of TIS (Trade in Services) transactions†. There is not much import of construction services because the great majority of construction works are done by â€Å"local† firms. However, that doesn’t imply discrimination against 17 foreign contractors as the next paragraph will explain. Neither is there much export of construction services, because indigenous local contractors are generally active in the traditional building construction sector, and they may not have the competitive advantages to compete in international markets yet. Hong Kong has been consistently ranked the top in the Index of Economic Freedom for 14 consecutive years ever since it was first co-published by The Heritage Foundation and The Wall Street Journal in 1995. Hong Kong being the freest economy in the world, the local government does not differentiate between foreign and local contractors. Announcing with a Technical Circular (Works Branch Technical Circular No. 9/97: Rules for the Administration of the List of Approved Contractors for Public Works, 26 May 1997), the government has abolished since 1997 the differentiation between foreign and local contractors eligible to tender for public works. From then on, both foreign and local contractors have been subject to the same sets of criteria, rules and regulations. Once registered, they are all â€Å"local† firms, and, by definition, their services are rendered locally and not â€Å"imported†. There is no statistics on the origin of the contractors, and hence there is not much â€Å"importation† of construction services expect for those one-off special cases when construction services have to be procured on an ad hoc basis. 18 The exports and imports of services are listed below: Export of services Major Service Group Year 2003 2004 2005 2006 2003 2004 2005 2006 HK$ million 3968 2941 2436 2083 590 929 1035 1191 Share3 (%) 3. 2. 7 2. 3 1. 9 Yearonyear % change 48. 2 -25. 9 -17. 2 -14. 5 74. 0 57. 5 11. 4 15. 1 Import of services HK$ million 3110 2697 2122 1872 207 246 283 306 Share3 (%) 2. 7 2. 5 2. 0 1. 7 Yearonyear % change 13. 9 -13. 3 -21. 3 -11. 8 32. 7 18. 8 15. 0 8. 1 Net export of services HK$ milli on 858 244 314 211 383 683 752 885 Construction services1 Architectural, engineering and other technical services2 1Construction services include â€Å"(g)eneral construction work (including new work, additions and alterations, repair and maintenance) and installation work at sites, buildings and structures that usually lasts for less than one year†. 2Architectural, ngineering and other technical services include â€Å"(a)dvisory architectural services; architectural design services; contract administration services; advisory and consultative engineering services; engineering design services for construction projects or industrial processes; and urban planning and landscape architectural services†. 3Share (%) is the share of export (or export) in total â€Å"building and construction†. Sources: Report on Hong Kong Trade in Services Statistics for 2006, p. 21. 2006 Gross Domestic Report, p. 41 Table 3. 6. 1 – Annual Import/Export of Construction and Consul tancy Services There is not much import nor export of construction services, though Hong Kong managed to have a positive net export of services between 2003 and 2006. In 2006, there were HK$2083 million and HK$1872million worth of construction services exported and imported respectively, resulting in a net export of services worth HK$211 million. The value of exported construction services represented 2% – 3. 4% of the total â€Å"Building and Construction† only in the years 2003 2006, or a mere 0. 36% of the total value of all exports of services in 2006. On the other hand, there is an increasing trend of export of Architectural, engineering and other technical services. The value increased to HK$1,191 million in 2006. In that year, the total value of â€Å"Building and Construction† was HK$105,960 million. If we assume that professional fees amounted to 3% of the value, the consultancy fees would be HK$3,179 million. Compared to HK$3,179 million, the HK$1,191 million earned from export of services amounted to more than 30%. In Hong Kong, architects, engineers and other professionals appear to have relied on export of services much more than the contractors. It has been commented that professional skills and expertise, which have their origins from the British institutions, have been much treasured by China Mainland, Dubai, India and other South East countries. In Hong Kong professionals seem to have more exportable advantages than building construction firms. 3. 6. 2 Top 5 Countries for Construction Import/Export The sources of imports and destinations of exports of construction and consultancy services are summarised in the following table. 19 Major service group/Region Year Export of services HK$million Import of services HK$million Net export of services HK$million Construction services Asia Australasia and Oceania Central and South America North America Western Europe Others Architectural, engineering and other technical services Asia Australasia and Oceania Central and South America North America Western Europe Others 2003 2004 2005 2006 2003 2004 2005 2006 2003 2004 2005 2006 2003 2004 2005 2006 2003 2004 2005 2006 2003 2004 2005 2006 2003 2004 2005 2006 2003 2004 2005 2006 2003 2004 2005 2006 2003 2004 2005 2006 2003 2004 2005 2006 2003 2004 2005 2006 2003 2004 2005 2006 2003 2004 2005 2006 3968 2941 2436 2083 3737 2941 2330 2054