The Philippines A Strategic Business Location For Your Construction Engineering and Design Services December 2001.

The PhilippinesA Strategic Business Location

For Your Construction Engineering

and Design Services

December 2001

Construction-Related Engineering & Design

D : In-house or subcontracted computer-aided design services for transport, water/environmental, commercial/industrial, health/sports/educ, housing/institutional and other facilities.Tr : Opening of China market for construction servicesV : Good fundamentals - 75,000 licensed professionals;

15%-30% of cost vis US, Japan, SingaporeM : Top International Design & Build Firms (America, Japan, Europe)Ta : [in the interim, target ENR Top international design firms to outsource low-end segment of engineering design services, i.e., CAD-translation/transcription of completed designs]KSF: CAD/3-D bridging programs, JV-partnerships with top international contractors and design & build firms for international exposure/experience R : Currently projects/market is identified by mother company; need for added investment in training w/c increases cost

DEFINITION/SCOPE DEFINITION/SCOPE OF INDUSTRYOF INDUSTRY

DEFINITION/SCOPE OF INDUSTRY In-house or subcontracted computer-aided design services for

transport, water/environmental, commercial/industrial, health/sports/educ, housing/institutional and other facilities.

WTO Sectoral Classification definition adopts the UN Central Product Classification Version 1.0 (1997) of Architectural & Engineering Services as advisory and pre-design, integrated engineering services design and construction management of:

• Buildings (Residential & non-residential - industrial, commercial or agricultural)

• Engineering Works (Highways, streets, roads, railways, airfield runways, bridges, elevated highways, tunnels and subways, harbours, waterways, dams, irrigation and other waterworks, long distance pipelines, communication and power – cables, local pipelines and cables and related works, and indoor or outdoor sports and recreation facilities)

• Industrial Plant and Processes (Mining constructions, power plant constructions, chemical and related facilities, constructions for manufacturing, automation of industrial processes)

• Other Projects (Traffic control systems, geodetic engineering services, ground water engineering services, contamination & quality management studies, corrosion engineering services, failure investigations)

TRENDSTRENDS

TRENDS

• Increased Outsourcing Activity Worldwide(McKinsey & Company Report – Year 2000)

• Opening up of CHINA

Membership in WTO

Phenomenal and sustained growth has led to increasing construction activities such as residential and urban areas (city modernization), factories for increased manufacturing activities, et.al.

Revenue potential for international design firms and contractors (EPC companies)

GLOBAL MARKET TRENDS The McKinsey & Co., an investment consultancy firm,

projects a bigger demand for outsourcing services that will reach US$ 180 billion in 2010. It projects the following world demand for white collar services:

Remote Education

(11%)Network

Consulting & Management

(4%)

Website Services4%

ENG'G & DESIGN(3%)

MARKET RESEARCH

(3%)

TRANSCRIPTION/LOCALIZATION

(1%)

HUMAN RESOURCES

Services(28%)

CUSTOMER INTERACTION

SERVICES(24%)

Data Search, Integration & Management

(11%)

FINANCE & ACCOUNTING

(11%)

Our Value PropositionOur Value Proposition

OUR VALUE PROPOSITION Good Fundamentals

• Good engineering curriculum produces graduates equipped with the basic skills/principles

• Over 30,000 graduates annually

Labor Availability 75,000 licensed professionals (1995-2000) (About 3,800 OFWs - Skilled Const. Engrs. & Technicians)

76% - Middle East | 5 % - Africa 11% - Asia | 1.39% - Australasia 6% - Americas | 1.37% - Europe

Competitive Labor Costs 15% - 30% salaries vis US, Japan, Singapore

Readily Available IT-enabled Office Space Among the cheapest in the Asian region for broadband-ready, grade A

premium office space

Labor Availability (Construction Related)

Source: Professional Regulation Commission

DISCIPLINELicensed

Professionals

(1995–2000)DISCIPLINE

Licensed Professionals

(1995–2000)

Architect 9,306 Master Plumber 820

Civil Engineer 17,709 Mechanical Engineer 11,652

Interior Designer 274 Professional 671

Landscape Architect 45 Sanitary Engineer 289

Electrical Engineer 25,759 Geodetic Engineer 1,226

Professional 297 Junior 1,414

Associate 114

TOTAL 75,147Assitant 2,606

Master 2,965

Position US Japan Sing RP RP v USRP v Jap

RP v Sing

Architect 5,743 5,598 3,216 918 16% 16.4% 29%

Civil Engineer 6,213 5,687 3,184 918 15% 16% 29%

Systems Engineer 5,460 4,663 2,290 547 10% 11.7% 24%

Field Service Engineer 3,417 3,670 2,008 602 18% 16% 30%

Systems Director 10,433 12.648 5,190 1,545 15% 12% 30%

Software Developer 5,250 4,708 2,792 547 10% 11.6% 20%

Accountant 4,463 4,527 2,290 410 9% 9% 18%

Production Supervisor 3,917 3,485 1,847 449 12% 12.9% 24%

Executive Secretary 2,933 3,068 1,701 382 13% 12.5% 23%

Secretary 2,208 1,720 1,326 309 14% 18% 23%

Chauffer 2,442 1,217 975 231 9.5% 19% 24%

Source: Asiaweek-Year 2000 Salary Survey (USD/month), includes other benefits

Competitive Labor Cost

Source: Colliers Jardine, Global Office Real Estate Highlights Report – as of June 2001

Available IT-Enabled Office Space

One of the cheapest in the Region – for Class A/Prime Office Space (Broadband Ready)

Tokyo (Japan) 13,878.336 51.226 7.5 % 508.872 1,761.150

HongKong (Central) 12,910.080 1.949 8.5 % 787.515 1,363.089

Singapore 10,543.232 4.155 11.6 % 47.337 565.892

Taipei (Taiwan) 3,873.024 3.833 7.8 % 476.597 477.673

Mumbai (India) 3,442.688 0.790 9.0 % 446.474 607.850

Shanghai (China) 2,797.184 6.285 24.0 % 288.325 474.445

New Delhi (India) 2,582.016 0.627 16.0 % 301.235 408.819

Beijing (China) 2,366.848 1.902 13.1 % 359.331 778.908

Kuala Lumpur (Malaysia) 1,291.008 4.408 26.0 % 152.769 254.974

Manila (Philippines) 1,183.424 2.540 16.2 % 171.059 186.120

Bangkok (Thailand) 753.088 2.431 32.5 % 100.053 104.356

Sydney (Australia) 4,841.280 4.517 4.4 % 370.089 488.431

Melbourne (Australia) 2,904.768 3.156 5.8 % 193.651 331.359

Auckland (New Zealand) 1,075.840 1.058 14.3 % 122.646 146.314

Wellington (New Zealand) 1,075.840 0.897 9.1 % 116.191 132.328

Top Annual Quoted Rent

(US$ / Sq. Met.)

Average Sales Price Class A - CBD (US$ / Sq. Met.)

COUNTRYINVENTORY

(Mil. Sq. Met.)

OVERALL VACANCY

RATE

AVERAGE ANNUAL QUOTED RENT (US$ / Sq. Met.)

PRIORITY MARKETPRIORITY MARKET

PRIORITY MARKETTop International Design & Build Firms/Top International Contractors

American, Japanese & European firms dominate ENR (Engineering News Record) Magazines listing of top 200 international design & build firms and top 225 international contractors in terms of revenue earned outside of home country location

Interim: Outsource low-end segment of engineering design services CADD (Computer-aided design & drafting) translation /

transcription of completed designs(e.g. Eichleay Pacific Inc – 50 CADD engrs exporting 100% to

U.S. mother company, located in Eastwood City)

Long-term, convince top international firms to outsource, locate/relocate regional design activities in the Philippines e.g. (Regional design office in RP) Fluor Daniel Inc – Phils, JGC Philippines Inc. and Parsons International Ltd e.g. (Non-RP R.D.O.; Branch/Rep. Office only) Foster Wheeler Inc., Bouygues Construction and Kellog, Brown & Root

TARGETS (Specific Companies in Top Countries)ENR Figures (Year 2000 - 200 Top International Design Firms)

1 USA 7,341.10 44.952%2 UK 2,069.80 12.674%3 Netherlands 1,924.10 11.782%4 Canada 960.70 5.883%5 Japan 827.10 5.065%6 France 607.70 3.721%7 Germany 520.10 3.185%8 Finland 376.40 2.305%9 Egypt 346.00 2.119%

10 Denmark 237.90 1.457%11 Spain 148.60 0.910%12 Italy 97.20 0.595%13 Belgium 96.10 0.588%14 Korea 93.20 0.571%15 Greece 63.60 0.389%

RANKINTL Revenue (US$ Million)

COUNTRY % Share

16 Sweden 63.30 0.388%17 Australia 56.90 0.348%18 China 51.60 0.316%19 Lebanon 37.90 0.232%20 South Africa 33.40 0.205%21 Israel 31.00 0.190%22 Portugal 22.70 0.139%23 Norway 21.80 0.133%24 Austria 20.60 0.126%25 New Zealand 19.70 0.121%26 Switzerland 13.70 0.084%27 Taiwan 13.70 0.084%28 Yugoslavia 8.30 0.051%29 Brazil 5.10 0.031%

399.70 100.000%

RANK

TOTAL

INTL Revenue (US$ Million)

COUNTRY % Share

GLOBAL MARKET REVENUESENR Figures (Year 2000 - 225 Top International Contractors)

1 USA 24,962.80 21.537%2 Germany 18,161.90 15.669%3 France 15,991.60 13.797%4 Sweden 10,321.00 8.905%5 UK 9,182.80 7.923%6 Japan 8,801.60 7.594%7 China 4,769.10 4.115%8 Netherlands 4,522.40 3.902%9 Spain 4,405.20 3.801%10 Korea 3,611.80 3.116%11 Italy 3,437.20 2.965%12 Greece 1,390.70 1.200%13 Brazil 1,108.00 0.956%14 South Africa 943.00 0.814%15 Turkey 841.20 0.726%16 Australia 807.40 0.697%

RANKINTL Revenue (US$ Million)

COUNTRY % Share

17 HongKong 615.00 0.531%18 Belgium 512.40 0.442%19 Denmark 261.20 0.225%20 UAE 233.50 0.201%21 Canada 194.60 0.168%22 Egypt 181.90 0.157%23 Lebanon 119.80 0.103%24 Norway 116.00 0.100%25 Israel 101.10 0.087%26 India 96.80 0.084%27 Yugoslavia 60.50 0.052%28 Macedonia 41.00 0.035%29 Taiwan 33.40 0.029%30 Cyprus 28.00 0.024%31 Portugal 16.00 0.014%32 Philippines 14.90 0.013%33 Ecuador 10.40 0.009%34 Thailand 9.40 0.008%35 Singapore 3.40 0.003%

115,907.00 100.002%

RANKINTL Revenue (US$ Million)

COUNTRY % Share

TOTAL

KEY SUCCESS KEY SUCCESS FACTORSFACTORS

KEY SUCCESS FACTOR(s)

CAD Skills Training

Use of latest computer-aided design software in construction (e.g. STAAD Pro/STAAD III, Fabricad, Autocivil, CADPipe, etc.)

3-Dimensional CAD Training(‘Virtual structures’ - design simulation)

JV-Partnerships with Top International Design & Build firms, Top International Contractors

Access to international markets (Not any Philippine firm is listed in ENR’s top 200 intl design & build firms) To gain international exposure & experience (EEI Corp ranked 187th in year 2000 as a top international contractor only) Transfer of technology (PDS, PDMS, X-Steel, FWP, Autopipe, etc.)

RISK(s)RISK(s)

RISK(s)

Competition from Pakistan, India

Engineering graduates are equally as skilled and speaks English

Dependence on mother company

Projects are accepted and defined by head office Revenues are highly project dependent (e.g. Bechtel Phils hired around 1000 contractuals doing CAD design.

Upon project completion, maintains a staff complement of 15 employees)

Considerable investment

Initial investment (e.g. JGC Phils Inc – USD 18k to 20k per employee Fluor Daniel Inc – USD 23k to 25K per employee) Investment for training (IT equipment, software and man-hours)

THANK YOU!THANK YOU!

ANNEXESANNEXES

E&D Service Niches (Local Companies)

Project Type Scope of Activities (Construction Related)

TransportRoads, Bridges and Viaducts, Ports and Harbors, Airports and Air Terminal Facilities

Water/EnvironmentalIrrigation, Flood Control and Drainage, Municipal Water Supply, Dams and Impounding Reservoirs, Waste Management

Commercial/IndustrialOffice Buildings, Manufacturing Plants, Industrial Parks, Mixed-use Complexes, Power Generation

Housing/Institutional Residential, Hotels, General Land Developments

Health/Education/Sports Hospitals, Medical Facilities, Golf Courses

Source: Internal Survey of BOI-registered firms with E&D activities, July 2001

Project Type Scope of Activities (Manufacturing Related)

Electronics/Electrical Products and Components

Firmware/Hardware, ICs, Connectivity Devices, Telecom Products, Audio & Video, etc.

Mechanical Products Coils, Boilers, Generators, Power Supplies, Appliances, etc.

Home Furnishings Furniture and Fixtures

Philippine Advantage Labor Availability

Source: Philippine Overseas Employment Agency

OFWs (Engg Related Skills) – Year 2001

REGNArchitects

& Town Planners

Drafts.ENGG TECH.

(Chem)

ENGG TECH. (Civil)

ENGG TECH.

(Elec & Elect)

ENGG TECH. (Mech)

Other ENGG TECH.

(N.E.C.)

ENGR (Chem)

ENGR (Civil)

ENGR (Elec & Elect.)

ENGR (Mech)

ENGR (Ind'l)

ENGR (n.e.c.)

ENGR/ SRVYR

(Geodetic)TOTAL (%)

Africa 4 3 - 6 29 28 14 2 42 15 10 7 31 3 5.10%Americas 6 3 - 13 3 1 6 - 14 47 1 20 97 - 5.54%Asia 3 9 4 8 8 78 8 3 32 41 13 23 197 9 11.46%Australasia - 3 0 3 4 6 - - 6 4 4 2 15 6 1.39%Europe - 4 0 2 3 8 5 - 1 - 1 3 25 - 1.37%

Middle East 66 200 19 68 1,134 451 12 11 176 282 15 42 291 93 75.14%

TOTALS 79 222 23 100 1,181 572 45 16 271 389 44 97 656 111 3,806AVERAGE

Africa 588 675 0 890 1,195 1,382 808 1,700 1,454 1,240 1,271 1,717 1,025 0 996Americas 963 825 558 937 710 830 821 825 986 1,254 1,087 1,228 1,140 780 925Asia 3,125 2,750 0 2,883 1,957 660 1,945 0 2,163 3,515 3,125 3,450 4,875 0 2,175Australasia 1,085 1,166 1,185 1,008 894 548 830 690 1,559 2,052 1,590 1,221 2,669 733 1,231Europe 0 488 0 1,510 0 878 1,803 0 2,260 600 995 2,543 3,268 0 1,025

Middle East 0 735 0 1,230 773 554 673 0 1,900 1,453 1,725 1,570 1,200 693 893

AVERAGE 960 1,106 290 1,410 921 809 1,147 536 1,720 1,686 1,632 1,955 2,363 367

SKILLS DEMOGRAPHICS

SALARY AVERAGES (End Aug 2001, USD)

GLOBAL MARKET REVENUESENR Figures (Year 2000 - 225 Top International Contractors)

1 USA 24,962.80 21.537%2 Germany 18,161.90 15.669%3 France 15,991.60 13.797%4 Sweden 10,321.00 8.905%5 UK 9,182.80 7.923%6 Japan 8,801.60 7.594%7 China 4,769.10 4.115%8 Netherlands 4,522.40 3.902%9 Spain 4,405.20 3.801%10 Korea 3,611.80 3.116%11 Italy 3,437.20 2.965%12 Greece 1,390.70 1.200%13 Brazil 1,108.00 0.956%14 South Africa 943.00 0.814%15 Turkey 841.20 0.726%16 Australia 807.40 0.697%

RANKINTL Revenue (US$ Million)

COUNTRY % Share

17 HongKong 615.00 0.531%18 Belgium 512.40 0.442%19 Denmark 261.20 0.225%20 UAE 233.50 0.201%21 Canada 194.60 0.168%22 Egypt 181.90 0.157%23 Lebanon 119.80 0.103%24 Norway 116.00 0.100%25 Israel 101.10 0.087%26 India 96.80 0.084%27 Yugoslavia 60.50 0.052%28 Macedonia 41.00 0.035%29 Taiwan 33.40 0.029%30 Cyprus 28.00 0.024%31 Portugal 16.00 0.014%32 Philippines 14.90 0.013%33 Ecuador 10.40 0.009%34 Thailand 9.40 0.008%35 Singapore 3.40 0.003%

115,907.00 100.002%

RANKINTL Revenue (US$ Million)

COUNTRY % Share

TOTAL

INTERNATIONAL CONTRACTORS With Major Design Office In RP

COMPANY

( In RP )SCOPE OF ACTIVITY

NO. OF EMP.

Total Revenue

(US$ M)

Intl Revenue (US$M)

ENR1 RANK (2000)

FLUOR DANIEL Inc - Phils (USA)

Engineering design, procurement & construction services (global execution)

535

(370+)7,823.7 3,280.2 10

KAJIMA Corp - Phil Dist. Office (Japan)

Construction & engineering design services (Mostly local projects)

500+

(100+)11,791.0 1,373.0 18

JGC Philippines Inc. (Japan)

Engineering design, procurement & construction services (global execution)

600+

(580+)1,482.0 1,144.0 23

PARSONS International Ltd (USA)

Engineering design (global execution) 300+ 1,256.1 535.4 47

C&E Corporation

(Chiyoda Corp – Japan)Engineering design (foreign and local projects)

170

(150+)743.0 422.0 58

EEI Corporation (Philippines)

Construction services – 88% local

(global execution)

6,826

(300+)70.6 14.9 187

Eichleay Pacific Inc (USA)

CADD - Computer Aided Design & Drafting (100% export)

50+

(50)41.9 4.0 219

1 - Engg News Record Magazine – Top 225 International Contractors (in 2000 Intl Revenue), Aug-2001

INTERNATIONAL Contractors/Firms With Design Office In RP

COMPANY

( In RP )SCOPE OF ACTIVITY

NO. OF EMP.

Total Revenue

(US$ M)

Intl Revenue (US$M)

ENR1 RANK (2000)

URS Philippines Inc.

(USA)

Environmental consultancy projects design office

44 201.0 12.0 194

Kvaerner Phil Const. Inc

(Norway & U.K.)

Local projects design office

(Kvaerner PLC Group) 20 8,420.0* 6,540.0* 2*

Hatch Associates Inc.

(Canada) Local projects design office

20 181.4 143.3 30D

* 1999 Intl Ranking D Design Firm Ranking

2MRT-4 Lead Contractor/Design Office in HK 3Design Office in Singapore 4Design Office in Thailand

COMPANY Local OfficeTotal Revenue

(US$ Million)

Intenational Revenue (US$

Million)

ENR1 RANK (2000)

Bechtel Group (USA) Bechtel Phils 12,390.0 6,811.0 3

Bouygues Construction (France) 2

Bouygues Construction

Dragages Asia Phils12,656.0 5,664.0 5

Kellog, Brown & Root (USA) 3

Halliburton Phils, Halliburton Energy Services

Brown & Root Industrial Services Phils Inc.

5,283.0 3,955.0 7

HBG-Hollandsche Beton Groep (Netherlands)

Interbeton Manila Office

HAM Philippines4,614.0 3,568.0 9

Hyundai Engineering (Korea)

4,452.0 2,014.0 14

Foster Wheeler (USA) 4 Foster Wheeler Phils Inc 2,758.0 1,983.0 15

Some INTERNATIONAL CONTRACTORS With Representative/Branch Office In RP

Philippine Advantage OFW Labor Availability

Source: Philippinme Overseas Employment Agency

ENGG-RELATED OFWs - By Location (End Aug 2001)

Middle East (76%)

ASIA (11%)

Africa(5%)

Americas (6%)

Europe (1.37%)

Australasia (1.39%)

Philippine Advantage OFW Labor Availability

Source: Philippinme Overseas Employment Agency

ENGINEERING-Related OFWs (By Skill - End Aug 2001)

ENGG. TECH. - Electrical & Electronics (14.95%)

ENGG. TECH. - Civil Engg (3.09%)

ENGG. TECH. - Chemical (0.00%)

ELECTRONICS & COMM. ENGRS.

(7.73%)

CIVIL ENGRS. (21.65%)

MECH. ENGRS. (5.15%)

INDL ENGRS (3.61%)

ENGRS. - n.e.c. (15.98%)

SURVEYORS / GEODETIC ENGRS(1.55%)

Architects & Town Planners (2.06%)

DRAFTSMEN (1.55%)

ENGG. TECH. - Mechanical (14.43%)

Other ENGG TECHNICIANS (7.22%)

CHEM. ENGRS (1.03%)

Philippine Advantage Labor Availability

Source: Philippine Overseas Employment Agency

OFWs (Engg Related Skills) SALARY AVERAGES – Year 2001

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

US

Do

llar

OFW Salary Ranges (End Aug 2001)

AFRICA AMERICAS ASIA AUSTRALASIA EUROPE MIDDLE EAST

“ We picked the Philippines because of its

engineering talent. They’re more cost-

effective and … competitive globally …

It’s been a win-win situation for us. ”

TESTIMONIALSTESTIMONIALS

ROBERT FLUOR

President, Fluor Corp.

IAN M. BILL Chairman & CEO Foster Wheeler Energy Limited

CLINTON, New Jersey, USA - 21 June 1999 On US$ 4.5 Billion Onshore Gas-to-Power Contract with SHELL Philippines Exploration B.V. in Batangas

“… The array of qualified resources and skills within the Philippines will be a significant factor to enable the project, which has a challenging schedule, to be completed on time …

… Exacting availability, quality, health, safety and environmental standards will be adopted to meet the key objectives of the business.”

(First flow, scheduled October 2001)

TESTIMONIALSTESTIMONIALS

DWIGHT HUNT General Manager-Parsons (Phils.)

“… availability of strongly motivated, effective engineering talent … the people of the Philippines are the country’s greatest assets;

… the people, the supporting infrastructure, and the economy have all come together in a very positive way for us.”

TESTIMONIALSTESTIMONIALS