Risk and Opportunity 

China’s construction market may be a very competitive sector for companies like Leighton Asia, but the country’s continued growth, however small, continues to fuel projects for the company in other parts of the region. Sophie Loras reports.  

Leighton Asia managing director Hamish Tyrwhitt knows where he’d rather be to see out the current financial crisis – and it’s not Australia. 

Despite predictions that China’s growth for 2009 could drop below 7.5 percent, Tyrwhitt still believes China has and will continue to, generate business opportunities for the rest of the region.  

Leighton Asia, which has offices in Hong Kong, Macau, Shanghai, Beijing and throughout the Asian region, specialises in construction and mining services.  

The company first entered the Chinese mainland around 15 years ago but has struggled to find a foothold amongst the country’s booming construction sector.  

"We have always acknowledged that China has a very mature construction market and a very capable domestic construction market,” says Tyrwhitt.  

Generally the company has sought construction opportunities where there is a limited domestic or in-country construction capacity and so construction opportunities in mainland China have generally come off the back of foreign direct investment.  

Where China is playing a key role, is by generating projects for Leighton Asia in other parts of the region.  

"China has never been a huge market for us as far as construction opportunities, however the bulk of the work that we have outside of China indirectly is a result of the growth in China – whether it’s fuelling China’s natural resources or whether it’s money coming out of China and is being invested in other emerging markets throughout Asia,” says Tyrwhitt.  

 Mongolia 

One of those regions is Mongolia. For several years Leighton Asia has been exploring new markets in both Mongolia and Russia from its Beijing office.  

Compared to operating in China, Mongolia has been a very different experience says Tyrwhitt.  

"You really cannot compare the two as far as business opportunities for Leighton’s goes. The two are very, very different.” 

Where projects in China have been largely based on Leighton Asia’s construction expertise, in Mongolia it has been very much capitalising on the ability to provide mining services as the country begins profiting from its rich natural resources.  

The biggest advantage of all however is Mongolia’s lack of domestic competition in the mining services sector.   

"It’s a country with limited population and the mining industry is really only sitting there at the moment as a huge potential,” says Tyrwhitt.  

"There is limited competition for us and we are providing a unique service with our contract mining skills and mining services.” 

There is also the geographical position of Mongolia to be considered.  

"In Mongolia you are sitting there sandwiched between Russia and China which are arguably two of the top four emerging markets in the world and you are sitting right on the doorstop to provide the resources straight into these economies,” says Tyrwhitt. 

Doing business in Mongolia – despite the challenges in navigating the country’s accounting and legal framework – has been significantly easier than China.  

"When you are in a market as big as China if you are not focussed you can tend to chase this incredible pool of opportunities and never really nail any of them, whereas in Mongolia we have been very focused on our approach to purely support the mining industry.”  

While the market in Mongolia remains very small, the long-term potential of its undeveloped resources could also provide opportunities for Leighton Asia’s construction and infrastructure arm.  

"Right now we are looking at supporting the mining industry but bear in mind that if you have got a large coal deposit that is 200km from the Chinese border, how do you get it there? You have got to either build roads or rail and we’d be very interested to participate in that infrastructure.” 

The Future 

For the time being though, Hong Kong remains the heart and soul of Leighton Asia’s business.  

"If you look specifically at Hong Kong this has been a fabulous market for Leightons now for almost 30 years,” says Tyrwhitt. "And even during this time of financial uncertainty or financial volatility, the government continues to support the need for infrastructure here in Hong Kong.” 

The company is currently split into two business units. The first is Hong Kong and Macau which Leighton Asia sees as the core of its business over the next 12 months. “We see a lot of government funded infrastructure projects coming onto the market – and we’ve been quite successful over the last six months in securing a reasonably high percentage of those,” says Tyrwhitt.  

The second business unit comprises of all other markets in the region. 

"We are mindful of the risks in some of these emerging markets at the moment,” says Tyrwhitt. “…which means we have to spread ourselves around to manage that risk.” 

Leighton Asia currently has strong projects in the Philippines and Thailand and is continuing to explore opportunities in Mongolia.  

GFC 

Generally though, Tyrwhitt remains optimistic that during this period of global economic turmoil the company will continue to grow. 

"We are probably not as pessimistic as some other businesses are at the moment,” he says.   

"We are very much aware that the financial crisis and the sub-prime issues have spread globally now but the fundamentals are that China will continue to grow, albeit at a slightly slower pace than what was originally forecast.” 

"In any crisis, yes, there are always issues but at the end of it there are always opportunities as well,” says Tyrwhitt. “And during this period of time we will certainly be keeping our eyes open for opportunities and it’s a company where we are lean enough and fast enough on our feet to capitalise on opportunities… and we will be looking for them.”