ICON Q3 2012

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04 QUARTER 2012

International Construction Review

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FINDING NETHER LAND Scarcity of space is driving the world’s most populous places to develop underground

INSIDE: WHY ZHANG YUE WANTS TO BUILD THE WORLD’S TALLEST TOWER TURKEY, ENVY OF EUROPE WE’RE MOVING ONLINE!

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CONTENTS | 3

IN THIS ISSUE 6 GLOBAL ROUND-UP

Concerns raised over China’s prolific dam building in seismic zones; India’s contractors shun major road-building contracts; Brazil’s infrastructure catch-22; America’s pollution-eating street 8 AFRICA EMBRACES THE INFRASTRUCTURE BOND

Infrastructure bonds have turned out to be a huge success for funding muchneeded infrastructure in Kenya, Cameroon and other countries. Plus, failed procurement reform in Nigeria and a study into corruption in South Africa 12 ENVY OF EUROPE

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Turkey is enjoying a surge in its economic clout. The OECD expects it to become the fastest growing economy among OECD member states during 2011-2017. World attention is once again fixed on this crucial bridge between East and West

As 2012 draws to a close we find encouraging signs in the Gulf, with Qatar and Saudi Arabia steaming ahead, definite stirrings in the UAE and Oman sticking to its slow-and-steady pace. The big question mark hangs over Kuwait, where political turmoil continues 20 TOWERING AMBITIONS

Meet the man who is planning to finance and build the world’s tallest building in fewer than six months, and for less than half the cost of the Burj Khalifa Tower. But what’s really surprising is his reason for doing it

DISSING+WEITLING ARCHITECTURE

16 SIGNS OF RECOVERY IN THE GULF

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26 BUILDING UNDERGROUND

In the most populated places on earth, planners are starting to build in the only direction left – down. But will the benefits ever justify the cost? Kristina Smith reports 30 MOVING ONLINE

Exciting changes ahead as iCON moves online, bringing you the same great content, but more of it and more frequently

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32 USING WHAT YOU’VE GOT

An award-winning resort prototype built by local, unskilled labour using sandbags and barbed wire in the remote south of Oman claims to set a new standard for tourism development that is economically, environmentally and socially sustainable

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04 QUARTER 2012

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LEADER | 5

ZHANG’S GAME As the 18th National Congress of the Communist Party of China concluded and the world watched for the next steps in that country’s remarkable journey, many observers were also watching for a construction-specific event in China: the start, or not, of the lightening-speed construction of the tallest building in the world.

It’s hard to know how to categorise the claims of Zhang Yue’s Broad Group to be ready, pending local approvals, to build an 838-metre, steel-framed residential tower dubbed Sky City in Changsha, Hunan Province, and to be able to finish it in just a few short months. Is it pure engineering exuberance? An ego-driven testament to wealth and power?

Zhang is not a typical property developer (see page 20). His company, Broad Group, made its fortune with an unpopular piece of air-conditioning technology. His proposed tower, intended to be 83% residential in a provincial, industrial city, is not a typical property move, like Dubai’s Burj Khalifa or Saudi Arabia’s Kingdom Tower. Rather, Sky City is a serious bid to highlight the world’s pressing need for cheap, safe, resource- and energy-efficient structures, and then to meet it.

His answer is Broad’s prefabricated, high-rise, steel-frame system, which, as five million people have seen so far on YouTube, allowed Broad to erect a 30-storey hotel in two weeks last year. With his factory franchise model already rolled out in six Chinese provinces, he wants eventually to erect his steel structures all over the world, from London to Lagos, from Boston to Beijing, from Riyadh to Rio de Janeiro.

All of these places have a pressing need for buildings – housing, in particular – that are fit for purpose and affordable. Currently, such buildings are not on offer because of old-style construction techniques, which are slow, wasteful, expensive and prone to uncertain quality. The problem is not technical. Zhang and others have shown that cheap, fit-for-purpose and lightening-speed buildings are possible. The problem is that, all over the world, market and institutional forces perpetuate old-style construction techniques and make it too risky for any one company or client to invest in new modes of delivery.

Zhang Yue claims to have cracked this problem. Broad’s industrial building capabilities are in place and he says he’s ready to make his move. Zhang’s game is simple: the world shall bear witness to Broad’s astounding technical prowess and, having seen it, everyone will want a Broad building. Sky City is a towering loss-leader designed to create and capture a global market of stunning proportions.

Whether it gets built or not, and whether or not it works out as Zhang hopes, it certainly is a new and interesting strategy in the built-environment business, and construction companies should note that it comes from outside the industry.

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6 | GLOBAL ROUND-UP

INDIA’S CONTRACTORS SHUN BIG ROAD JOBS India is having trouble finding anyone willing to take on the country’s many road projects, with experts saying the buildoperate-transfer (BOT) procurement model is turning companies and investors away.

Last fiscal year the National Highways Authority of India (NHAI) awarded 49 road building and improvement projects covering 7,500 km, but in the first six months of this year the authority managed to award just four projects covering 560 km, the newspaper Daily News & Analysis (DNA) has reported.

All the awards last year were on a BOT basis, where the bidders shouldered the cost with the expectation of making money in the operation and transfer phase. In fact, reports DNA, in many of these projects the bidders had also offered financial premiums for the contract awards.

But this fiscal year even a 40% subsidy offered by NHAI for taking up the execution of road-widening projects has failed to attract bidders.

JN Singh, member (finance), NHAI, blames it on the apparent economic slowdown. “Tollpaying traffic is less on roads right now. So companies are apprehensive how traffic will grow in future and that is why few players are participating in the bids,” he said, adding that necessary land acquisitions are taking a long time.

But industry watchers say the real issue is that banks are now averse to funding road projects, even though lending to the road sector grew 200% over the last three years.

According to industry experts, reports DNA, loans were based on the strength of the parent company’s balance sheet, while now banks scrutinise the proposed return of the projects.

Amit Srivastava, analyst at Nirmal Bang Institutional Equities, told DNA that investors only support companies who win orders that promise returns of over 18% in long run. icon

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Transport inefficiencies in Brazil are pushing logistics costs up to 12%-15% of GDP, says Credit Suisse

HYDROPOWER

Building dams in seismic zones is dicing with disast More than 130 large dams being built in western China could cause massive damage and loss of life due to their location in seismic hazard zones, a report claims.

“In a worst-case scenario, dams could collapse, creating a tsunami that would wipe out everything in its path, including downstream dams, and cause untold loss of life and property,” said a report released in April by the Canadian environmental group Probe International.

Probe says it overlay a Chinese map of dam locations with US Geological Survey earthquake data and a United Nations’ seismic hazard map and concluded that 98.6% of the dams being constructed in western China are located in moderate to very high seismic hazard zones.

The Zipingpu Dam, for example, was built in a moderate seismic zone. The report says that in the magnitude 7.9 Sichuan earthquake in 2008 that killed an estimated 80,000 people, the dam cracked and shook it so severely that it sank one metre and moved 60 centimetres downstream.

The location of large dams near clusters of recorded earthquakes “is cause for grave concern,” said the report’s author, given a false name

of John Jackson. Probe said the author is “a geologist with detailed knowledge of western China who must remain anonymous”.

Probe further claimed that the dams themselves could trigger earthquakes. It said that shallow earthquakes less than 10km deep could be activated by the repeated filling and emptying of a reservoir in the process of generating power.

“In addition to the hazard of high natural seismicity in western China, reservoir-induced seismicity is likely to increase the frequency and perhaps the magnitude of earthquakes

in this area,” said John Jackson. He added that the positioning of some dams too closely one after another along river courses could create a “deadly domino effect of collapsing dams”.

Reservoir-induced seismicity, or RIS, has been debated hotly around the world since US magazine Science, among others, suggested a link between the filling of the Zipingpu Reservoir and the 2008 Sichuan quake. The idea behind RIS is that the weight of the water and its seepage into fissures can cause rockfalls and trigger earthquakes.

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INFRASTRUCTURE

BRAZIL’S CATCH-22: GROWTH MEANS BOTTLENECKS Hosting both the 2014 FIFA World Cup and the 2016 Olympics has highlighted Brazil’s need to invest heavily in its infrastructure, according to reports.

Brazil’s recent economic success has been driven by high commodity prices and the emergence of a middle class of consumers with easier access to credit. But this has led to a catch-22 in which demand for consumer goods has clogged the country’s insufficient network of highways, logistics parks, ports and warehouses. Meanwhile, rising exports of commodities such as iron ore and soyabeans are creating congestion on highways thousands of kilometres from the coast.

The Financial Times calls the resulting bottlenecks a “chokehold” on Brazil’s economy because it is driving up prices and stifling internal demand. This is why economic growth is expected to fall from an annual rate of 7.5 per cent in 2010 to below 2 per cent in 2012. “Every time we talk with an investor in Brazil, the biggest and the single most important problem they talk about is infrastructure,” says David Beker of Bank

of America Merrill Lynch.

This challenge lies behind the government’s ambitious plan to invest R$955bn (US$470bn) in new roads, ports, airports and power plants, with the participation of foreign investors.

According to the Institute for Applied Economic Research, a government think-tank, annual state investment in toll roads and railways nearly tripled between 2002 and 2010 to a total of just under R$21bn.

But while Brazil’s road network is more extensive in terms of kilometres per 1,000 workers than Russia’s or China’s, only 6 per cent of it is paved, compared with 54 per cent in China and 80 per cent in Russia, according to Goldman Sachs research.

In a World Economic Forum survey of infrastructure quality, Brazil scored 3.6 out of 7, compared with China’s 5.5. Mexico and Chile also beat Brazil on almost all measures, from roads, railways and ports to air transport, with the exception of electricity supply. The number of passengers using Brazilian airports rose 75 per cent between 2007 and 2011,

leaving many of them running at overcapacity.

“Brazil’s infrastructure bottlenecks lead to inefficiencies that end up taking logistics costs to 12-15 per cent of GDP while in the US, Germany and other countries they are on average at 5 per cent,” says Bruno Savaris of Credit Suisse.

Until the early 1980s Brazil and other nations in the region invested heavily in infrastructure. But after a series of financial crises, spending halved to as little as 2 per cent, as governments reined in debt levels. “Total infrastructure investment collapsed in the second half of the 1980s, and the fall has not been reversed in the ensuing two decades,” said a 2010 World Bank report.

Economists at Goldman Sachs estimate that if Latin America, led by Brazil, doubled its infrastructure investment to 4-6 per cent a year in 20 years, capacity would catch up with South Korea, an emerging-market success story. This would boost potential GDP growth from below 4 per cent to about 5.5 per cent. “This would reduce income inequality by 10-20 per cent,” they said in a report this year. icon

SUSTAINABILITY

isaster, report says Some scientists have denied the Sichuan quake was reservoirinduced because it occurred at 14km below the surface.

Probe urged China to disclose details of its dam construction and to launch an independent risk assessment. Zhang Boting, deputy secretary of the China Society for Hydropower Engineering, has countered that no dam has ever failed due to an earthquake, and that as long as dams are not built directly over faults planners can guarantee safety through earthquake-resistant construction. icon

Three Gorges Dam. Environment group Probe International calls on China to commission an independent regional seismic risk assessment

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Chicago unveils “greenest street in America” It eats pollutants, absorbs rain and its plants do not guzzle potable water – these are the headline attributes of what Chicago’s Department of Transportation is calling the “greenest street in America”.

The $14 million streetscape project at Blue Island Avenue in Chicago’s Pilsen neighborhood is the first commercial roadway application of photocatalytic cement, which cleans its own surface and removes mono-nitrogen oxides from the air through a catalytic reaction driven by UV light.

The street diverts up to 80% of the typical average annual rainfall from the sewer system using bioswales, rain gardens and permeable pavements.

Designers hope to eliminate the use of potable water for landscape irrigation by trialling 95 drought-tolerant, native plant species in bioswales and infiltration planters.

Energy use has been cut by 42% thanks to the first permanent wind- and solar-powered pedestrian lights and the first LED pedestrian light poles on a streetscape in Chicago.

High-albedo pavement surfaces were installed to decrease the urban heat island effect. Designers also provided a 131% increase in landscape and tree canopy cover.

For the first time, Chicago required a contractor to track the use of recycled content, recycled materials, and local sourcing of materials. As a

Pilsen neighbourhood

result, 76% of all materials were manufactured and extracted within 500 miles of the project and 23% of all materials were within 200 miles of the project site. 60% of construction waste was recycled and 23% of new materials were sourced from recycled content.

It’s the city’s first installation of sidewalk concrete that has 30% recycled content. The roadway asphalt includes reclaimed asphalt pavement, slag, ground tire rubber and reclaimed asphalt shingles.

The Department of Transport said it hopes the street will lead to guidelines for broader application. icon

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NEW HOPE FOR INFRASTRUCTURE FUNDING Infrastructure bonds have turned out to be a huge success for some African countries, suggesting that, given the right legal and policy frameworks, the region may be able to finance its muchneeded infrastructure from local sources. Shem Oirere reports

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nder-financing of infrastructure has been cited as a major constraint in expanding and improving Africa’s economy. The inadequate capacities of the region’s electricity networks, roads, rail, ports, and water and information communication technology top the factors that have held back Africa from achieving its annual development growth projections.

Deloitte estimates that the continent needs an annual infrastructure budget of US$93 billion, which includes $60 billion for new infrastructure and $33 billion for improving existing capacities. But governments in the region are spending an average of $25 billion annually for infrastructure, leaving a huge shortfall.

The United Nations Development Programme for example says the continent could grow by 7% but this achievement hinges on investments into infrastructure development, particularly on energy, roads, rail and ICT. Huge demand from Asia for natural resources such as oil, gas, iron ore and coal is a major reason for the agitation for better, bigger infrastructure. The region’s increasing population, estimated to have more than tripled to 860 million in the last 50 years, and still growing, exerts much pressure on existing infrastructure. Politicians must deal with mounting public protests over the high cost of living, caused by

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inefficient roads, rail and ports. Deloitte estimates that consumable goods across Africa cost 30% to 40% more because of poor infrastructure.

BUDGET SHORTFALLS Some effort has been made to increase investment in infrastructure. Kenya’s infrastructure went up by 24% in the current financial year to $3.1 billion, up from $2.5 billion in 2011/12. This is despite constraints of delayed uptake of donor funds, road maintenance backlog and lack of local construction capacity.

Uganda has also allocated 29 percent of the total 2012/2013 fiscal year budget for infrastructure up from 27.2 percent the previous year. Rwanda, East Africa’s fastest growing economy, has allocated $512 million in the 2012/2013 fiscal year for infrastructure projects, up from $409 million in 2011/2012.

China is a major source of income. Analysts estimate trade between Beijing and Africa to be around $107 billion per year, a figure they say could grow to $300 billion/year by 2015.

It’s not enough. The African Development Bank cautions: “The vast infrastructure gap has limited their growth potential and in some cases also impeded achieving

The UN says Africa could grow by 7% per year but only with proper investment in infrastructure

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CORRUPTION IN SOUTH AFRICA: WHERE TO START? As the government cracks down on industry corruption, new research suggests it needs to get its own house in order first Research into corruption in the South African construction industry has found that 71% of consultants, clients and contractors have personal experience of it, and that the principal offenders are government officials.

The forms of corruption among public clients include kickbacks from successful bidders, additional payments for administrative services and even “sex for contracts”. One industry member questioned in the report suggested that some public bodies were corrupt from top to bottom. He said: “It is standard practice that you pay for work, pay for processing of payments, pay for meetings, and this starts at the top and the value decreases as the position of the individual changes.”

Another commented: “When I tender as consulting engineer I’m 99.9% of the times phoned for kickbacks, bribes, etc, sometimes during tender stage, most of the time before they want to award the tender.”

The report, entitled “Corruption in the South African Construction Industry”, was carried out by out by Paul Bowen and Keith Cattell of Cape Town University and Peter Edwards of the RMIT University of Melbourne. It was based on 493 responses to a questionnaire that asked clients, consultants and contractors about their personal experiences of corruption.

Although all sections of the industry reported that government officials were the most associated with kickbacks, it also found that architects, engineers and QSs were

South Africa’s Competition Commission has opened files on 70 projects built for the 2010 FIFA World Cup, including piling for the Moses Mabhida Stadium associated with conflict of interest, kickbacks and “fronting” (that is, misrepresenting the racial balance within an organisation to evade the Black Economic Empowerment Act of 2003). Contractors were associated with tender rigging, bribery and fronting.

The most common form of corruption, according to the respondents, were tender rigging and collusion (65%), fronting (64%), kickbacks (64%) and conflicts of interest (63%). The most corrupt groups, after public clients, were contractors, followed by subcontractors and building inspectors. Engineers, architects and quantity surveyors are the least corrupt professionals.

The questionnaire also probed the industry’s attitude to uncovering corruption. It found that public clients’ project planning, financial management and auditing skills were poor, and this made it more difficult to prove corruption.

Eighty-two percent of respondents said they had no confidence in the judicial system, and a majority of respondents mentioned a fear of retaliation and physical harm to themselves or their families, as well as a fear of being

“IT IS STANDARD PRACTICE THAT YOU PAY FOR WORK, PAY FOR PROCESSING OF PAYMENTS, PAY FOR MEETINGS, AND THIS STARTS AT THE TOP” stigmatised as a whistle blower. One said: “It’s never reported due to the belief that government by and large is corrupt at the top echelons.”

Another remarked that “very often

millennium development goals.”

Now, however, a financial instrument is emerging – the infrastructure bond – that was ignored before because of the immaturity of the region’s capital markets. Infrastructure bonds have turned out to be a huge success for some countries, suggesting that Africa, given the right legal and policy frameworks, may be able to finance its infrastructure needs from local sources.

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the party you have to report to is involved. Most people who try to report corruption are marginalised in some manner, or give up. Leaking details to the press is currently the most effective, although they only take up cases selectively”.

South Africa’s Competition Commission has been investigating the country’s construction industry since 2007. In the wake of the 2010 World Cup finals, it announced that it had opened files on 70 projects built for the tournament. The charges involved stadiums and associated road and rail work worth a total of £2 billion [US$3.4 billion].

The commission has focused on collusion in the industry, not government. In February 2011 it said it had uncovered an organisation called “the Party” in which firms “held meetings to allocate tenders and police each other’s behaviour”. In March 2011, the commission referred an alleged piling cartel case to the Competition Tribunal. The commission said projects implicated in suspected bid-rigging for piling included the World Cup Moses Mabhida Stadium and the Gautrain.

It also said that 150 companies had been in contact to inquire about its leniency policy.

“Corruption in the South African Construction Industry” was presented at the 28th Annual Conference of the Association of Researchers in Construction Management in September 2012, and published in Construction Management and Economics in October 2012.

BOLD STEPS Although some countries in the region have tried to improve policies on public private partnerships, launched sovereign wealth funds, and courted private sector banks for additional funding, the infrastructure bond is offering new hope of revolutionalising Africa’s development.

Kenya, Ghana, Cameroon and Zimbabwe have either successfully tapped their capital markets to borrow money RR www.iconreview.org

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NIGERIA’S FAILED PROCUREMENT REFORM

New research into the impact of Nigeria’s 2007 Public Procurement Act suggests it has not improved value for Nigerian taxpayers Nigeria’s attempts to reform its public procurement processes have had no effect on its construction projects, despite the fact that it is reckoned to be the most inefficient in the world, new research has found.

The research looked at 20 buildings completed before reforms of the Public Procurement Act of 2007 were introduced and 20 that were completed after, and found no statistically significant difference between the two groups, both of which suffered from serious delay and overspending.

Nigeria’s Budget Monitoring and Price Intelligence Unit was set up in 2003 to improve the way the government does business. This body ranked Nigeria’s construction industry as the most inefficient in the world. The list of industry and

government failings is a long one.

The principal problems were a lack of transparency and accountability, which made corrupt practices easy to carry out and difficult to prosecute. For example, contracts were often awarded without competitive tender. These problems were aggravated by poor project planning, inadequate budgets, professional incompetence among project staff and over-invoicing by contractors.

The result was gross cost and time overruns, such as the 13.2 billion naira (£50 million) Foreign Affairs headquarters that was supposed to be built in two years, but in fact took almost 12. According to Francis Adetola, president of the Nigerian Institute of Quantity Surveyors, “most public contracts are awarded for political patronage

RR from individuals and institutions through issuing infrastructure bonds, or are at an advanced stage of floating the debt instruments to raise the additional funding.

Kenya took what the country’s Central Bank calls a “bold step” in 2009 when it introduced the first set of project- and sector-specific bonds to fund infrastructure projects. Five infrastructure bonds worth $1.5 billion have so far been issued, says Central Bank Governor, Professor Njuguna Ndung’u.

Part of the proceeds, about $154 million, will be spent on the design and construction of three berths at the new Lamu Port, just one component of a US$23-billion transport corridor linking Lamu to South Sudan and Ethiopia, providing these countries with a route to the global market.

Prof Njuguna says between September 2011 and February this year, the government through Central Bank sold $437 million of 12-year infrastructure bonds.

Separately, state-controlled electricity generator KenGen successfully borrowed $176 million from individuals and institutions through a public infrastructure bond issued to finance phase one of its generation expansion programme, dubbed Horizon One. This phase, initially set for completion in June 2013, will inject an additional 543.6MW to the national grid from twelve projects at a cost of $1.68 billion. The projects include five each for hydro and geothermal and one each for thermal and wind.

With the funds from the infrastructure bond, KenGen has completed six of the projects under Horizon One. KenGen has already invited bids for financial consultancy on raising a www.iconreview.org

or to pay for electioneering cost, or just to pay ‘godfathers’, and less than 40% of the project sum is spent on the project”.

The Public Procurement Act of 2007 was meant to address these problems but the findings of researchers, S Shwarka of Kaduna Polytechnic and N Anigbogu of the University of Jos, show the act has made little difference in the delivery of projects.

Shwarka and Anigbogu also canvassed opinion among a random sample of contractors, consultants and construction professionals. On the positive side, they found that the reforms had had an effect on the use of incompetent professionals, poor project documentation, the quality of work and the unjustified determination of contracts.

But there is a long way to go. The

industry members also made recommendations for improving the performance of public procurement.

The most important were improvements in planning by the project team and budgeting by the public client, followed by more prosecutions of individuals who contravened the Public Procurement Act and, as a corollary, greater political will to enforce the act.

A more diffuse problem is that government and industry exist in a society in which poor quality services and corruption are widespread. Public opinion surveys regularly find that one-third of the population regards the provision of water, electricity, law enforcement, health and education as poor or very poor, and 77% of public officials believe the government operates a system of patronage. As

second bond to finance phase two, which is hoped to add 2,000MW of new capacity when fully completed.

Both the Central Bank of Kenya and KenGen infrastructure bonds were oversubscribed by 130% and 77% respectively, showing the appetite for bond offers.

In August, Ghana joined Nigeria in launching an infrastructure bond to finance its infrastructure. The five-year infrastructure bond was well oversubscribed after receiving bids worth $569 million against a target of $159 million. The Government accepted $477 million at a coupon rate of 23 percent, says Ghana’s Ministry of Finance and Economic Development.

“PROVIDED THE PROJECTS FINANCED ARE WELL CHOSEN AND EXECUTED CAPABLY AND HONESTLY, THE CONTINENT WILL RECEIVE A TREMENDOUS DIRECT AND INDIRECT ECONOMIC BOOST” This was the second 5-year bond this year and the fourth medium- to long-term bond issued in 2012, according to Dr Kwabena Duffuor, Ghana’s Minister for Finance and Economic Planning.

“It is significant to note that about 80% of the bids came from foreign investors,” he said. “The huge foreign investor 04 QUARTER 2012

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Nigerian economy is has grown by an average of 7% for the past three years, but has still been constrained by poor infrastructure provision

the report’s authors point out, these perceptions can only be tackled through economic growth, but this growth is constrained by the failure of the public authorities and the suppliers of construction

services to build the physical infrastructure that the economy needs.

“Impact of the Public Procurement Reform on Public Building Projects Delivery in

Nigeria”, by S Shwarka and N Anigbogu, was presented at the 28th Annual Conference of the Association of Researchers in Construction Management in September 2012.

participation in the auction is an indication of the strong appetite that foreign investors have for Ghanaian risk.”

Zimbabwe, which is struggling to recover from crippling international economic sanctions, has also announced plans for a $30-million, three-year infrastructure bond to raise funds for its weakening electricity supply system.

State-controlled development financier, Infrastructure Development Bank of Zimbabwe (IDBZ), estimates the country needs $20 billion for infrastructure including $12 billion for maintenance costs. The bank estimates Zimbabwe’s energy infrastructure needs for the next three years at $4 billion.

“Investors, particularly long-term investors such as pension and provident funds, and insurance companies, are therefore encouraged to participate actively in the bond issue,” the bank said.

Cameroon has also successfully borrowed from the capital markets to finance key infrastructure projects. Between the last quarter of 2010 and February 2012, the country raised $501 million from the bond market for infrastructure projects including Lom Pangar Dam, Yassa Thermal Station, Kribi deep sea port and upgrading of at least 2,000 kilometers of roads countrywide.

The proceeds included the February 2012 infrastructure bond which raised $20 million and which was also oversubscribed. The government has also approved issuance of another $557 million treasury bonds to finance ambitious infrastructure projects.

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But it is the announcement in August by the African Development Bank (AfDB) that it will launch a regional infrastructure bond that has raised the hopes of the region achieving its infrastructure financing targets.

The bond, when successfully launched, the bank’s president Donald Kaberuka said, will raise an estimated $22 billion, much of it drawn from the region’s central banks reserves.

“Let each Central Bank invest only five percent of its reserves in an Africa Infrastructure Bond. Managed by the African Development Bank, such an investment would in the first year total $22 billion, sufficient to make a major impact on some of the key very profitable projects,” he said.

Analysts, however, say the proposed infrastructure bond by AfDB represents more of a “repatriation drive” since it is targeting a share of $450 billion in reserves held by African central banks “in safe but low-yielding investments in the financial systems of the world’s traditional industrial powers.”

According to an IHS Global Insight release in August: “Projected subscriptions from non-African sources, largely institutional investors, bulk up the anticipated size of the bond programme to about $40 billion, which surpasses the $19 billion per a year currently committed to Africa by AfDB and the World Bank combined.”

“Provided the projects financed are well chosen and executed capably and honestly, the continent will receive a tremendous direct and indirect economic boost although this is not likely to challenge China’s position as the top investor in African infrastructure.” icon

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ENVY OF EUROPE Negotiations over its accession to the EU may drag on, but Turkey is enjoying a surge in its economic clout. The OECD expects it to become the fastest growing economy among OECD member states during 2011-2017. World attention is once again fixed on this crucial bridge between East and West, and any company hoping to expand overseas should take note

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n November this year Dutch Prime Minister Mark Rutte traveled to Turkey to celebrate 400 years of diplomatic relations between the two countries. His host, Turkish Prime Minister Recep Tayyip Erdogan, used the opportunity to slam the European Union for its strict visa policy towards the estimated five million Turks living in Europe.

But he was nice to his guest, noting that bilateral trade between the two countries reached 7 billion euros last year, and that there were 2,000 Dutch companies now operating in Turkey. He said he hoped a solution could be found, and that the Netherlands would back him up.

Rutte responded, according to local press, by praising all that Turkey was doing to align itself with Europe in its bid to join the EU, and added, contrary to what powerful counterparts in other European countries might feel, that he believed Turkey would ‘certainly join the EU in time.’

There have been many dramatic reversals of fortune for both countries since the envoy of the Dutch Empire arrived in the Ottoman court in 1612, but 400 years on, it’s clear who’s on the rise. Turkey suffered during the global credit crunch, with GDP shrinking by 4.8% in 2009, and construction output shrinking by 16% the same year, according to the Turkish Contractors Association. But the economy and construction output bounced back vigorously (see Table 1) and Turkey is now the envy of Europe.

Things have been cooler in 2012, but the longer-term view is promising. According to the Turkish Statistical Institute, Turkey has showed an average annual real GDP growth rate of 5.2% over the last nine years, and the OECD expects Turkey to become the fastest growing economy among OECD member states during 2011-2017, with an annual average real GDP growth rate of 6.7 per cent.

Negotiations over Turkey’s accession to the EU drag on, with

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Turkey hoping now to join by its 100th anniversary as a republic, in 2023.

Much will depend on the fortunes of Prime Minister Erdogan. Strongly proEurope, his AK Party enjoys a majority in the Turkish parliament now, but he faces an election in 2014. This year he submitted a plan to change Turkey’s constitution, creating a new post for a more powerful president with executive powers. If the plan is implemented, in 2014 he would be seeking election to that new presidential post.

Meanwhile, Turkey should be very interesting indeed for any construction company looking to expand overseas. Some big factors driving demand for construction there include high population growth, urbanisation (as the population shifts to cities), repeated earthquakes, and the need to modernise housing and commercial building stock. Big multinational and large domestic companies are setting up in the major cities, leading to office space requirements. And finally, Turkey remains a geographical bridge between Europe, Central Asia and the Middle East. It means that in the globalised world of today there is huge demand for transport infrastructure.

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Ozge Dursun, Turkey manager for UK Trade & Investment (UKTI), a UK-government body that supports UK firms trading overseas, identifies three streams in the Turkish construction sector: 1) domestic infrastructure and public investments, 2) domestic residential and commercial investments, including touristic developments and urban regeneration projects, and 3) projects carried out by large Turkish firms abroad.

THE PICTURE AT HOME Turkey hosted 118 million passengers in 2011, up from 103 million in 2010 – a 14.4% year-on-year growth. The current infrastructure can’t cope with the 150 million air passengers expected to be hosted in Istanbul by 2023, which is why Turkey is planning a third airport for Istanbul, estimated to cost US$5 billion. It is planned to have an annual passenger capacity of 100 million, with potential to expand. The buildoperate-transfer (BOT) project was to be put to tender in 2012, but details have not been announced yet.

Traffic is a major problem in Istanbul, which is why the infrastructure pipeline includes such ambitious projects as the US$1.07-bn Marmaray Bosphorus Tunnel, a third bridge over the Bosphorus, the famous narrow seaway dividing Europe and Asia.

Ms. Dursun said 1,500 km roads have been constructed in Turkey in the last 10 years and the total network reached 65,000 km, including 2,000 km of motorways. The Ministry of

CLOCKWISE FROM TOP: Traffic in Istanbul; new developments in Izmir; Four Winds Residence development in Istanbul; housing development in Istanbul; city centre in Ankara

Transport is planning to have a motorway network of 7,300 km by 2023, and the expected cost of the motorways projects is €35-40bn, most will be financed by the private sector with BOT model.

Projects will be focused on the infrastructure needs of Istanbul, privatising existing toll-roads, and connecting major cities, such as the Çanakkale Bridge and the Ankara-to-Izmir motorway.

According to Ms. Dursun, the yearly need for housing units is about 400,000 domestically, and the residential sector is considered to be the “locomotive” of the economy. Added to that are a variety of ambitious healthcare “campus” projects and numerous comprehensive port development plans.

Overall, Turkey represents significant opportunities for foreign firms in areas such as sustainable construction consultancy, urban regeneration, engineering and design.

“In particular,” says Ms. Dursun, “UK firms with expertise in creative and technical services with good networking skills will get a chance to take part in this high-growth area.” She cited UK consultancies Mott MacDonald and Arup as success stories.

OPEN PLAYING FIELD But other countries are getting in on the act. For example, the largest project in the history of the Turkish Republic is RR

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RR the Gebze-Orhangazi-Izmir Motorway. Part of that project will be the new Izmit Bay Bridge, the second longest suspension bridge in Europe and fourth longest in the world, located at the eastern end of the Sea of Marmara.

The overall motorway project was tendered in April 2009 and a consortium comprising five Turkish companies and one Italian company, Astaldi, was selected to build and operate the facility for the 22-year concession. In September 2011 the consortium awarded the contract to build the Izmit Bay suspension bridge to the Japanese consortium IHI-ITOCHU. Metehan Caglar Sonbahar, senior construction consultant at Akinci Law Office in Istanbul, says: “We see nowadays construction and energy firms and investors from Spain, Germany, Austria, France and the USA trying to enter Turkey by establishing branches, tendering in new projects and acquiring local companies.”

Turkey is renowned for its overseas contracting prowess.

There were 33 Turkish firms in Engineering News-Record’s 2012 list of the top international contractors, coming second only to China and easily beating traditional overseas heavyweights such as the US, Italy, Spain and Japan. But at home, competition is fierce.

Mr. Sonbahar says there are many contractors and subcontractors capable of providing all different types of contracting services, and thousands of young and wellqualified construction professionals. Turkey is also a big producer of materials such as cement, concrete, reinforcement steel and ceramic tiles.

But there is still room for foreign competition. “The substantial advantages of foreign firms in the Turkish market are advanced engineering expertise and major-project experience,” says Mr. Sonbahar. “This helps, as Turkey has been investing in complex engineering projects from immersed tunnels to nuclear power plants.” He added that technology by itself is not enough, and foreign firms regularly team up with Turkish contractors to bid.

TURKEY ABROAD Over the past 40 years, Turkish firms have undertaken approximately 6,047 projects in 90 countries with more than US$191.6 billion in project value, according to Turkish government statistics.

Turkish firms have been adept at capitalising on cultural,

TURKEY’S RECENT GROWTH PERFORMANCE Source: Turkish Contractors Association

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GDP Construction

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10% 9.2%

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linguistic and geographic affinities. The Turkish Contractors Association (TCA) says that before the Libyan civil war more than 90% of Turkish contractors’ international business took place in Middle Eastern, African and Eurasian countries (such as the former Soviet republics of Central Asia). The Libyan civil war disrupted many contracts held by Turkish firms, but the TCA maintains that 88% of international business still takes place in Turkey’s hard-won sphere of influence.

In this geographic arena Turkish firms play to their strengths, says Mr. Sonbahar, including technical knowledge, business experience, strong discipline, adaptability to new technologies, and a skilled workforce that is cheaper than Western or Japanese firms. He added that Turkish contractors have a good understanding of the political and demographic dynamics of the region and lost no time rekindling cultural, linguistic and historical ties after the collapse of the Soviet Union.

“Bilateral agreements and visa regimes with those countries has inevitably improved day to day operations of Turkish contractors working abroad,” says Mr. Sonbahar.

THE CONTRACTUAL ENVIRONMENT AT HOME To date major public projects have usually been tendered through various forms of public-private partnership (PPP) schemes and EPC contracts.

Turkey is one of the first countries in the world to have developed its own PPP legislation. In 1984 Turkey passed a law enabling private sector involvement specifically in power plant projects. From 1992, after the establishment of PFI in the UK, Turkey enacted further laws for transportation, energy, water supply, which enhanced the legal base for PPP. 04 QUARTER 2012

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The largest project in the history of the Turkish Republic is the GebzeOrhangazi-Izmir Motorway, which includes the new Izmit Bay Bridge at the eastern end of the Sea of Marmara. Turkey plans up to €40bn worth of motorway projects in the coming years

The first PPP projects in Turkey concerned power generation and drinking water facilities, which were carried out as BOT and later as BO projects. Between 1995 and 2001, 30 power plants with a total capacity of 8500MW – nearly one fourth of Turkey’s power production capacity – were completed under BOT and BO models.

Since then, further projects completed under PPP schemes have included airports, motorways, bridges, industrial ports, marinas, customs stations, highway roadside facilities and a road tunnel.

Despite the wide use of PPP models, Turkey does not have a central PPP authority. Furthermore, there is a lack of harmonisation as there are multiple, sector-specific PPP laws.

For a long time the government has been working on new, unifying piece of legislation. After many years of discussions, in November 2007 the government’s privatisation administration finally proposed a draft. It was expected to be on the parliamentary agenda in 2009.

“We’re hoping for a new PPP law under the new government,” Michael Davey, Turkey director of the European Bank for Reconstruction and Development (EBRD), said in 2011. “Following that, we would expect to see a lot of privatesector investment.” But the industry is still waiting. Also the lack of a central administrative agency for PPP projects means different government bodies run projects in different ways, which creates issues in coordination.

The industry has responded positively to PPPs but considering that Turkey is planning to commission around US$50 billion in infrastructure projects over the next 10 years, a comprehensive legal framework with a central public body, plus improved institutional capacity in other public bodies, would help ensure efficient delivery and value for money.

On the industry side, firms should improve skills in detailed, whole-life project costing and economics, and contract and risk management. We may also add selecting the right project to tender, and improved operations overall.

Turkish contractors are flexible and experienced in all procurement structures envisaged by the FIDIC books, including the ‘design and build’, unit price and EPC/Turnkey models. Various PPP models are common in Turkey and most have supporting legislation: l BLT (Build-Lease-Transfer): A private entity finances and builds a facility and leases it to the public authority.

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Ownership remains with the private entity for a period, after which ownership and operational responsibility go to the public authority at a previously agreed price. This model is mainly used in new healthcare facilities. BLT finds favour with foreign investors because the private entity maintains the property rights while avoiding operational risks.

BOT (Build-Operate-Transfer): The asset is financed, designed, built and operated by a private entity for a period, after which ownership is transferred to the public authority. In Turkey BOT is generally implemented in complicated construction projects such as power plants, highway and bridge projects.

TOR (Transfer of Operational Rights): The public authority transfers its operating rights to the private sector for a period and under certain terms. Proprietary rights are not transferred.

BO (Build-Operate): Ownership of the facility which is financed, designed, constructed and operated by the private entity, is not transferred to the public authority. This model is being used mainly in power plant projects.

Turkish contractors find they can generally export their knowledge and experience of these models to neighbouring countries. Over the years they have become flexible project organisers and work with the requirements of the given region, such as the requirement that a certain percentage of the workforce to be locally sourced. Main Contractors may choose to subcontract all specialised work of a power plant, on one hand, while building housing complex with their own direct labour force on the other.

Because Turkey is working hard to align with international processes in its bid to join the EU, there are no Turkey-specific standard contracts. While the Public Procurement Agency does have “typical” contracts for public construction works, these are usually just models on which public bodies base their own contracts, and are guidelines on the Public Procurement Law. Instead, the forms generally accepted as standard elsewhere in the world are used, sometimes in Turkish translation. For instance, the Association of Turkish Consulting Engineers and Architects publishes official Turkish versions of FIDIC contracts. icon Thanks to Stuart Wilks of Hill International for help in compiling this report.

THREE NOTABLE TURKISH CONTRACTORS Selected by Metehan Caglar Sonbahar RENAISSANCE CONSTRUCTION Renaissance Construction was founded by a Turkish engineer in around 1993 and since then the company has developed its business mainly in Russia and Turkmenistan, and has become one of the top 100 contractors in the world.

Renaissance Construction develops and builds, among other things, shopping centres, hotels, heavy industry plants, power plants and infrastructure. Renaissance also operates in Ukraine, Libya, Iraq, Qatar, Austria, Saudi Arabia and Azerbaijan. A subsidiary, Renaissance Energy, has also been established recently.

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GAMA HOLDING Gama is probably the first Turkish contractor to operate in western Europe. Established in 1959, Gama has built power plants, refineries, cement plants, petrochemical plants, high rise buildings and bridges. With its offices in Europe and Middle East, Gama operates in Saudi Arabia, Ireland, Russia, Macedonia, Jordan, Latvia, CIS and so on.

Subsidiaries include Gama Industrial Plants Manufacturing and Erection Inc., Gama Energy Inc., Gama International B.V., Gama Power Systems Engineering and Contracting Inc., and Gama Trading and Tourism Inc.

ENKA CONSTRUCTION Established in 1957, Enka is the first Turkish construction company to go abroad, in 1972, to build Benghazi Cement Plant in Libya. Since then it has worked in Russia, Central Asia, Libya, Saudi Arabia, Iraq, Croatia and Ethiopia. It has around 10 subsidiaries operating in three continents, and has for decades worked with America’s Bechtel.

These three firms share an understanding of the dynamics of the different countries they work in, a multinational working mentality, and knowledge of diverse business sectors.

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SIGNS OF RECOVERY As 2012 draws to a close we find encouraging signs in the Gulf, with Qatar and Saudi Arabia steaming ahead, definite stirrings in the UAE and Oman sticking to its slow-and-steady pace. The big question mark hangs over Kuwait, where political turmoil continues

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n January, construction spending across the six Gulf Co-operation Council (GCC) markets of Kuwait, Saudi Arabia, Qatar, the UAE, Bahrain and Oman was US$7.5 billion. By December, it is forecast to fall to US$5.4 billion, thanks in large part to a fall in spending in the UAE. At US$3.9 billion, Dubai and Abu Dhabi accounted for just over half of the regional total. This is forecast to fall 60 per cent to US$1.6 billion by the end of the year.

The reason for plummeting demand in the UAE is that projects begun before the 2008 crash are being completed this year, and little new work has been commissioned over the past two. This year, work worth US$58.3 billion will be completed, according to economic consultant MEED Projects; since the second half of last year, US$21 billion of new contract have been awarded – a shortfall of more than US$37 billion.

This means that Saudi Arabia will be the region’s largest market in terms of spending, even though the Kingdom’s performance this year is expected to be flat at about $1.9bn a month. By comparison, the monthly spend will be US$700900 million in Qatar, US$350-400 million in Kuwait, US$170210 million in Oman and US$150-190 million in Bahrain.

Looking ahead, the UAE is expected to recover in 2013, reaching a peak of $2.19bn in June as a result of some major contracts awarded this year, notably the Dubai and Abu Dhabi airports. After the June peak, spending in the UAE will decline again, and in September will once again be replaced by Saudi Arabia as the region’s most active market, even though Saudi spending in 2013 will stay at the $1.9bn a month level.

QATAR, WORLD CUP WONDER Qatar may not be the largest market in the GCC, but it will be the one with the fastest growth. The peninsula is principally known for two things: the fact that its 2 million people have the world’s highest per capita income, and that it was chosen to host the 2022 World Cup Finals. Put these facts together and you would expect them to add up to a boom in public spending.

However, there are two further considerations. One is that Qataris may be statistically the richest people on Earth, but the country still lives with the legacy of centuries of poverty, compounded by the reign of Sheikh Khalifa bin Hamad alThani, who was overthrown by his son in 1995. The second is that oil and gas make up about 65% of the economy and 85% of export earnings, www.iconreview.org

and although the gas reserves are thought to be the third largest in the world, the oil will run out about 10 years after that World Cup tournament. As a result, Qatar is in a great hurry to diversify its economy.

These problems are addressed by the Qatar National Development plan, which began last year, and which sets targets and timetables for public investment over the next five years. Some fairly wild figures have been tossed around for Qatar’s projected spending in the next 10 years, varying between US$240 billion and US$138 billion. If we stick to the government’s outline budget, the total figure for investment by the government and the quasi-public oil industry is US$125 billion, of which US$65 billion is earmarked for infrastructure projects.

Qataris travel everywhere by car, so it is not surprising that the single largest item of expenditure will be on roads: projects worth US$20 billion are planned in the next five years, including about US$3 billion for a 40km causeway linking Qatar with Bahrain. Intriguingly, the causeway is also required for a US$25 billion rail link between Doha and the rest of the Gulf Co-operation Council. This would take the form of a loop in the US$30 billion rail line that is planned between Kuwait City and Muscat, the capital of Oman at the eastern edge of the Gulf, which is seen as an important element in integrating the disjointed regional economy.

However, the focus of all this spending will be Doha, the capital, home to about two-thirds of the emirate’s population.

This is to get an international airport (US$11.1 billion), a deep water seaport (US$5.5 billion) and a metro, but the most spectacular project will be Lusail City, a 35km2 suburb to be located about 15km north of the city centre. As well as providing 250,000 people with homes, luxury shopping facilities, marinas, a choice of golf course and a “snow dome”, it will be the setting for the 86,000-seat, air-conditioned Lusail stadium, which will be the venue for the first match of the 2022 World Cup finals. The total cost for all this is expected to be something like US$25 billion.

In addition to Lusail, Qatar plans to build eight solarpowered open-air stadiums designed by the German architect Albert Speer and Partner and to renovate three others. One interesting by-product of this activity is the development of Qatar’s solar power industry.

Electricity to cool the stadiums will be generated with photovoltaic panels and solar thermal collectors, and scientists and engineers at Qatar university have developed a solar powered gas-filled clouds that will shade spectators and players. And in a symbolic diversification away from both 04 QUARTER 2012

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hydrocarbons and Doha, the Qatar Science and Technology company will develop a polysilicon plant for photovoltaics at Ras Laffan Industrial City in the north of the country. The plant will produce more than 3,500 tons a year, and has been designed with expansion in mind.

The government, which is hoping to supplement its own investment with money from overseas, has allowed 100% foreign ownership in some sectors, and has adopted a system of dual funding and the PPP model. According to National Development Strategy (NDS), the expected investment by the private sector is around US$130 billion.

TOP: Shelved schemes are coming to life in Dubai BELOW: Lusail stadium in Qatar

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UPS AND DOWNS IN THE UAE When the great crunch came in 2008, Dubai’s property market disappeared, leaving a cloud of unpaid invoices and a landscape dotted with half-finished developments. Four years on it seems that the emirate is beginning to recover, with property agent Jones Lang LaSalle reporting steady rent increases and price growth in the hotel, retail and residential sectors, but as yet only in the prime locations.

As a result, some of those semi-completed schemes are shuddering back into life. For example, the Dubai master developer Meydan has said that it is developing two more stages in its Meydan City masterplan: a vast housing scheme in Nad Al Sheba which comes with canals and “English, French and Japanese-style gardens”, and the 72-storey Meydan Tower. It has also announced that work is to start on Meydan Sobha City, a collection of 280 villas, 13 high-rises, entertainment, a retail complex and schools that is to be co-developed with India’s Sobha Group. That site, alongside Al Khail Road, will be the largest project to be launched in Dubai in the last four years.

The other big Dubai-based announcement came from Dubailand’s Falconcity of Wonders, the long-delayed project that runs alongside Emirates Road. The developer announced that US$1 billion “Land of India Taj Arabia”, the city’s first monument replica, will be completed by the end of 2014. The zone will feature a copy of the Taj Mahal; other zones will have replicas of the Eiffel Tower, the Leaning Tower of Pisa, the Pyramid of Cheops and a guess at what the Hanging Gardens of Babylon might have looked like.

Dubai World Central, the mega-development that plays host to what will be the biggest airport in the world, said the US$33 billion project was taking shape. Chief operating officer Rashid Bu Qara’a said that his company was planning to develop Al Maktoum International Airport as a private jet hub while the facility waits for commercial traffic to transfer from Dubai International Airport after 2020.

Meanwhile, in Abu Dhabi, a consortium has been chosen to build the midfield terminal for the emirate’s international airport. The group is made up of TAV Construction, the inhouse contractor of Turkey’s TAV airport group, Athens-based Consolidated Contractors Company (CCC) and Arabtec. It has been the frontrunner for the contract since it submitted a low bid of US$2.87 billion. This is the largest ever construction contract awarded in the UAE, and beat South Korean bidders Hyundai Engineering & Construction, Kumho Engineering & Construction, as well as China State Construction Engineering Corporation and the local Al-Shafar General Contracting Company.

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RR KUWAIT ON PAUSE The economy of Kuwait suffers from serious structural problems. The oil industry supplies 95 percent of its export earnings and its government revenues, and much of this money has been used to create a corporate welfare state in which 92 percent of the citizenry work for the government or a stateowned company, leaving expats to staff the private sector.

After the Arab Spring the government announced plans to invest some of its petrodollars in improving the country’s rundown infrastructure and diversifying its economy. A budget of US$110 billion was allocated to national investment, including a comprehensive renewal of pretty much every part of its infrastructure.

But while administrators hone plans for dredging harbours and building rail links to the Mediterranean, the kingdom has been in the grip of a slow-motion political crisis, at the root of which is a power struggle between the elected, 50-year-old National Assembly, unique among the Gulf states, and the Emir, Sabah Al-Ahmed Al-Sabah, who controls the assembly through his appointed Council of Ministers, or cabinet.

Frustration among Kuwait’s political activists over perceptions of government mismanagement and corruption reached a tipping point on 20 June when the constitutional court annulled the results of the February 2012 election, which had returned an assembly dominated by MPs, including a strong Islamist bloc, hostile to the Emir’s cabinet.

Since then a state of war has existed between executive and legislature, during which MPs used their power to crossexamine and make votes of no confidence in ministers, thereby forcing a number of them to resign. The Emir responded by issuing a decree that changed the election laws; in the election to be held in December, the electorate will have one vote each, rather than the four they previously possessed.

The opposition claims this favours the government, and have held a number of demonstrations, including the largest one in Kuwaiti history, on 15 October, which was called to protest against the government’s decision to detain three opposition MPs on grounds that they “undermined the status of Kuwait’s ruler”.

Commentators wonder what will happen next. Kristian Coates-Ulrichsen, a Gulf specialist at the London School of Economics, told The Financial Times that matters might reach a tipping point at which the Al-Sabah family could lose control of events. The ruling family has dissolved parliament for extended periods before when its security has been threatened, but the extent and intensity of political protest in Kuwait is unprecedented. On 4 November, riot police used stun grenades and smoke bombs against thousands of demonstrators who were blocking motorway south of the capital in Mishref. On 11 November a reported 18,000 demonstrators defied a ban on public protests to gather outside the National Assembly. Islamist opposition MPs are calling for a boycott of the December election.

The political unrest is likely to delay the national renewal plan for two reasons. Firstly, the plan assumes foreign, private investment, and the ongoing political chaos will turn investors away. Secondly, the plan requires a great deal of enabling legislation in the Kuwaiti parliament, and this cannot happen while parliament is locked in a struggle with itself. www.iconreview.org

SAUDI ARABIA, IN A LEAGUE OF ITS OWN Saudi rulers will be watching Kuwait closely. In spite of its vast oil wealth the Kingdom has a swelling population of young people coupled with a housing shortage and high unemployment. The ruling family holds a tight monopoly on power, yet corruption is rife and a deep strain of religious extremism has tended to challenge its legitimacy. However, the Saudi state is ploughing ahead with its ambitious development plans.

Owners of about 1,800 properties in central Mecca which are to be removed to make way for an expansion of the Grand Mosque are set to share around US$8 billion in compensation payments. A country prepared to spend that kind of money just to clear the way for development is clearly in a league of its own. The expansion will enlarge the mosque’s northern courtyard, and make way for two railway stations and three public transport stations.

Three of the world’s oldest mosques will go in plans to expand the kingdom’s second holiest site, the Masjid anNabawi in Madinah, where the Prophet Mohammed is buried.

The plan is to create a mosque with the astonishing capacity of 1.6 million worshippers. This redevelopment is due to take place to the west of the existing mosque, which also contains the tombs of Mohammed’s companions Abu Bakr and Umar.

Tenders for the US$16.5 billion Mecca Metro are due to be called for in January 2013, according to Osama Al Bar, the mayor of Mecca. Al Bar made the announcement as this year’s Haj pilgrimage recorded 2.5 million pilgrims. The Mecca Metro network has been designed specifically to ease congestion during this period. It will cover 182km when its four lines are completed in 10 years’ time. The first stage is due to be completed in three years, and will stretch for 122km.

Economic consultant Business Monitor International suggests that huge investment will be made in social infrastructure sector is in the pipeline, in part to preempt any signs of the Arab spring in the Arabian peninsula.

Something like US$385 billion is to be invested in The Ninth Development Plan (which covers 2010-14) and a further US$130 billion is to go on a package of social benefit

ABOVE: Kuwait has been rocked by unprecedented political protests this year

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packages; both are heavy on healthcare and education, and the potential for private sector participation is increasing. Huge social housing projects are also in the pipeline with the construction, hastily announced in the wake of the Arab Spring, of 500,000 housing units.

BELOW: Saudi Arabia has spent US$8bn just acquiring land for the Grand Mosque expansion

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OMAN: SLOW AND STEADY Oman is usually thought of as the somewhat sleepy neighbour of Dubai and Abu Dhabi, and it is true that developments in the sultanate tend to be low-rise. But it is also true that it was less affected by the financial crash: the pace of development did slow, but it never came to a halt, thanks in large part to the government’s ambitious programme of infrastructure improvements.

For example, the redevelopment of Muscat International airport, undertaken by a joint venture between TAV Construction and CCC. This was begun in 2009 and is due to finish in 2014. Nick Smith, chair of the CIOB’s Oman centre, reports that steel structures for the new terminal have just arrived on site.

Overall, construction activity seems to be picking up.

Carillion has announced a number of contracts in the country, the largest being a US$182 million project to build a mixeduse development for the Oman Public Authority for Social Insurance, on which work has already commenced. There is also a 250-unit residential and mixed-use scheme by Aqar, at Bowsher heights, which has sold out and is under construction, as is The Wave Muscat, a marina development which includes 121 waterside apartments, complete with a Waitrose supermarket. Meanwhile, Muscat Hills has teamed up with Towell to construct around 70 residential properties and tourist developer Muriya has opened up hotels in Sifa and also in the south of the country in Salalah.

On the public sector side, the Ministry of Transport and Communications has invested US$1.85 billion in a port at Duqm and Petroleum Development Oman is moving ahead with the redevelopment of its campus in Muscat at Ras al Hamra.

For consultants, transport is also a potentially rewarding sector – nine firms are reportedly bidding for the US$155 million design-and-build consultation contract for Oman’s first major railway. Those reportedly involved are Cowi from Denmark, DBI and Aecom from the US, Systra from France, Parsons Brinckerhoff from the US and Mott MacDonald from the UK. Other names on the list include a consortium comprising Italy’s Italferr and Worsely Parsons of Australia, Egis Rail from France, Pointec Group from Nigeria and a consortium of Korea Rail and the Hyundai Group.

Building materials such as cement are in demand and industry analysts at Gulf Baader Capital Markets are rating the country’s cement producer Raysut as a hot investment. Many of those involved in the construction supply chain are seeing increased demand this year, and the outlook for 2013 is undoubtedly positive.

Nick Smith says: “Business in Oman is cautious by nature, but there is a degree of optimism that has not been felt since the boom times of 2007 and early 2008. We don’t want another roller coaster ride – steady progress and solid sustainable growth is what the business community is seeking.”

Smith said the majority of on-site labour in Oman is from the Indian sub-continent. “I do not see this changing, even with government employment initiatives that favour Omanis.

Few Omanis would choose a career on site. It is in the design, engineering and construction finance professions where the “Omanisation” programme may be more successful.” icon Thanks go out to CIOB members in the Gulf region for their help in compiling this report

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CHAIRMAN ZHANG AND HIS WORLD-SAVING TOWER Meet the man who is planning to finance and build the world’s tallest building in fewer than six months, and for less than half the cost of the Burj Khalifa Tower. But what’s really surprising is his reason for doing it. By Wang Fangqing and Rod Sweet

T

he year is 2015, and the world has been visited by an apocalyptical series of floods, plagues and industrial disasters that killed millions. An emergency session of the UN General Assembly has convened and has unanimously passed Resolution 1892. It calls for oil production in the Gulf to stop. Nuclear power projects are to be frozen and nuclear weapons destroyed. Every member state pledges that it will punitively tax greenhouse gas emissions and immediately stop polluting rivers. There are no exemption clauses.

The UN Secretary General takes to the podium. Instead of celebrating this historic moment, he moves slowly and his eyes are dull. Unbearable to him is the knowledge of the millions killed in just a few months by man-made environmental degradation. Choked with sobs, he curses former American president George W. Bush for not signing the Kyoto Protocol. He laments the blind pursuit of industrialisation in the developing world. For a moment he loses the power of speech altogether before rallying, and crying out that, at last, the human will to survive has forced the world’s statesmen to choose a higher ideal.

He does not say “I told you so”, but he could, because he did. For the UN Secretary General is none other than 67-yearold Al Gore.

This operatic scene concludes an 8,500-word visionary

Sky City 838 m

essay entitled “The World in 2015”, written in 2005 by Zhang Yue, the chairman of China’s Broad Group.

Broad Group is the air-conditioning-giant-turned-builder that claims its subsidiary, Broad Sustainable Buildings (BSB), is ready and waiting to erect the world’s tallest building: an 838 metre, 220-storey steel-framed residential tower in Changsha, a city of 7 million people in the south eastern province of Hunan. If it gets built, it will be a neat 10 metres taller than the Burj Khalifa Tower in Dubai.

Zhang claims, further, that this building, to be called Sky City, will use a fifth of the energy consumed by conventional designs, that it will be able to survive an earthquake of magnitude nine on the Richter scale, that its construction cost it will be less than half of the Burj’s and, thanks to Broad’s

“IF YOU REALLY HAVE TO COMPARE, JUST COMPARE US WITH MAKING AN AIRCRAFT, BECAUSE THE TWO DEMAND THE SAME ACCURACY AND QUALITY” ZHANG YUE, CHAIRMAN BROAD GROUP

900 m

Burj Khalifa 828 m

Tokyo Skytree 634 m

Shanghai Tower 632 m

Abraj Al Bait Towers 601 m

600 m

300 m

0m

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SKY CITY PARTICULARS It will be built in Changsha, costing about RMB4 billion (US$631.9 million), compared with US$1.5 billion for the Burj Khalifa Tower (BKT) in Dubai.

According to Broad Group, the company that will finance and construct it, the 220-storey, steelframed tower will be 10 metres higher than the current world-record holder, the 828-metre BKT. It will have a floor area of something like 1 million square meters, 83% of which will be used for

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apartments housing about 17,400 people. The rest will be taken up with facilities such as hospitals, schools and malls.

Incidentally, it may seem odd to construction professionals under pressure to adopt digital technology such as BIM, but Zhang Yue, the chairman of Broad, hates computers. “The computer is a terrible thing that eats away creativeness,” he told iCON. “In Broad, all the design drawings have to be produced manually.”

Artist’s impression of Sky City, the 838-m steelframe tower proposed by China’s Broad Group

unique air-conditioning technology, that the air inside the tower will be 20 times purer than Changsha’s smoggy air outside.

Most astonishingly, he says his company will build this tower in a few months, at a rate of five storeys a day, once government approval (which was due as iCON was going to press) has been given. The Burj, meanwhile, took five years.

A lot of people are asking if Zhang is for real. That’s why his essay, “The World in 2015”, translated into patchy English and given pride of place on the Broad Group website, is a compelling read. The temptation is to hunt for clues as to whether the author, who says he will perform the most amazing feat of construction in the history of the world, is a wise man or crazy.

But you reach the end none the wiser. Hardly any of Zhang’s predictions, from our vantage point in the closing days of 2012, look set to be true by 2015: world markets are not saturated by super-efficient, three-foot-wide, two-seater cars; the “Asian dollar” has not been created, much less reached near parity with the US dollar; China has not frozen research into nuclear technology, out of love, and is not RR

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RR leading the world in sustainable development; nor are its government officials universally admired as “hard working, competent, upright public servants”.

Never mind. It only shows that Zhang is not a scholar of history, economics, or whatever else you need to make good, 10-year-out predictions. The essay is naïve, and patriotic, and delves indulgently into peculiar detail. He did identify certain trends, pre-financial crisis, such as the frailty of the property and banking industries. More importantly for our purposes – understanding the man and his plans – the essay proclaims the values he most wants to be associated with: safe, sustainable development on an industrial scale.

ART COLLEGE TO RICHES Zhang, who is in his early fifties, may not be a scholar but he is a very successful businessman, ranked by Forbes this year as China’s 210th richest person, with a personal net worth of US$780m.

He studied art in college. In 1988 he started his airconditioning business with his brother. The pair made their mark by investing in absorption-chilling technology. This process, which has been on the market since the 1920s, works by using natural gas, or other fuel, to heat a refrigerant liquid, which then cools its environment as it evaporates. (It’s how camper van fridges work.) It is far less common than compressor refrigeration technology, which uses electricity to compress a refrigerant, which cools as it expands. This “nonelectric” air-conditioning is more expensive to buy but is cheaper to run, and has clear advantages in places where electricity is expensive or unreliable. The Zhang brothers bet big on absorption technology, and won. Broad now ships its large, central air-conditioning units all over the world.

Principles drive Zhang harder than profit, he says. He campaigns for lower emissions and claims that the worldwide use of his air-conditioners, which he says are 200% more energy efficient than compressor chillers, has so far spared the earth’s atmosphere of 90 million tons of CO2, a million tons of sulphur dioxide and 10,000 tons of CFCs. In 2001, Broad joined the UN Global Compact, a business club committed to justice, human welfare and the environment. In 2011 he was named a Champion of the Earth by the UN Environment Programme (UNEP). He has even, reportedly, grounded his fleet of private jets.

Observers notice that Zhang’s staunch opposition to emissions makes excellent business sense: taxing or restricting the fumes belched out by coal or oil-fired power plants would drive up the cost of the electricity needed to power his competitors’ air conditioners. But Zhang says his motivation is purely altruistic. “When I set up my business, I challenged myself to create wealth,” he said upon winning the 2011 award. “Now, I have completely shifted the focus of this business towards the direction of reducing emissions.”

DONE IT BEFORE Can an air-conditioning tycoon build the world’s tallest building in a few months? Well, Broad has executed remarkable feats of construction before. For example, the New Ark Hotel, on the shore of Dongting Lake in Hunan. A YouTube time lapse video that shows this 30-storey steelframed building being erected in 15 days has attracted more than five million views. Zhang’s BSB subsidiary built it.

This T30 project, as it’s known at Broad, showed the world the marvel of prefabricated construction, which is new to China. Broad claimed that 93% of the building, including ceilings, floors, ventilation and lighting systems, were prefabricated in panels by BSB and its partners, shipped to www.iconreview.org

THE USE OF SPACE IN SKY CITY Area

People

Residence Hotel Education Healthcare Offices Shops, restaurants, etc

83% 5% 3% 3% 3%

17,400 1,000 4,600 1,400 2,000

3%

5,000

Total

100%

31,400

Source: Broad Group website

“WE HAVE OVER 5,000 WORKERS AND THEY ARE NOT REGARDED AS CONSTRUCTION WORKERS LIKE THE UNPROFESSIONAL MIGRANT WORKERS YOU SEE AT A TYPICAL CHINESE CONSTRUCTION SITE”

the site then bolted into place around the clock.

“Just like playing with Lego, all workers need to do is follow the manual to put parts together. We can basically build anything in the same way,” Zhang told iCON. Since most of the parts are connected through bolted joints, little training is required for site workers. The real skills are back in the factories. “We have more than 5,000 workers and they are not regarded as construction workers like the unprofessional migrant workers you see at a typical Chinese construction site,” he said. “In fact, our workers are regarded as mechanics. They are professional welders, plumbers and electricians, and they are the guarantee of the quality of our buildings.”

He declined to reveal the cost of T30, but said it cut 30% off traditional methods, which he despises as “loud, dusty and chaotic with uneven quality”.

Aside from cost and time-efficiency, T30’s claimed earthquake resilience and sustainability credentials attracted attention nationwide. According to Broad, T30 can withstand 04 QUARTER 2012

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Zhang Yue says the 2008 Sichuan earthquake pushed him to find a way to build safe, sustainable buildings.

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a magnitude nine earthquake, compared with the magnitude seven robustness required by Chinese regulations.

Broad says T30 generated only 25 tons of construction waste, 100 times less than a counterpart built in the traditional way. Its energy-saving features include Broad’s famous heat recovery ventilators, energy-generating elevators and quadruple-paned windows.

“If you really have to compare, just compare us with making an aircraft, because the two demand the same accuracy and quality,” Zhang said.

However, he did answer one point: absolutely no concrete was used on the New Ark. Broad also claims to be working with architects and engineers who worked on the Burj.

We’ll have to wait to see if Zhang’s supreme confidence is justified. Approval for the project has been delayed. This in itself is somewhat curious for China, where whole towns are proposed, approved and built in the span of time it takes to get a single building through planning in Europe, although the change in Communist Party leadership scheduled for November may have put such decisions on hold.

SUPREME CONFIDENCE BSB has performed other prefab feats, but T30 was the biggest. Now it plans to build the tallest building in the world in a few months.

How many months go into a “few” is not clear, because the proposed schedule has varied. On its website, BSB says it will start this November and finish in January 2013: three months.

In his interview with iCON Zhang said it would be four months.

Interviewed by Wired magazine in September 2012, he estimated that the job would take seven months. It hardly matters, because a schedule for a project this size measured in months, rather than years, sounds crazy whichever number you put in front of it.

As king of the Broad empire, Zhang is used to giving orders instead of taking them, which makes it a challenge, during a telephone interview with iCON, to keep him on agreed topics.

Showing little interest in detailed questions about training programmes, supply chains or quality control, he made it clear he wanted to talk about his philosophy of sustainable business.

“These things are way more important than the buildings,” he said.

But Chinese construction experts are suspicious. Questions like “as long as they use concrete, even a little, don’t they have to wait at least a month for solidification?” and “The components are supplied by different factories; can they guarantee the quality?” are all over Chinese websites like ScienceNet. Zhang doesn’t feel the need to respond to them.

“I don’t have to clarify anything,” he said. “People having questions are welcome to visit our factories to find answers.”

WHY? A more intriguing question than can-he-build-it might be, why would he want to? As a commercial project, Sky City is unusual. Broad is funding the estimated US$632 million project itself, yet 83% of the space will be used to provide homes for 17,400 people. Just 5% of the space will be a hotel, and the remaining 12% is divided between education, healthcare and office uses, as well as shops and restaurants.

Changsha is a largely industrial city, capital of the interior Hunan province, and not a millionaire magnet like Beijing and coastal provinces such as Guangdong and Shandong. Will there be, among Changsha’s worker population, enough wealthy homebuyers to fill Sky City’s estimated 7,000 apartments? Does he even expect to make a profit?

The more you consider Sky City the more the impression grows that Zhang is not a tycoon lured into a bold property play to multiply his net worth. Nor is it ego driven. “We do not intend to erect a landmark,” Broad says on its website, “but to develop and extensively build, a practical building with medium cost and ultra-low energy consumption that will reciprocally shape the future urban life style.”

So is Sky City a gift to the people then? The world’s tallestever social housing tower block?

CHAIRMAN ZHANG Anybody searching for “normal” business motivations behind Sky City should be aware that if there is such a thing as a “normal” company, Broad is not it. Overlaying its business success and impressive technical feats is Zhang’s own personality, which has a fantastical, If-I-Were-King quality.

The company is headquartered at a purpose-built, onesquare-kilometre campus called “Broad Town” on the edge of Changsha. Whereas most Chinese entrepreneurs cultivate a low profile, Zhang has welcomed to Broad Town journalists such as James Fallows, a writer for The Atlantic magazine, who in 2007 described a 130-foot-high gilded replica of an Egyptian pyramid, a Versailles-style palace, and other expressions of what may be interpreted as hubristic extravagance. Fallows also described a regime for Broad’s 5,000 workers that has struck some commentators as cultlike: they, like Zhang and his family, live on site, and new recruits undergo a 10-day boot-camp orientation, complete with military-style fatigues.

Adding to the picture of a personality cult, Lauren Hilgers, writing in Wired magazine in September this year, said employees called Zhang “my Chairman”, and had to recite a life manual, written by Zhang himself, on everything from saving energy to brushing your teeth and having children.

Hilgers also said all prospective Broad employees had to be able to run 7.5 miles over two days and that although food is free at Broad Town, workers are fined and publicly shamed if they are caught wasting it.

It might be argued that such a culture of regimentation is needed for an operation like T30, not to mention Sky City.

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RR personal stamp on the behaviour and thoughts of his workforce, a characteristic of rulers with world re-ordering ambitions. But behind Sky City – the tallest, most energy efficient, safest and fastest building in the history of mankind – there lies a much more mundane, but commercially vast, proposition.

NUMBER ONE HOME-BUILDER To maintain harmony, China must find a way of accommodating the millions who flock to cities every year in search of economic betterment. Mass urban migration has sparked a speculative property boom that has pushed the price of homes in many areas beyond ordinary people’s means. The Communist Party takes social unrest seriously, so the government has passed laws to curb speculation and deflate the bubble. This is showing signs of working. In 2010, the government went much further and announced a plan to build 36 million social housing units between 2011 and 2015, at a cost of nearly US$800 billion.

Meanwhile, prefabrication is attracting attention as a way of building these homes more efficiently. In March this year, Qi Ji, vice-minister of housing and urban-rural development, said at a forum in Shenzhen that the time was right for China to pursue modular homes and thereby “upgrade the general quality of domestic construction”. He also made it clear that prefabrication was the future for China’s housing market.

Major cities such as Beijing and Shanghai have officially recognised prefabrication as the model for local housing construction, particularly for people earning low incomes. The Beijing government released a plan in September that said modular homes would reach 2.4 million square metres by the end of the year, and would account for at least 30% of new housing construction in the capital by 2015. The Shanghai city government aims for 20% in the same year.

Zhang saw this coming. Broad’s tie with manufactured homes dates to 1996, when it formed a joint venture with Japan’s Suzuki Business, the housebuilding arm of the automaker Suzuki, to make fabricated shower-rooms. But he told iCON that it was the 7.9-magnitude earthquake in Sichuan province in 2008 that pushed him to found Broad Sustainable Building the following year: more than 80,000 people died in that event, many from the collapse of badly constructed buildings.

“Seeing so many people killed, I realised the urgency to change our messy construction industry to build safe, sustainable buildings,” Zhang said.

He acted fast. In December 2009 Broad put up a prototype building in three days in Changsha and asked the UN to come and see it. This the UN did, and in its 2010 report on the Sichuan earthquake, “Building Back Better”, the UNEP singled out Broad’s prefabricated steel method, which, UNEP said, had “significant international potential”.

Not content with this shining testimonial, he had Broad race over to Cancun in Mexico before the UN’s international climate change conference in November 2010 and erected a multistorey prefabricated pavilion in eight days, winning lavish praise from the conference host, Mexican president Felipe Calderón, who called Broad’s approach a model of sustainability.

Trends closer to home lined up in Zhang’s favour as well.

In 2009, the China Daily newspaper profiled the city of Changsha and reported the plans of the mayor, Zhang Jianfei, to turn the city into an exemplar of sustainable development and quality of life. Mayor Zhang said Changsha and the neighbouring cities of Zhuzhou and Xiangtan were an experimental zone for building a “resource-saving and environment-friendly society”. Using words that could have www.iconreview.org

6 hours

41 hours

63 hours

149 hours

195 hours

274 hours

286 hours

314 hours

341 hours

“I DON’T HAVE TO CLARIFY ANYTHING. PEOPLE HAVING QUESTIONS ARE WELCOME TO VISIT OUR FACTORIES TO FIND ANSWERS”

been scripted by Zhang Yue, the mayor said priority would be given to environmental protection, efficient land use and good quality urban construction.

Zhang is ready to be China’s number one sustainable home builder. There are no more boxes to tick. After the Suzuki joint venture he set up his own factory in Xiangyin county, next to Changsha, and he now plans to roll out the Broad construction model across the country, and the world.

“So far, we have developed six franchisees, in Hubei, Henan, Shanxi, Ningxia, Shandong and Fujian provinces,” he told iCON. “In the future, we will have franchisees in each province, as well as other countries. Ultimately, I hope we will be able to supply 30% of the global construction market.”

NOT THE ONLY GAME IN TOWN He is hugely ambitious and he has adroitly aligned his business with the global project to save humanity, but there are two flies in the ointment.

Firstly, Broad is not the only company attracted to China’s market for cheap, fast, safe, sustainable housing. Other players include Shenzhen-based Vanke, China’s largest 04 QUARTER 2012

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enough funding all take time, especially for homes, which need to cater to individual requirements. This is a key difference from office buildings and manufacturing facilities,” he said.

China started trials of modular homes in 1999 but there still is no specific building regulation or standard, which is why China has shown little interest in using prefabrication to build mid and high-rise residential towers. For example, SUC’s welfare homes in Shanghai are relatively low-rise, at 14-to-18 storeys. Chen notes that even in more developed markets, such as Japan, where sophisticated PC technologies have been used for decades, not many PC buildings reach higher than 30 storeys.

360 hours

In 2011 Broad shocked the world by erecting a 30-storey hotel in just 15 days in Hunan Province

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residential property developer, and Shanghai Urban Construction (SUC), a state-run company that is in charge of welfare housing in Shanghai.

These competitors are staking their own claims in the prefabrication territory. SUC says it can prefabricate 70% of its precast concrete (PC) buildings off-site. In July this year, Yu Liang, the president of Vanke, told investors that its PC construction sites would reach 3 million square metres nationwide by the end of 2012, an increase of 10.2% on 2011.

The company earned US$1.51 billion in net profit in 2011, up 32.2% from 2010.

These are impressive growth figures. They indicate the companies’ early traction in the market for prefabricated, modular residential buildings, which is still in its infancy in China. In a country where cheap, abundant labour supports old construction methods and keeps many millions in jobs, it will take time for prefabricated or modular buildings to become mainstream, according to Chen Yiyi, a professor of civil engineering at Shanghai Tongji University, and an expert in steel structure and modular homes.

“Technology improvement, market education and getting

THE TROUBLE WITH STEEL The other problem for Zhang is that concrete enjoys incumbent status in the nascent prefab home-building market, whereas steel is as outsider.

Low-rise steel framed factories and warehouses are common in China but high-rise, steel-framed residential buildings are not. One reason is that China has no specification for structural steel buildings, said Ding Chengzhang, an expert in steel building and the author of several books on the subject.

“As far as I know, the current cold-formed steel manufacturers in China all started from export businesses and therefore they are able to develop their own quality specifications based on major international standards, such as the American specification,” he said. “So to date, China has few architectural academics knowing about steel structures, let alone teaching the students. Obviously we lack the talent pool which can take the lead in this area.”

This makes people nervous about steel, which may be evident when Ding says: “Companies like Broad are indeed pioneers in steel framed buildings in China, however, we cannot rely on them solely. I think it’s the government’s role to lead the way.” (Zhang, on the other hand, would not mind at all if Broad were relied upon solely to house China’s population in its steel-frame towers.)

Interestingly, the Zhang family is also poised to benefit from any boom in the precast market. Zhang Jian, Zhang Yue’s brother, founded an independent precast company, Broad Homes Industrial (BHI), in 2006. In August this year, BHI launched Discovery, a PC solution that it says allows 85% of a building to be fabricated in factories (which is a higher percentage than that achieved by Shanghai’s SUC). BHI also boasts it can build a finely decorated 30-storey PC building in nine months.

However, Zhang Yue has clearly staked everything, including time, capital and reputation, on steel being the shining future for China, the world and, of course, Broad.

This explains Sky City. In 1988 he backed an outsider technology and won. Now he wants to do it again. But being liked by the UN isn’t enough. To educate and capture a vast, confused market weighed down by inertia and riven with competing interests, and to get the necessary regulatory alignment in a country where official sanction from the centre counts for more than market demand, Zhang feels he needs a titanic gesture, rendered in primary, comic-book colours.

In his apocalyptical vision of 2015, it took a planetary crisis to bring the governments of the world to their senses, which was too late for many of their citizens. Just as it did in his vision, Zhang wants the bullwhip of common sense to crack over the heads of the bickering, unenlightened masses. Sky City is such a gesture, and the evidence suggests Zhang is the man who can make it happen. icon www.iconreview.org

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TAKING THE PLUNGE In the most populated places on earth, planners are starting to build in the only direction left – down. But will the benefits ever justify the cost?

Kristina Smith reports

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ver 100 metres beneath Jurong Island in Singapore, South Korea’s Hyundai Engineering and Construction is creating five huge caverns in the sedimentary rock. The S$950m Jurong Rock Caverns project is Southeast Asia’s first underground oil storage facility and will free up 60 hectares of precious land on top for industrial development.

Singapore needs space: its population of 5.1 million share a meagre 710 km2 of surface land. “We have to explore new concepts and innovative ideas,” says a spokesperson for JTC, the government agency in charge of industrial infrastructure including the Jurong Rock Caverns.

JTC also has ambitious plans to build an underground science park (see photo) near Kent Ridge, below two existing science parks. If constructed, the development would provide 30 storeys for research laboratories, offices and a data centre, potentially allowing one plot of precious land to be developed twice.

While few have ambitions as high, or as low, as Singapore, other cities are looking to the depths to meet the challenges of limited land. In Hong Kong the government plans to put a sewage treatment plant underground, and that appears to be

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just the start (see box). It’s no coincidence that in the UN’s league table of the planet’s most densely populated places Hong Kong comes fourth, just below Singapore at third (behind not very comparable Monaco at second place, and Chinese territory Macao in the lead).

Over in Mexico City, preserving the fabric of the historic centre while limiting urban sprawl is the main allure of an ambitious proposal called the Earthscaper, put forward by architects Bunker Arquitectura (see box). Though this project is still in the speculative stage, it has captured popular imagination in a city where commuters from everexpanding suburbs can face a three-hour commute to work.

Building underground can help keep a city more compact, reducing travelling times and carbon emissions. It can also make cities more resilient to natural disasters, and shelter residents from extreme temperatures. But it’s a complex subject – deep, you might say – involving, as well as opportunities, new business models and technical challenges.

To help in this initial exploration of the underworld and its issues, I’ve chosen as my guide Han Admiraal, chair of the International Tunnelling Association’s Committee on Underground Space (ITACUS). As you might expect of an organisation representing companies who dig, ITACUS is very enthusiastic about the opportunities opening up under our feet. But the UN recognises its leadership in the field, too.

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EARTHSCRAPER, MEXICO Mexico City is home to 21.2 million people, 25% of Mexico’s population.

As more people move to the city, it spreads and spreads, adding to congestion and pollution and lowering

standards of living. The Earthscraper is architect Bunker Arquitectura’s response to this problem.

Bunker came up with the Earthscraper concept for the eVolo

magazine 2009 Skyscraper Competition but then decided to promote it as an actual development to the authorities.

It would sit below Mexico City’s central square, the Zocalo, a huge, 240m-by-240m-wide hole in the heart of the historic centre. The 300mdeep inverted pyramid would contain four different layers of space: a museum, revealing the remains of the original Aztec development beneath the Spanish one; followed by retail, residential and offices.

The surface of the square would be glass, letting light pour down and allowing the regular activities of the Zocolo – concerts, military parades, political rallies – to continue.

The Earthscraper would face many technical challenges, of course, not

least being groundwater: the original Aztec city was built on a lake. “It can be technically built,” says Bunker’s CEO and founding partner Esteban Suarez. “The water level is only 20 meters deep at the most, as the original lake on which Mexico City was built was very shallow.”

Bunker argues that the Earthscraper could spark the regeneration of the historic but decaying city centre, as the Guggenheim museum did for Spain’s Bilbao, and would therefore justify public funds. But to date it’s a step to far, or too deep, for the authorities.

Says Suarez: “Since the project began to generate interest we are coordinating meetings with the city government to discuss the project, but it is still in a speculative phase.”

“IF PLANNERS START THINKING ABOUT HOW UNDERGROUND SPACE CAN BE USED AS THEY ARE PLANNING THE CITIES, THE HIGH COSTS OFTEN ASSOCIATED WITH DEVELOPING UNDERGROUND SPACE CAN BE AVOIDED”

surface there was devastation, the UN International Strategy for Disaster Reduction (UNISDR) asked ITACUS to write papers on creating underground space to inform politicians around the world.

So, for us, Han Admiraal will be like Virgil in Dante’s Inferno, who guided the poet down through the nine circles of Hell – except this tour should be rather more upbeat.

DOWNWARD PRESSURE The UN estimates that by 2050, six billion people, or 70% of the world’s population, will live in cities. Already in subSaharan Africa, in fast-growing cities like Lagos in Nigeria and Accra in Ghana, six out of 10 urban residents live in slums.

Admiraal believes that while the developed world has started building down, it’s the new cities of Asia and Africa which will benefit most from it. All cities should be developing underground masterplans, he says.

“These new mega cities which are developing in Africa should be considering using the underground from the word go,” says Admiraal. “If planners start thinking about how underground space can be used as they are planning the cities, the high costs often associated with developing underground space can be avoided.”

In China, home to the most rapid process of urbanisation in the history of the world, poor coordination of underground development – a ‘first come first served’ approach – has meant clashes. Planned metro lines in Shanghai had to be sunk deeper due to building foundations which extended lower than the 16m expected. City planners have started regulating underground space: now nearly 20 cities in China have what you might call “depth plans” governing layout, use, and timescale of development.

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SHA TIN SEWAGE TREATMENT WORKS, HONG KONG The relocation of the Sha Tin Sewage Treatment Works to rock caverns is likely to be the first in a series of similar projects in landhungry Hong Kong.

Planning guidelines were revised in 2008 to accommodate caverns, and a feasibility study in 2011 identified 400 public facilities which could be suitable for relocation underground. A further study on long-term cavern strategy, commissioned in September 2012, will include even more ideas for burying government facilities.

The Sha Tin project is a typical case. The sewage works currently occupy 28 hectares of prime waterfront at the mouth of the Shing Mun River. As well as freeing up space, putting it underground will remove an eyesore and boost land prices. The city’s drainage services department led a feasibility study into its relocation in May 2012.

Cavern construction is not new to Hong Kong: many caverns for

A study by Arup identified hundreds of Hong Kong government facilities that could be located underground

transportation projects have been and are being constructed, and three caverns for public facilities – Island Wet refuse transfer station, Stanley sewage treatment plant, and Kau Shat Wan explosives depot – were built in the 1990s. But a new generation of caverns could create a huge amount of work for civil engineering firms in the future.

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1. RESO, MONTREAL: The RESO in Montreal is a 32km underground network of pedestrian corridors and tunnels, mostly with retail either side, linking buildings and metro stations. Fifty years old this year, the RESO was made possible due to a combination of planning and incentives which made it viable for the private sector to pay for the construction of the network. Like the PATH in Toronto and the PEDWAY in Chicago, RESO offers pedestrians a more pleasant environment during Montreal’s freezing winters. Similarly, building down in hot countries would help keep people cool.

2. UNDERGROUND SCIENCE PARK: Currently in the feasibility stages, Singapore’s Underground Science Park has been described as an expensive experiment. The developer is government agency JTC, which is responsible for Singapore’s industrial infrastructure.

Situated on land between Science Park 1 and Science Park 2 near Kent Ridge in Singapore, the underground building would house laboratories, offices and a data centre. Though it may seem like a fantasy, Singapore’s land limitations mean that such a project is more likely to be built here than anywhere else.

RR The very first city to create an underground masterplan was Helsinki in Finland. Helsinki already has a huge amount of public infrastructure beneath its surface, made possible by the fact that the Government owns much of the land and because the city is sitting on granite bedrock. Among the 400 underground developments in Helsinki are a huge automated coal storage facility, and a data centre built in a former bomb shelter cavern beneath Uspensky Cathedral. Plans for a further 200 underground developments have also been registered.

Helsinki realised that the space underground had to be properly controlled if it was to make the most of it. The city’s Underground Masterplan identifies a number of areas where the bedrock is suitable for development, or “undervelopment”, reserving them for public or important private facilities.

Before we imagine that every city in the world will be growing an underground district, however, it’s important to remember that each has its own geological constraints, water being a big problem. Nor can underground masterplanning be left to planners. Says Admiraal: “We cannot copy what we are doing on the surface underground. Planning underground space shouts out for an integrated approach. Planners and geologists will need to work together.”

THAT SINKING FEELING The biggest barrier to building underground space is cost.

Constructing underground always involves the unknown, however thorough the site investigations, and more risk means more cost. In developed areas, you can add to that the challenge of working around existing infrastructure and the need to limit ground movement to protect topside buildings.

Even in Singapore where land is at such a premium it’s a challenge making the projects stack up financially. JTC has estimated that its underground science park will cost 50% more than a comparable above-ground facility, according to local press reports. The JTC spokesperson admitted to me they were still scratching their heads over projected demand for the space, timing of the development and what the best mix of users would be.

But underground development doesn’t have to involve a massive outlay of state funds. Montreal, which boasts the www.iconreview.org

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world’s biggest underground network, the RESO, spent very little public money developing the 32km of shop-lined tunnels which connect offices, metro stations, museums and banks.

I’m told by Jacques Besant, an urban planning consultant and former planner for the city of Montreal, that the two main reasons the RESO developed so successfully were that a planner and architect had the vision in the 1960s when the first portion was constructed, and the council put the right legal and financial framework in place.

The private sector funded the underground network as each developer was required to construct its own portion of tunnel to connect to a metro station or to the basements of other buildings, while the council offered incentives to make underground development attractive. “This makes it cheaper and easier for a city to build,” says Besant.

If the legal framework isn’t in place, creating underground space can be very costly indeed. Our guide Admiraal cites the example of Japan where land ownership, which extended below the surface, made for some tricky engineering challenges – tight curves and tunnelling make an awkward mix.

“The design was governed by who owned what land where.

Then technology had to come up with a way to cope with that. That’s the wrong way round,” says Admiraal. “We have to look at legislation and say if legislation is preventing this, we need to redesign the legislation.”

In 2001, Japan introduced a new law which said it could develop underground space which was more than 10m below existing deep foundations to allow it to build utility and metro tunnels more easily.

BURIED TREASURE? Against the higher costs of building down it seems you need a broader business case than just the real estate value of the subterranean square footage. For instance on Singapore’s Jurong Island they now have above-ground space to develop six more petrochemical plants, and the extra underground storage capacity could help the island draw investment away from competing industrial hubs.

A study published by Hong Kong’s Civil Engineering & Development Department (CEDD), in 2011, identifies 400

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JURONG ROCK CAVERNS, SINGAPORE

public facilities that could be put underground in purposebuilt rock caverns. But the report authors, Arup, admitted that underground facilities are generally more costly to run, and in order to make the cost-benefit case engineers must take a broader view, even factoring in “public relations and government image”.

So finding a way to monetise these benefits remains a challenge. Admiraal wishes all examples could shine as brightly as Kuala Lumpur’s SMART Tunnel. Opened in 2007, the Stormwater Management and Road Tunnel (SMART) was designed to alleviate two problems at once: flash flooding and traffic congestion. The tunnel has three modes of operation: 1) traffic only, 2) traffic and water running in its lower section and 3) just stormwater during heavy rains. In just three years SMART paid for itself by alleviating seven potentially disastrous floods in the city centre.

“That project has brought so many benefits,” says Admiraal.

“It has saved the costs of clean-up after flooding, real estate prices have gone up, creating value. We have to capture the value and translate it into currency to pay for the projects.”

For every underground development that works, such as Montreal’s RESO or Kuala Lumpur’s SMART tunnel, there are more fanciful projects that will never make it off the drawing board. One is the “Alice Cities” concept in Japan. Named after Lewis Carroll’s famous character, these complete underground cities were imagined in the 1980s by the Taisei Corporation of Tokyo, and they remain as fictional as the girl who visited Wonderland.

Like cities in space or under the ocean, the idea of cities underground sparks popular imagination. Jacques Besant is dismissive. “People need to be connected to the city on the surface,” he says. “You cannot create an artificial world underneath.” Perhaps in this category comes the Earthscraper. Besant thinks such ideas don’t help. “Plan with realism,” he urges.

But Admiraal sees them as useful for raising awareness about underground space. “The Earthscraper is not about asking ‘Are we ever going to build this?’” he says. “It’s about using the concept to talk about some of the challenges we face.” icon

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The photos of the Jurong Rock Caverns 100m beneath Jurong Island in Singapore demonstrate that this is a construction project with some very unique construction challenges.

“The key challenge in the construction of the Jurong Rock Caverns is the uncertainties encountered during underground excavation works,” says a spokesperson for JTC, the government agency which is developing the caverns. “This is due to the varying geology of the rocks, for instance, the presence of fault lines which leads to possible excessive water ingress.”

Before any excavation, using the drill and blast method, the contractor drills 15m deep probe holes to check for water. If water is found, grouting is required to limit its ingress.

Contractor Hyundai Engineering and Construction began work on Phase One of the caverns in 2007.

The five caverns of this phase, which will collectively provide 1.47m cubic metres of storage space, are due for completion in 2014.

Singapore’s, and South-east Asia’s, first underground oil storage facility will store liquid hydrocarbons such as crude oil, condensate, gas oil and naphtha. Jurong Aromatics Corporation (JAC) is building a petrochemical complex on the island and is the first company to sign up for a rock cavern.

According to JTC the excavation of underground tunnels and caverns is progressing well, together with piping, M&E and instrumentation for the oil storage process facilities.

Originally estimated at S$700M, the cost of phase 1 has risen to S$950m following design changes to allow each storage cave to operate independently and be adaptable to different users, according to JTC. Safety is a challenge. The caverns must be ventilated after each blasting and the air quality closely monitored both with meters running constantly and manual checks.

Singapore is developing its first underground masterplan. This won’t be quick. Technology and geology must be considered, and land rights come into it too, because in Singapore if you own land you own it all the way down.

As well as future phases of the Jurong Rock Caverns and the Underground Science Park, JTC is also looking at using underground space for warehousing and logistics.

“Underground development in Singapore is still in its relatively early stages,” says the JTC spokesperson.

“In order for Singapore to be able to make use of underground space, R&D is necessary to help us develop the knowledge and capabilities to build and operate underground facilities more efficiently, safely and cost-effectively.”

The Jurong Rock Caverns project is Southeast Asia’s first underground oil storage facility and will free up 60 hectares of precious land in densely populated Singapore www.iconreview.org

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THIS IS IT. WE’RE GOING

ONLINE. The built environment is central to the quality of life of everyone, everywhere.

Because the CIOB is a global centre of excellence for the delivery and stewardship of the built environment, since 2006 we’ve produced iCON once a quarter, packed with in-depth features, case studies, news and analysis.

But the world is changing. It’s becoming more interconnected. Old certainties are fading and economic power is shifting. We feel that a printed product once a quarter is no longer enough to keep you up to date with how the global picture is evolving. Moving the magazine online offers us opportunities to provide the same valuable content, but more of it, and more frequently.

It helps us meet our commitments to conserve resources. And it provides a platform for you to give us feedback, and to share your insights and knowledge with the global built environment community.

So, in late January 2013, iCON is moving online. The printed, quarterly version will stop. In its place, at a URL to be announced, you will find, updated several times per week: l Region reports offering digests of what’s going on in the most active and promising construction markets around the world l Features on notable projects, advances in technique, technology & business processes l Reports on issues affecting the business, such as health & safety, corruption, sustainability, labour relations l Latest developments by the most promising sectors, such as infrastructure, energy, leisure, healthcare and education l Lively and insightful blogs from CIOB members and experts in every region Whatever your interest, whether it’s business or career opportunities in new markets, or updates on new thinking and best practice in the design, delivery and stewardship of a quality built environment, we’re sure you’ll find the new iCON online an invaluable resource for your organisation and your career.

We’ll be in touch.

See you online in 2013.

Michael Brown Deputy Chief Executive, Chartered Institute of Building November 2012

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32 | HORIZON ECO-RESORTS

USING WHAT YOU’VE GOT An award-winning resort prototype built by local, unskilled labour using sandbags and barbed wire in the remote south of Oman claims to set a new standard for tourism development that is economically, environmentally and socially sustainable

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he small fishing village of Shuwaimia rests on a 30km stretch of virgin beach in the remote south of Oman, where the mountains descend to the Arabian Sea. One of the largest developers in the MENA region was interested in developing a million square metres of this unspoilt land, but various masterplans submitted suggested high-density, over-development and it was felt that the remoteness of the location made this conventional approach financially unviable.

Kuwaiti architects SSH International proposed something different: a low-density approach that uses new techniques with traditional designs and local material and labour. The prototype Gunoot Eco-resort has won the “future projects – leisure development” category in the World Architecture Festival 2012.

In the firm’s citation, architect Waleed Shaalan said they

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were inspired by the late Nader Khalili, an Iranian-born architect who championed sustainable, ethical architecture for dispossessed people on behalf of the United Nations. He founded the California Institute for Earth Art and Architecture (Cal-Earth) in 1991.

One of his innovations was the “Super Adobe” technique, which uses sturdy fabric tubes filled with earth and clay, stacked and anchored between courses with barbed wire to form strong, naturally insulative walls.

Shaalan said this approach would satisfy a “triple bottom line”. First, economically, it would cheaper to build because they could employ low-skilled, local labour and materials. It could also generate higher revenue by attracting “ecotourists” seeking remote and authentic experiences. Second, it would have a low environmental impact, using local materials, traditional, passive temperature control techniques 04 QUARTER 2012

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CREDITS Lead Architect: Dar SSH International Engineering Consultants, Kuwait Architect: Mr Hooman Fazly, California Institute of Earth Art and Architecture, USA Architect: Mr Waleed Shaalan, SSH International, Kuwait Client / Developer: United Real Estate Company, Kuwait Main Contractor: Al Tajawob, Oman

CLOCKWISE FROM TOP LEFT: The prototype Gunoot Eco-resort has won the “future projects – leisure development” category in the World Architecture Festival 2012; “We hope the project will inspire the community to switch to green energy,” said architect Waleed Shaalan; The 50-cm-thick earth walls combined with the traditional wind-catching tower provide comfort in an environment that can reach 50 degrees C in summer; Plaster is applied to the sandbag walls to achieve a smooth finish

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04 QUARTER 2012

and solar energy harvesting. Finally, in the social sphere, it would engage the local population, giving fishermen an additional skill while expressing local culture in its design, giving the community a sense of identity and pride.

The client agreed to commission a prototype to inspect.

SSH engaged Hooman Fazly from the California Institute for Earth Art and Architecture, and the team went to Shuwaimia to conduct a five-day open house session with the local people and the local building contractor. Shaalan told WAF that turnout was high, and local people were curious about the plans and the building technique.

Following the workshop a team of local men and women were hired to work with the contractor in building the prototype. The design team experimented with local materials including old fishing nets to help reinforce the exterior plaster and local stone for the flooring. They traveled further around RR

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RR Oman to select items from traditional arts and crafts to give the prototype a strong sense of place. A separate workshop engaged local women to weave palm leaves for coverings.

All power for the prototype is generated from solar panels and the team modified the internal wind tower to house the batteries in a separate compartment. The 50-cm-thick earth walls combined with the traditional wind-catching tower provides comfort in an environment that can reach 50 degrees C in summer.

“All of this new technology aroused the curiosity of the locals who were eager to investigate its viability,” said Shaalan.

“We hope the project will inspire the community to switch to green energy. The result of the prototype was extremely successful, the client was very pleased with the results as we managed to reduce the construction cost by 30% and expect these figures to improve.” www.iconreview.org

Shaalan said they were exploring, with the American University in Beirut, the possibility of setting up a monitoring system to measure building performance. This data would be made available for research and would inform design of subsequent phases of the project. He had also contacted universities in Oman about running summer studio workshops there for students to experience the building as they innovate with design.

In his citation Shaalan concluded: “The project brings in the private sector, the government (Ministry of Tourism), the local population, the academic community … and aspires to set a precedent where sustainable development can help this precious area of Oman meet the demands of “development” yet preserve the local environment and culture. The success of this can influence and strengthen the Ministry of Tourism in advocating this type of development.” icon

CLOCKWISE FROM TOP LEFT: Architect Waleed Shaalan packing the earth-filled fabric bags to prepare for the next course; A five-day open house was held with local people to explain the concept and select a team of workers; The “Super Adobe” technique uses sturdy fabric tubes filled with earth and clay, stacked and anchored between courses with barbed wire to form strong, naturally insulative walls

04 QUARTER 2012

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