Here & Now (June 2015) by Dowling & Kim

Data & Insights | Here & Now

10 June 2015

Welcome to ‘Here and Now’ Welcome to the first edition of ‘Here & Now’. We can’t provide any answers unless you have the questions! That said, the easiest way to pose a ‘Here & Now’ topic to our team is to simply go through the Contact Us link at www.dowlingkim.com. Nothing is too complex, too big or too small - as long as it is important, we will cover it. This week we will take stock of what is happening in Asia, talk about China’s health investment dillemma, and Dowling & Kim share some projections on the engineering Bespoke support specialising in the Asiaand construction pipeline in Australia and Pacific market.

New Zealand.

Linked In

Keeping ahead in Asia

We are now on Linked In. Feel free to follow us at Dowling & Kim.

Asia Pacific Market intelligence

‘Here & Now’ is our stepping stone into integrating Asian market knowledge into a format for executives and senior management that allows them to easily digest the shifting forces that shape the region and understand how market intelligence will impact on how decisions and strategy is constructed.

Strategy

The Health of China

Financial and Economics Modelling

Every nation, developed and developing alike, has public health challenges. What's different about China is the scale is just so enormous.

Resourcing We are here to help you succeed:

Commercial Support Talent Identification and Screening Business Development Data Intelligence Leads and Opportunities Negotiation Bespoke Consulting Facilitation Culture and Education International Relations Relationships Trust

Dowling & Kim

www.dowlingkim.com

1

Data & Insights | Here & Now

China Health Facts SOME KEY NUMBERS

!

-Half the population is estimated to be prediabetic (suffering from metabolic syndrome).

-12% of the populace now has diabetes, roughly 115 million people.

-An estimated 70% of China's diabetics are undiagnosed; only 25% are receiving any treatment and of the 25%, the disease is only being controlled in 40% of those getting treatment.

-Noncommunicable diseases--cardiovascular disease, chronic respiratory diseases and cancer, account for 85% of total deaths in China today -- much higher than the global average of 60%.

-Mental disorders rose by more than 50 percent between 2003 and 2008. An estimated 17.5% of the population (225 million) suffers from some form of mental problem, one of the highest rates in the world.

-More than 300 million people in China smoke tobacco and Informal estimates suggest a large percentage of the urban population suffers from lung/pulmonary diseases. Over the last 30 years, deaths ascribed to lung cancer have risen by a factor of five in China.

-200 million workers are directly exposed to occupational hazards.

-160 million Chinese adults have hypertension (high blood pressure).

FUNDING CHALLENGES

!

-In 2006, 80 percent of China’s health budget was spent on just 8.5 million government officials.

!

-The rate of health-care coverage is high, but the level of benefits is still very low. 836 million rural residents who were officially covered by the government's plan still had to pay the lion’s share of their medical bills. The government coverage paid a mere 8.6% of rural residents' total healthcare expenditures.

Dowling & Kim

10 June 2015

!

The rapid ageing of the Chinese populace is exacerbating an already immense public health crisis. It's estimated that by 2040 there will be more people with Alzheimer’s disease in China than in all the developed countries combined.

Ill health and chronic disease are undercutting the economic growth everyone is focusing on. The rise in health-related costs going forward will not be linear but geometric.

Although the size of the Chinese health market opportunity is constrained by the ability of China’s low earners to pay for products - the challenge for executives is to work intelligently to find sustainable models to provide China’s low earning citizens with solutions to their health challenges.

!

Key opportunities: Health technology, health services, infrastructure, IT, business model solutions, environmental solutions

!!

E&C Outlook Australia 2015-2019

A new report from BCI Shrapnel forecasts that opportunities in the Australian E&C market for the 5 year period 2015-2019 will total AUD394 billion, a 16% contraction in value from the AUD470 billion awarded from 2010-2014. A decline in Asian demand growth has constrained commodities prices and BCI Shrapnel also contends that the resources sector, public infrastructure and housing construction sector are all on contractionary cycles over the next five year period due to constrained demand, and also due to a lack of Government and private sector funding for projects. Despite the bearish news from BCI, Here & Now sees some areas of blue sky for those solutions focused firms that can drive value through the full value and lifecycle chain of projects.

Making sense of the numbers

It is expected that most E&C activity over the forward five year period 2015-2019 will come from the existing backlog of projects in oil & gas and iron ore, and that clear opportunities exist in the large projects space to provide value of clients as these projects shift from construction to operations phase.

! www.dowlingkim.com

2

Data & Insights | Here & Now

10 June 2015

Where are the new project opportunities?

The most promising opportunities in the resources space lie in the Galilee Basin projects of Adani and GVK, who will continue to require cost focused solutions to progress their business case. The recent Federal Budget announced a $5billion infrastructure fund for Northern Australian projects and there will be opportunities to explore relationships in the oil and gas transportation space through the development of projects such as the NEGI Pipeline.

Although public sector E&C projects have diminished due to the funding bottleneck created by the cancellation of the $6billion East-West Link toll road project in Melbourne and the lack of funding solutions from Federal and State Governments, it can be expected that states that are able to recycle their existing infrastructure through asset sales such as NSW will be able to continue to bring projects such as the Westconnex project online. BCI Shrapnel data suggests that NSW is the only state that will increase new E&C activity in the five-year outlook period and that traditional growth engine economies Qld and WA will have few opportunities other than already financed projects such as Toowoomba Bypass Project in Qld.

The Australian E&C 15 year Outlook

Over the 15 year horizon 2015-2029, BCI Shrapnel have modelled a promising recovery for the E&C sector in Australia with a pipeline of close to $1.4trillion of E&C projects. The key assumption applied is that the Australian economy will be successful in dealing with macroeconomic risks such as global demand issues and that State and Federal Governments will find ways to procure funds to address the nations’s infrastructure deficit. There is high uncertainty in forecasting Australian E&C projects into the future however it is expected that once labour and equipment is released from oil and gas projects over the coming forward period that projects will improve their cost competitiveness and be expedited.

!

Dowling & Kim

www.dowlingkim.com

3

Data & Insights | Here & Now

NZ E&C Projects 2015-2024 Source: NZ NIU

The National Infrastructure Unit of New Zealand has recently released the 2015 National Infrastructure Evidence Base which is a 10 year capital intentions plan including a total of 3659 infrastructure related projects across the central and local Government and private sectors worth a total of $110 billion. The key opportunities lie in social, transport, water and energy.

10 June 2015

New Zealand E&C Outlook

Construction

According to BIS Shrapnel’s Building and Construction in New Zealand 2015-2020 Report, the New Zealand construction sector is set to see a boost in activity – taking the total industry value to a record high of an estimated annual average of NZ$8.4 billion in real terms, compared to the previous high of NZ$6.1 billion over the period from 2000 to 2005.

The building sector is expected to peak in 2015/16 at NZD$14 billion, backed by further seven per cent growth in dwelling consent in the Auckland region and in the country’s nonresidential building sector. The housing sector in the Auckland region is likely to be supported by a number of factors, particularly by the city’s prevailing housing stock deficiency as housing demand continues to outpace new supply. In the year to December 2014, housing prices New Zealand wide increased 5% and by 10% in Auckland.

While Christchurch reconstruction will provide a major boost to the non-residential building activity over the next five years, BIS Shrapnel also expects a pick-up in new building and refurbishment activity in the office, retail and educational building sectors in the North Island.

The building sector during the forward 5 year period 2015-2019 can be expected to be underpinned by positive economic growth driven by the demand for New Zealand good and services into Asian markets coupled with an increase in domestic demand through population growth through reasonably strong net immigration. Over the last year employment has grown by a strong 3.5% and migration and a high participation rate have boosted the size of the workforce.

Dowling & Kim

www.dowlingkim.com

4