PPP in mega infrastructure projects: perspectives from Mainland China

Dr. Wilson LuAssistant professor, Department of Real Estate and Construction, The University of Hong Kong, Hong Kong, wilsonlu@hku.hk

Three Gorges Dam

Hangzhou Bay Bridge

China plans to spend more than $1 trillion on expanding its railway network from 78,000 km today to 110,000 km in 2012 and 120,000 km in 2020.

China has embarked on the second largest public works program in history, following only the Eisenhower Interstate Highway System in size.

Major projectsIn China

The ambitious high-speed railway pla

Keys to succeed in these giant infrastructure projects(1) Confucianism/authoritarian management(2) public – public/private partnership(3) “Guanxi, ubiquitous guanxi!” – A Chinese way to

manage stakeholders

(only my personnel views)

Confucianism/authoritarian project management1.1 A powerful central government to coordinate the stakeholders in local authorities1.2 Largely, project management style is still the traditional command and control style

A “nail house’ in Zhejiang, ChinaNIMBY in China

Public – Public/Private Partnership(1) Many large-scale contractors are state-owned enterprises(2) They are often associated to main clients of infrastructure project,

e.g. Ministry of Transportation (Road), Ministry of Railway (Railway)

(3) Contractors in some cases will build roads, public rental building projects for local governments (councils) and the later will purchase back these projects when the fund is becoming available.

intriguing exotic

mysteriousdaunting

Gale and Luo (2004), International Journal of Project Management

Wang et al. (2006), Construction Management and Economics

Lu et al.  (2008), ASCE CEM

Kwan and Ofori (2001), CME

Fellows et al. (2003), Construction Management and 

Economics

“guanxi, ubiquitous guanxi!” – A Chinese way to manage stakeholders

Stakeholder managementStakeholder (利益相关方[Mainland China]，持份者[Hong Kong])

High speed railway project land reclamation in Hong Kong

Demystify Guanxi - definitions

Guanxi

LocalityLocality

ClassmateshipClassmateship

Guanxi

LocalityLocality

ClassmateshipClassmateship

Messages

• Has Guanxi been overstated? Not simply yes or no

• Guanxi is not that mysterious; you are familiar with it; you can handle it.

• Negative aspects of Guanxi will phase out

• Develop your competitive advantage in China’s construction industry through developing long-term Guanxi

Hong Kong-Zhuhai-Macau Bridge

The proposed 50 kilometres (31.1 mi) bridge is expected to cost US $10.7 billion

A proposed series of bridges and tunnels that would connect Hong Kong to Macau and Zhuhai.

Construction formally began on 15 December 2009. It is due to be completed in 2016

New challenges in Hong Kong –Zhuhai – Macau Bridge

Hong Kong-Zhuhai-Macau Bridge

It consists of a Main Bridge in Mainland waters together with the boundary crossing facilities (BCFs) and link roads within the three places.

The HZMB Main Bridge runs from the artificial island off Gongbei of Zhuhai to the eastern artificial island for the tunnel section just west of the HKSAR boundary.

New challenges in Hong Kong –Zhuhai – Macau Bridge

New challenges in Hong Kong –Zhuhai – Macau Bridge

Socialism, Continental laws, GB standard, environment awareness …

Capitalism, Common laws, BS standard …

??????…

Well planning aheadIn August 2003, the State Council agreed that the three local governments should set up the Advance Work Co-ordination Group (AWCG) and press ahead with the advance work for the construction of the Bridge. The AWCG consists of three representatives from each of the three governments of Guangdong , HKSAR and Macao SAR.

Clear financial arrangement – there must be a leader in presenceThe three governments in March selected the Bank of China as the lead bank to form a consortium to provide loans for the main body of the HZMB.

Clear scope and responsibilityThree sides agreed that the three Governments would be responsible for the construction and operation of the boundary crossing facilities and the link roads to the bridge within their own territory.

The HZMB Main Bridge runs from the artificial island and artificial island for the tunnel section just west of the HKSAR boundary.

More informatin to be found via http://www.hzmb.hk/eng/index.html and http://www.thb.gov.hk/eng/policy/transport/issues/cbt_3.htm

Thank you!