PACIFIC REPORT : Changing Asia's Landscape : Construction: U.S. companies are trying to cash in on the building spree. Taiwan alone plans to spend $300 billion on its infrastructure.

By GEORGE WHITE

April 22, 1991 12 AM PT

TIMES STAFF WRITER

American firms are streaming to the Middle East in a frantic quest for up to $100 billion in construction contracts to repair war-torn Kuwait over the next five years, a rebuilding program touted as the most expensive in history.

However, amid recent announcements by Taiwan, the Kuwaiti reconstruction effort may not even be the most expensive building program of the 1990s.

Taiwan’s government plans to spend a staggering $300 billion over the next six years to improve roads, phones, transit services and the environment and to construct or repair facilities for industry, agriculture, health care and other services. Under the government’s plans, Taiwan’s landscape--with its gritty pollution, gridlocked streets and deteriorating structural base--will be transformed.

“There’s been a large amount of publicity surrounding the opportunities in Kuwait, but for American firms the opportunities in Taiwan may be more significant,” said Ray Sander, Washington-based director of commercial programs at the American Institute in Taiwan, a private organization that provides embassy and consulate services for Americans with interests in Taiwan.

Taiwan’s scheme is an American contractor’s dream. It’s also a sign of the times in the Pacific Rim.

Throughout Asia, governments are beginning to set aside huge sums of money to resuscitate their environment, improve their transportation infrastructure and boost their power-generating capacity--outlays that are essential for continued economic growth.

While Kuwait has reportedly been slow to let contracts for its rebuilding needs, many Asian nations have major projects in or near the bidding stage. More and more U.S. firms--including Irvine-based Fluor Daniel, American Telephone & Telegraph and San Francisco-based Bechtel Corp.--are looking east because the contracting opportunities in Asia exceed those in the Middle East and Europe, engineering industry executives say.

Asian infrastructure spending could total as much as $1 trillion over the next 10 to 15 years, with U.S. companies likely to get a significant portion, engineering executives say. Taiwan and Japan are expected to be the biggest spenders this decade.

“Asia will be No. 1 in infrastructure spending in the 1990s,” said John L. Moore, the Tokyo-based chief of Bechtel’s Asian operations. “Taiwan’s plans are so large that some (contractors) will have trouble finding enough engineers and laborers. . . . When you look at the (economic) growth in South Korea, Taiwan, Singapore and Hong Kong and consider the money Indonesia and Malaysia will be spending, it’s clear that we’re looking at a huge market.”

American firms won’t win these contracts easily. Many U.S. companies would like better access to construction business in some Asian countries.

The U.S. government, for example, has accused Japan of unfairly denying American firms adequate access to the lucrative Japanese contracting market. The U.S. government may retaliate by denying Japanese firms government contracts in America if the dispute is not resolved during negotiations this week between Tokyo and Washington.

U.S. companies will also face stiff competition from Asian firms--many of them based in the countries letting the contracts. Also, European firms are beginning to more aggressively seek construction deals in the Pacific Rim.

However, many U.S. firms are already benefiting from the building bonanza in the Pacific Basin. Successful American bidders typically possess the best expertise or the leading technology and sometimes already have a track record with the government offering the work.

The contract orders are a reflection of the economic progress in various Asian nations. Less-developed countries like Malaysia, Indonesia and Thailand are installing new infrastructure because they lack basic facilities and services in certain areas.

For example, Thailand recently hired AT&T; to expand telecommunications into unserved areas. AT&T; last week announced that it would also modernize Thailand’s phone system by installing optical fiber transmission systems.

Because much of Indonesia is not accessible by motor vehicle, the Jakarta government plans to spend about $126 million this year building new roads and repairing or improving current routes. That’s a spending increase of about 45% over last year.

Indonesia also lacks the generating capacity to power its fast-growing industries. The government recently agreed to hire a consortium that includes a subsidiary of Asea Brown Boveri of Stamford, Conn., to help build a $210-million power plant complex that will be the first major coal-fired station in East Java. Jakarta is seeking $1 billion in private investment to finance additional power plants.

More industrialized Pacific Rim nations, such as Singapore, South Korea, Australia and Hong Kong, are also in need of major projects to help curb pollution. For example, Hong Kong authorities recently announced plans for spending $2.6 billion to carry out a comprehensive 10-year blueprint to reduce air, water and noise pollution.

With so much experience in pollution cleanup, emissions monitoring and waste disposal, American waste-management and pollution-control firms can take advantage of this spending spree, said J. J. Coneys, a Los Angeles-based tax planning executive at Price Waterhouse who advises investors in Asia and the United States.

“In the environmental area, U.S. firms have technological advantages,” Coneys said. “We also have the expertise. Environmental consulting should be a fertile area in Asia.”

Browning-Ferris Industries, a Houston-based waste-management firm, is among the companies recently winning contracts. It will construct and operate a $16.6-billion waste-management facility in Hong Kong.

The export-oriented economies of Hong Kong and South Korea are also expanding and enhancing seaports and airports to sustain their trade growth. In fact, airport construction is one of the most lucrative contracting areas in Asia.

Hong Kong is planning to spend about $16.3 billion for massive new airport facilities. Greiner Engineering of Irving, Tex., and Bechtel are part of a consortium that will manage the construction.

Bechtel also just completed a planning study for a proposed new airport in Sydney, Australia. Bechtel also recently agreed to serve as project manager for the construction of a new $5-billion international airport near Seoul.

Bechtel’s revenues from its Asian operations doubled between 1989 and 1990, company executives said. Bechtel began to more aggressively seek Asian contracts when it expanded its regional headquarters in Tokyo in 1989.

Now, Bechtel and other U.S. engineering and construction services giants are setting their sights on the region’s biggest contracting opportunity: Taiwan.

With cash reserves of about $75 billion, Taiwan has the world’s second-richest treasury after Japan. However, Taiwan has paid a price for its frugality.

A report in Taiwan’s six-year development plan issued in January points out that “amid rising prosperity and affluence, there have been signs of imbalance and dislocation, including traffic congestion, environmental pollution, a rising crime rate and a lack of cultural and recreational facilities.” The report blamed these problems largely on “deficient investment in infrastructural software and hardware.”

Taiwan’s government plans to remedy the situation with its $300-billion-plus spending plan. Transportation and telecommunications projects will be among the costliest items on the shopping list, accounting for $103 billion.

Some U.S. firms have already obtained transportation contracts. Bechtel and Oakland-based Kaiser Engineers International will serve as general consultants for the construction of a $6-billion rapid transit system in Taipei. Bechtel may have to shift staff from the Philippines to Taipei to meet its rapidly growing personnel needs in Taiwan, company executives say.

Also, De Leuw Cather, a Washington engineering and construction services firm, will serve as planning consultants for a $6.5-billion mass-transit system in the southern city of Kaohsiung.

American firms are also expected to vie for contracts in two other major spending categories--a $44.5-billion set-aside for housing and a $10.7-billion outlay for environmental protection technology.

Taiwan is encouraging American firms to bid for contracts because it has been trying to boost its purchases of U.S. goods and services in a bid to head off trade frictions with Washington. Taiwan’s trade surplus with the United States peaked at $17.2 billion five years ago, but it has narrowed to $11.2 billion in 1990 partly because American firms are selling more to the Taiwanese.

The Taiwanese are especially eager to buy environmental clean-up technology and pollution-monitoring equipment from U.S. firms, said Harry T. Chen, a Los Angeles-based commercial division official at the Coordination Council for North American Affairs, which provides embassy and consulate services for Taiwan.

“I strongly urge American companies to make bids and take shares of (contracting) business,” Chen said. “We want to decrease the trade balance, but we still want good quality at a reasonable price.”

Indeed, Taiwan hopes to dole out contracts in a fair--but savvy--fashion. The Taiwanese government has given preference to some U.S. contractors in the past, but Japanese and European companies are aggressively seeking Taipei’s business.

Taiwanese businesses are expected to get much of the contracting. Major Taiwanese companies--including Formosa Plastics, Evergreen International Corp. and Tatung--have partnerships with Japanese firms.

Some French firms actively seeking deals are reportedly playing the trade friction card, suggesting to the Taiwanese that they will have to buy from European firms to sell to an economically united European Community in 1992.

American firms are getting information and assistance on the Taiwanese bidding process from the American Institute in Taiwan.

“The competition for contracts will be stiffer now because the European Community has rediscovered Taiwan,” said Sander of the institute. “However, American companies have an excellent track record of winning (Taiwanese) contracts over the past five years. I think we’ve demonstrated that American firms have good technology, world-class engineering and expertise in environmental areas.”

ASIAN BUILDING BOOM Major Asian infrastructure projects on the bidding block 1. TAIWAN: The nation will spend about $13.5 billion on mass-transit systems in Taipei and Kaohsiung. It’s part of six-year plan for spending about $300 billion on roads, phones, transit services, environmental facilities and infrastructural needs for industry, agriculture, social welfare, health care and other services.

2. HONG KONG: The territory is planning to spend about $16.3 billion for new airport facilities. Authorities also plan to spend $2.6 billion to carry out a comprehensive 10-year blueprint to reduce air, water and noise pollution.

3. SOUTH KOREA: The government plans to spend more than $5 billion to construct a new international airport on a man-made island near the capital of Seoul.

4. INDONESIA: The government plans to spend about $126 million this year building new roads and repairing or improving current routes, a spending increase of about 45% over last year. The government is also expected to build two generating plants, valued at $1 billion, in East Java.

5. JAPAN: Japan plans to spend at least $80 million on the construction of new airport facilities in Osaka. Also, under a recent agreement with the U.S. government, Japan pledged to open 17 major public projects to American construction companies by establishing new bidding processes.

Sources: Company and Asian government sources

CAPITALIZING ON THE BUILDING BOOM Selected Asian contracting projects recently awarded to U.S. firms:

Company: Kaiser Engineers, Oakland

Site: Taiwan

Project: Kaiser and its joint venture partners will serve as engineering consultants for construction of a Taipei rapid transit system

Cost of Project: About $6 billion

Company: Bechtel, San Francisco

Site: South Korea

Project: Develop master plan and engineering studies for new international airport near Seoul

Cost of Project: About $5 billion

Company: Greiner Engineering, Irving, Tex.

Site: Hong Kong