The representatives of a large Chinese construction firm discreetly toured Israel last week to take a closer look at the local construction industry. They were sent by China Railway Construction Engineering Group (CRCEG), a state-owned enterprise working worldwide which has previous experience with Israeli infrastructure projects.
Sources informed “Globes” that company personnel, alongside its official representative in the country IPC, led by Brigadier General (res.) Giora Inbar were given a comprehensive tour of Israel which included meetings with entrepreneurs and contractors and a closer look at residential ventures and other projects. They also met with industry executives and political officials, including Minister of Construction Yoav Galant and the ministry director general Eshel Armoni.
The visit was prompted by an Israeli government decision to publish a tender for foreign construction firms to bolster the domestic residential building industry and bring 1,000 of their own workers.
At first, the state plans to approve the entry of six large firms to work in conjunction with Israeli contractors. The government wants these firms to handle big projects and be involved in raising residential neighborhoods from the planning stage to project completion. Large firms from all over the world are invited to submit their application; senior officials in the Ministry of Construction confirmed there has been interest from Turkish, Greek, Spanish, and Chinese companies.
Bureaucracy concerns
A senior source at the Ministry of Construction confirmed to “Globes” that representatives of CRCEG met the minister and director general. He said, “This is not the only company to come take a closer look. There is interest. The firms primarily the Chinese ones see the Israeli market as an entry point into other areas Europe where they are less active. Israel is not a big market for them; they work in Africa and the Middle East, but they have yet to make it in Europe and this is an opportunity for them to take a step in that direction.”
CRCEG was founded in 1953 and is rated as one of the most influential companies in the world by the Fortune Global 500. It has 22 subsidiaries and employs a workforce of 8,560.
“The company sees Israel as a strategic destination,” said Inbar, who traveled with the group during its Israel tour. “It is a state-owned enterprise, which is important because only state-owned companies receive permission to build projects abroad. This firm has worked beyond the Chinese borders for many years. It builds in 20 countries, but not in Europe or America. We had many meetings with industry officials. We met with Canada Israel, Property & Building Corp, Gav Yam, Gindi, BST, and Electra.”
But Inbar provided mixed reviews from the representatives. “They are very impressed with the crazy growth in Israel but at the same time they are concerned by the regulation and bureaucracy. They hope to surmount it and to start bringing their professional staff to begin competing for projects.
“When a company of this magnitude comes it arrives on dozens of jumbo jets filled with equipment and employees. It is not a donation; both companies will benefit. Ask any contractor in Israel today and he will tell you his problems would be over if he had 1,000 Chinese workers. This is a good way to bring workers.”
Inbar further emphasized that while the Chinese were surprised by the build quality, they were less than pleased by project duration of Israeli firms: “They were surprised in the wrong way from the pace of construction. They consider the basic building of a floor to take three days. We are not there. There they work 24 hours a day, in 3 shifts, regardless of holidays and weekends. That would not be possible here especially in residential areas. But they will make adjustments; they will surely take on Israeli engineers and supervisors.”
One potential barrier to the entry of Chinese or other foreign firms to Israel is a condition that requires the companies hail from countries with high GDP. However, as part of a conference held by the Ministry of Construction last month for foreign attachés, they were told this limitation would potentially be removed.
Inbar said: “There is complicated regulation but I believe the Ministry of Construction is willing to remove some of the regulatory obstacles and even establish an appeals committee to make exceptions.”
“They asked many questions about materials”
The CRCEG representatives spent one of their days with BST CEO Elias Tannous, touring the various projects being built by the company.
“I felt the representatives of the Chinese company were very interested in the Israeli construction industry,” said Tannous after the tour. “In every project we visited, they asked a lot of questions about our methods and the materials we use and even financial issues. They were interested in construction costs, material costs, and the prices of the finished products the prices of the offices, the apartments, and more.
“In my opinion, they do not believe they will arrive in Israel to work independently. They understood there is a different culture here and a complicated bureaucracy. I believe the right model would be a mix of investment and joint ventures with Israeli firms.
“The construction industry in Israel is plagued by two major barriers: a shortage in qualified professional workers and a lack of credit. I think a cooperative model in which the foreign firms help finance the projects and reinforce domestic workers with their own employees will be the correct solution for the Israeli construction sector both for residential projects and commercial constructions.”
Published by Globes [online], Israel business news - www.globes-online.com - on June 14, 2016
© Copyright of Globes Publisher Itonut (1983) Ltd. 2016