Yat Hung Chiang

Market structure of the construction industry in Hong Kong

This study examines the market structure of four different sectors within the construction industry in Hong Kong. Market concentrations, expressed in terms of Herfindahl-Hershamann indices (HHIs) and number equivalents (HNEs), are calibrated for the top five contractors and compared with those of the local property industry. The study reveals the following ascending order of market concentrations: private building, public building, property development, and civil engineering. Our explanation is that technological and capital requirements have imposed a strong barrier to entry into the civil engineering sector, resulting in a concentrated market. Conversely, the lack of technological demand and supply in the private building sector has led to easy market entry and exit. Building contractors thus compete intensely on cost reduction rather than technology improvement, leading to poor construction safety and product quality. The paper concludes that the Government, being a major client of construction works and regulator of the industry, can assume a more active role in promoting the overall competitiveness of indigenous local contractors in Hong Kong.

A critical review of performance measurement in construction

Purpose – The purpose of this paper is to critically review the literature of performance measurement both in general and in the construction industry in particular. By doing so, it seeks to provide valuable insights into how to construct a comprehensive performance measurement model for the construction industry.Design/methodology/approach – Based on a comprehensive literature review on performance measurement, the paper presents a critical review of the development of performance measurement, with a special focus on the construction sector. The strengths and weaknesses of most previous measurement frameworks and techniques are investigated. Performance information that each can generate is analyzed in the context of the construction industry.Findings – The research findings showed that performance measurement studies in construction can be divided into three levels: project, organizational, and stakeholder levels. In addition, the major frameworks of performance measurement in construction were found to...

Construction and economic development: the case of Hong Kong

The role of construction in economic development is an important issue facing the construction research community, government and international development agencies. Based on empirical analyses, the complexities of the relationship between construction activity and stage of economic development in Hong Kong were examined. With time series data, Granger causality test results show that the construction output particularly the infrastructure sector drives the economic growth of Hong Kong, and not vice versa. Findings further indicate that the role of the local construction industry changes as the economy matures from newly industrializing country (NIC) to advanced industrialized country (AIC) status, as revealed by the diminishing rate of capacity addition by construction as well as the growing maintenance and repair sector. This complies with Bons inverted U‐shaped relationship between construction activity and gross domestic product (GDP). However, the proposition of ‘volume follows share’ is not supported since the indigenous construction investments still sustain for the service‐oriented economy which inevitably needs commercial development and logistics infrastructure to provide the services. The results may be significant for policy makers in NICs, in the long run, to formulate corporate and industrial policies to chart out a viable and sustainable course to revive the vigour of the industry.

Time series forecasts of the construction labour market in Hong Kong: the Box‐Jenkins approach

Labour resources are invaluable assets in the construction industry. Nurturing a quality workforce and promoting stable employment for construction personnel have often been advocated as part and parcel of an industrial policy. Yet, the future labour market of the industry is always uncertain, and there is a need for estimating future labour market conditions as an aid to policy formulation and implementation. The Box‐Jenkins approach has been applied to develop Autoregressive Integrated Moving Average (ARIMA) models to analyse and forecast five key indicators in the construction labour market of Hong Kong: employment level, productivity, unemployment rate, underemployment rate and real wage. This approach can be adopted in more complex and diverse labour markets subject to the properties of the utilized data series. Quarterly time‐series statistics over the period 1983–2002 are used in this study. The predictive adequacy of the models derived is evaluated with out‐of‐sample forecasts in comparison with actual data, based on the mean absolute percentage error (MAPE) and the Theils U statistics. The results indicate that except for construction employment, the proposed forecasting models have reasonably good predictive performance. Among the five case studies, the most accurate is the construction real wages model. In addition, we conclude that univariate projection is not an appropriate method for forecasting construction employment in Hong Kong. Multivariate structural forecasting analysis should be adopted in order to obtain more accurate estimates. The developed models can be used to provide benchmark estimates for further analysis of the construction labour market and the projections offer valuable information and early signals to training providers and employment policy makers.

‘Submarines don’t leak, why do buildings?’ Building quality, technological impediment and organization of the building industry in Hong Kong

Abstract This paper addresses a naive question: why do the new housing units in Hong Kong always leak? Conventional responses to this question, including slack construction supervision, poor workmanship, low construction cost, tight building schedule, are only superficial answers. This study addresses this question within the context of technology development and industrial organization within the house-building industry. The local building industry is notorious for its poor use of automated technology. This is reinforced by the existence of a fragmented industry that relies widely and increasingly on the use of subcontracting and procurement of labour services. Low technological applications in the house-building industry are further institutionalized by the practices of local developers, university educators and the government. This study explains why an off-site, assembly line mode of mass production of buildings cannot take off, and why the assembly work has to rely on human dexterity rather than technological precision. It is argued that the relationship between technological impediment and fragmentation of the building industry results in a vicious cycle. Unless this structural relationship is broken, poor building quality and technological backwardness will continue to linger in Hong Kong.

Coping with structural change in construction: experiences gained from advanced economies

As an economy approaches maturity, the relative importance of the construction sector would gradually decline. Without effective policies and strategies, the construction industry will suffer irreversably and this may trigger a knock‐on effect to the overall economy. The experiences of selected advanced economies are examined, including Australia, Japan, Singapore, South Korea and the UK in coping with structural changes in construction. Strategies employed by the government and the construction industry of these advanced economies to reinvent the construction industry were captured through an extensive literature review and a series of interviews with indigenous industry practitioners. In order to revitalize the construction industry, governments would accelerate publicly funded projects; provide financial support to ease the burden of industry stakeholders; and stimulate the market demand. In contrast, the industry would explore various market alternatives while companies would sharpen their competitive advantage locally and internationally through merger and acquisition. The identified strategies are corresponded to a construction industry development framework, which could therefore serve as a valuable reference for policy makers and practitioners to rejuvenate construction demand when a country approaches an urban service economy.

Achieving sustainable building maintenance through optimizing life-cycle carbon, cost, and labor: Case in Hong Kong

AbstractThe need to maintain an ever-increasing building stock especially in developed economies is growing. This study provides a computational framework to find the optimal solution for sustainable building maintenance. The methodology is composed of two major steps. First, the authors evaluate the life-cycle carbon emission, cost, and labor requirements of a project, which embody important environmental, economic, and social aspects of sustainable building maintenance. Second, the authors develop an optimization model to identify the optimal portfolio of materials that would minimize three sustainability objectives including carbon emission, cost, and labor deployment in their respective turns one at a time. By testing the model with seven scenarios in a case study, the authors demonstrate how this typical case project could significantly improve its sustainability objectives from environmental, economic, and social perspectives. This optimization methodology is generic. It can be readily applied to ot...

Forecasting the demand for construction skills in Hong Kong

Efficient manpower planning has been recognized as a critical aspect for the development of an economy. In 2001, the Works Bureau of the Hong Kong SAR Government (predecessor of Environment, Transport and Works Bureau) commissioned an HKPolyU consultancy team to develop a computer‐based model to estimate the demand for different categories of construction personnel. This article presents the concept and features of the manpower demand‐forecasting model developed for the construction industry of Hong Kong. The forecasting model is formulated on the basis of the labour multiplier approach by deriving the relationship between the number of workers required and the project expenditure in the given project duration. Multipliers for 61 project types were derived for 38 labour trades using completed project data. The labour demand by occupation for each project can then be estimated by multiplying the corresponding multipliers and the estimated project expenditure. Several unique features of the model have been developed, including “normalization” and “contract cost adjustment factor”. Normalizing the labour multipliers can facilitate the prediction of occupational labour requirements at different stages of a construction project. The adjustment factor is introduced to eliminate the discrepancy between the original estimates and final contract values so as to enhance the estimation accuracy. The model can also be used to predict the number of jobs created for a given level of investment. The government can apply this model to check and compare which project types will generate most jobs before committing public money. This model could be easily adopted and adapted by foreign construction authorities while planning manpower.

Determinants of efficiency of contractors in Hong Kong and China : panel data model analysis

AbstractThis study investigates how firm attributes affect construction contractors’ efficiency in Hong Kong and Mainland China, from the period 2004 to 2010. This study finds that the efficiency of Hong Kong contractors is associated with their managerial capability to control business costs and financial capability to manage both short-term and long-term capital liquidity. The efficiency of Mainland China contractors is also associated with their managerial capability to control business and administrative costs but not with their financial capability to maintain capital liquidity. Theoretically, this study shows that managerial and technological abilities are two common factors that transcend different institutions and systems. Hong Kong is the freest economy in the world, whereas the economy of Mainland China is more regulated. Methodologically, data envelopment analysis is adopted to establish the efficiency scores of contractors to be analyzed by panel data regression, which controls individual cont...

Comparing China Mainland and China Hong Kong contractors' productive efficiency

Purpose – The purpose of this study is to present and compare the productive efficiency of China Mainland and China Hong Kong contractors, and to identify and investigate the components and sources of their efficiency under different economic and institutional environments.Design/methodology/approach – Data envelopment analysis (DEA) is a non‐parametric approach to examine the relative efficiency among different firms. This study employs DEA based Malmquist Productivity Index (MPI) to compile the efficiency scores of 20 construction companies listed in the Hong Kong Exchange and Clearing Limited (HKEx) from 2004 to 2010.Findings – A decomposition of MPI suggests that catch‐up effect has contributed more to contractors efficiency than frontier‐shift effect. Compared to their Mainland counterparts, Hong Kong contractors have higher MPI mainly due to higher efficiency scores in catch‐up effect.Practical implications – Hong Kong contractors have advantage over Mainland contractors in their managerial and str...