The Philippines A Strategic Business Location For Your Construction Engineering and Design Services December 2001

Construction-Related Engineering & Design D : In-house or subcontracted computer-aided design services for transport, water/environmental, commercial/industrial, health/sports/educ, housing/institutional and other facilities. Tr : Opening of China market for construction services V : Good fundamentals - 75,000 licensed professionals; 15%-30% of cost vis US, Japan, Singapore M : Top International Design & Build Firms (America, Japan, Europe) Ta : [in the interim, target ENR Top international design firms to outsource low-end segment of engineering design services, i.e., CAD-translation/transcription of completed designs] KSF: CAD/3-D bridging programs, JV-partnerships with top international contractors and design & build firms for international exposure/experience R : Currently projects/market is identified by mother company; need for added investment in training w/c increases cost

DEFINITION/SCOPE OF INDUSTRY

In-house or subcontracted computer-aided design services for transport, water/environmental, commercial/industrial, health/sports/educ, housing/institutional and other facilities. WTO Sectoral Classification definition adopts the UN Central Product Classification Version 1.0 (1997) of Architectural & Engineering Services as advisory and pre-design, integrated engineering services design and construction management of: Buildings (Residential & non-residential - industrial, commercial or agricultural) Engineering Works (Highways, streets, roads, railways, airfield runways, bridges, elevated highways, tunnels and subways, harbours, waterways, dams, irrigation and other waterworks, long distance pipelines, communication and power – cables, local pipelines and cables and related works, and indoor or outdoor sports and recreation facilities) Industrial Plant and Processes (Mining constructions, power plant constructions, chemical and related facilities, constructions for manufacturing, automation of industrial processes) Other Projects (Traffic control systems, geodetic engineering services, ground water engineering services, contamination & quality management studies, corrosion engineering services, failure investigations)

TRENDS

TRENDS Increased Outsourcing Activity Worldwide (McKinsey & Company Report – Year 2000) Opening up of CHINA Membership in WTO Phenomenal and sustained growth has led to increasing construction activities such as residential and urban areas (city modernization), factories for increased manufacturing activities, et.al. Revenue potential for international design firms and contractors (EPC companies)

GLOBAL MARKET TRENDS The McKinsey & Co., an investment consultancy firm, projects a bigger demand for outsourcing services that will reach US$ 180 billion in It projects the following world demand for white collar services:

Our Value Proposition

OUR VALUE PROPOSITION Good Fundamentals Good engineering curriculum produces graduates equipped with the basic skills/principles Over 30,000 graduates annually Labor Availability 75,000 licensed professionals ( ) (About 3,800 OFWs - Skilled Const. Engrs. & Technicians) 76% - Middle East | 5 % - Africa 11% - Asia | 1.39% - Australasia 6% - Americas | 1.37% - Europe Competitive Labor Costs 15% - 30% salaries vis US, Japan, Singapore Readily Available IT-enabled Office Space Among the cheapest in the Asian region for broadband-ready, grade A premium office space

Labor Availability (Construction Related) Source: Professional Regulation Commission DISCIPLINE Licensed Professionals (1995–2000) DISCIPLINE Licensed Professionals (1995–2000) Architect9,306Master Plumber820 Civil Engineer17,709Mechanical Engineer11,652 Interior Designer274Professional671 Landscape Architect45Sanitary Engineer289 Electrical Engineer25,759Geodetic Engineer1,226 Professional297Junior1,414 Associate114 TOTAL75,147 Assitant2,606 Master2,965

PositionUSJapanSingRPRP v US RP v Jap RP v Sing Architect 5,7435,5983, % 16.4%29% Civil Engineer 6,2135,6873, %16%29% Systems Engineer 5,4604,6632, % 11.7%24% Field Service Engineer 3,4173,6702, % 16%30% Systems Director10, ,1901,545 15% 12%30% Software Developer 5,2504,7082, % 11.6%20% Accountant 4,4634,5272, % 18% Production Supervisor 3,9173,4851, % 12.9%24% Executive Secretary 2,9333,0681, % 12.5%23% Secretary 2,2081,7201, % 18%23% Chauffer 2,4421, % 19%24% Source: Asiaweek-Year 2000 Salary Survey (USD/month), includes other benefits Competitive Labor Cost

Source: Colliers Jardine, Global Office Real Estate Highlights Report – as of June 2001 Available IT-Enabled Office Space One of the cheapest in the Region – for Class A/Prime Office Space (Broadband Ready)

PRIORITY MARKET

Top International Design & Build Firms/Top International Contractors American, Japanese & European firms dominate ENR (Engineering News Record) Magazines listing of top 200 international design & build firms and top 225 international contractors in terms of revenue earned outside of home country location Interim: Outsource low-end segment of engineering design services CADD (Computer-aided design & drafting) translation / transcription of completed designs (e.g. Eichleay Pacific Inc – 50 CADD engrs exporting 100% to U.S. mother company, located in Eastwood City) Long-term, convince top international firms to outsource, locate/relocate regional design activities in the Philippines e.g. (Regional design office in RP) Fluor Daniel Inc – Phils, JGC Philippines Inc. and Parsons International Ltd e.g. (Non-RP R.D.O.; Branch/Rep. Office only) Foster Wheeler Inc., Bouygues Construction and Kellog, Brown & Root

TARGETS (Specific Companies in Top Countries) ENR Figures (Year Top International Design Firms)

GLOBAL MARKET REVENUES ENR Figures (Year Top International Contractors)

KEY SUCCESS FACTORS

KEY SUCCESS FACTOR(s) CAD Skills Training Use of latest computer-aided design software in construction (e.g. STAAD Pro/STAAD III, Fabricad, Autocivil, CADPipe, etc.) 3-Dimensional CAD Training (Virtual structures - design simulation) JV-Partnerships with Top International Design & Build firms, Top International Contractors Access to international markets (Not any Philippine firm is listed in ENRs top 200 intl design & build firms) To gain international exposure & experience (EEI Corp ranked 187 th in year 2000 as a top international contractor only) Transfer of technology (PDS, PDMS, X-Steel, FWP, Autopipe, etc.)

RISK(s)

RISK(s) Competition from Pakistan, India Engineering graduates are equally as skilled and speaks English Dependence on mother company Projects are accepted and defined by head office Revenues are highly project dependent (e.g. Bechtel Phils hired around 1000 contractuals doing CAD design. Upon project completion, maintains a staff complement of 15 employees) Considerable investment Initial investment (e.g. JGC Phils Inc – USD 18k to 20k per employee Fluor Daniel Inc – USD 23k to 25K per employee) Investment for training (IT equipment, software and man-hours)

THANK YOU!

ANNEXES

E&D Service Niches (Local Companies) Project TypeScope of Activities (Construction Related) Transport Roads, Bridges and Viaducts, Ports and Harbors, Airports and Air Terminal Facilities Water/Environmental Irrigation, Flood Control and Drainage, Municipal Water Supply, Dams and Impounding Reservoirs, Waste Management Commercial/Industrial Office Buildings, Manufacturing Plants, Industrial Parks, Mixed-use Complexes, Power Generation Housing/InstitutionalResidential, Hotels, General Land Developments Health/Education/SportsHospitals, Medical Facilities, Golf Courses Source: Internal Survey of BOI-registered firms with E&D activities, July 2001 Project TypeScope of Activities (Manufacturing Related) Electronics/Electrical Products and Components Firmware/Hardware, ICs, Connectivity Devices, Telecom Products, Audio & Video, etc. Mechanical ProductsCoils, Boilers, Generators, Power Supplies, Appliances, etc. Home FurnishingsFurniture and Fixtures

Philippine Advantage Labor Availability Source: Philippine Overseas Employment Agency OFWs (Engg Related Skills) – Year 2001

GLOBAL MARKET REVENUES ENR Figures (Year Top International Contractors)

INTERNATIONAL CONTRACTORS With Major Design Office In RP COMPANY ( In RP ) SCOPE OF ACTIVITY NO. OF EMP. Total Revenue (US$ M) Intl Revenue (US$M) ENR 1 RANK (2000) FLUOR DANIEL Inc - Phils (USA) Engineering design, procurement & construction services (global execution) 535 (370+) 7,823.73, KAJIMA Corp - Phil Dist. Office (Japan) Construction & engineering design services (Mostly local projects) 500+ (100+) 11,791.01, JGC Philippines Inc. (Japan) Engineering design, procurement & construction services (global execution) 600+ (580+) 1,482.01, PARSONS International Ltd (USA) Engineering design (global execution) 300+1, C&E Corporation (Chiyoda Corp – Japan) Engineering design (foreign and local projects) 170 (150+) EEI Corporation (Philippines) Construction services – 88% local (global execution) 6,826 (300+) Eichleay Pacific Inc (USA) CADD - Computer Aided Design & Drafting (100% export) 50+ (50) Engg News Record Magazine – Top 225 International Contractors (in 2000 Intl Revenue), Aug-2001

INTERNATIONAL Contractors/Firms With Design Office In RP COMPANY ( In RP ) SCOPE OF ACTIVITY NO. OF EMP. Total Revenue (US$ M) Intl Revenue (US$M) ENR 1 RANK (2000) URS Philippines Inc. (USA) Environmental consultancy projects design office Kvaerner Phil Const. Inc (Norway & U.K.) Local projects design office (Kvaerner PLC Group) 208,420.0*6,540.0*2*2* Hatch Associates Inc. (Canada) Local projects design office D * 1999 Intl Ranking D Design Firm Ranking

2 MRT-4 Lead Contractor/Design Office in HK 3 Design Office in Singapore 4 Design Office in Thailand COMPANYLocal Office Total Revenue (US$ Million) Intenational Revenue (US$ Million) ENR 1 RANK (2000) Bechtel Group (USA) Bechtel Phils12,390.06, Bouygues Construction (France) 2 Bouygues Construction Dragages Asia Phils 12,656.05, Kellog, Brown & Root (USA) 3 Halliburton Phils, Halliburton Energy Services Brown & Root Industrial Services Phils Inc. 5,283.03, HBG-Hollandsche Beton Groep (Netherlands) Interbeton Manila Office HAM Philippines 4,614.03, Hyundai Engineering (Korea) 4,452.02, Foster Wheeler (USA) 4 Foster Wheeler Phils Inc2,758.01, Some INTERNATIONAL CONTRACTORS With Representative/Branch Office In RP

Philippine Advantage OFW Labor Availability Source: Philippinme Overseas Employment Agency

Philippine Advantage OFW Labor Availability Source: Philippinme Overseas Employment Agency

Philippine Advantage Labor Availability Source: Philippine Overseas Employment Agency OFWs (Engg Related Skills) SALARY AVERAGES – Year 2001

We picked the Philippines because of its engineering talent. Theyre more cost- effective and … competitive globally … Its been a win-win situation for us. TESTIMONIALS ROBERT FLUOR President, Fluor Corp.

IAN M. BILL Chairman & CEO Foster Wheeler Energy Limited CLINTON, New Jersey, USA - 21 June 1999 On US$ 4.5 Billion Onshore Gas-to-Power Contract with SHELL Philippines Exploration B.V. in Batangas … The array of qualified resources and skills within the Philippines will be a significant factor to enable the project, which has a challenging schedule, to be completed on time … … Exacting availability, quality, health, safety and environmental standards will be adopted to meet the key objectives of the business. (First flow, scheduled October 2001) TESTIMONIALS

DWIGHT HUNT General Manager-Parsons (Phils.) … availability of strongly motivated, effective engineering talent … the people of the Philippines are the countrys greatest assets; … the people, the supporting infrastructure, and the economy have all come together in a very positive way for us. TESTIMONIALS