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Competition, labor costs hurt African profits

By Wang Wen in Xi'an (China Daily)

08:46, March 05, 2013

Construction firm boosts benefits to retain its Chinese employees

Top International Engineering Corp, or TIEC, believes its profit margin in the African market is declining because of the rising cost of human resources and stiffer competition.

"The company is under pressure from the rising human-resources cost, as few staff members want to work in Africa now," said Pan Lizhi, assistant general manager of TIEC, a construction company based in Xi'an, Shaanxi province.

Because the income of the staff members, especially the middle-level managers, in China has increased so rapidly, the income advantage of working on projects in Africa is less now, Pan told China Daily.

Pan said TIEC has had to raise the salary of its staff members in Africa and offer them more paid leave in order to persuade more employees to work there.

The company entered the international market in 1978, and now has projects in 15 African countries.

More than 610 Chinese staff members at TIEC work on its African projects, and the ratio of local workers to Chinese is about 10-to-1.

TIEC, which has total assets of 12 billion yuan ($1.93 billion), operated 42 construction projects overseas in 2012, most of them in Africa. The company made profits of $210 million from the overseas market in 2012.

But the company, the only one qualified as the top general contractor for civil works in Shaanxi and authorized to operate its business abroad, is small compared with central State-owned enterprises. Also, TIEC has to deal with competition from those companies.

"The competition among Chinese enterprises in the African market is stiff, and our profits are reduced by the cutthroat competition," Pan said.

Chinese construction enterprises working in Africa do their best to undercut each other's prices, which makes it more difficult to do business, he said.

The global economic crisis also has had an adverse effect on Chinese enterprises' business in Africa.

Pan said the number of project bids issued by local governments is dropping in Africa. Local governments are the company's main clients.

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