2017: USD2.3 BILLION IN CONTRACTS

Panama 2019 | REAL ESTATE & CONSTRUCTION | VIP INTERVIEW

TBY talks to Hou Xiaotun, Executive Vice President of Powerchina International Group Limited, on upcoming projects, using Panama City as a regional base, and breaking into new markets.

What has been the evolution of Powerchina in Panama since 2014 and what is the importance of Panama for the entire group?

The initial contact of the group with Panama was in 2009, in the bid for the first expansion of the Panama Canal through its subsidiary Sinohydro. Following the restructuring of Powerchina's international businesses in 2016, six regional offices were established globally. Panama was chosen to be the headquarters of the group's operations in the Americas in August that year. One year later and thanks to the work of a multidisciplinary team formed by Panamanian, Chinese, and professionals from other nations, Powerchina was awarded, in consortium with a local company, the water infrastructure project 'Extensión del Anillo Hidráulico hacia Panamá Este'. This election and achievement underline the commitment of Powerchina with Panama and its firm interest in contributing to the country's development process, supporting the execution of plans, programs and strategic projects in the fields of energy, social development, and transport infrastructure.

Why was Panama selected as one of the company's six regional offices?

As mentioned before, the group's international businesses is divided into six regions, one of which is the Americas. As the leader of the company's business in the Americas, I had to take the decision on the location of this regional headquarters. Among the options, there were the countries where our presence were already consolidated but Panama was finally the choice. What set Panama apart from the rest of the other alternatives were its strategic geographical position, its economic stability with the US dollar as currency and its political and social stability as a democratic country. Panama offers a central location from where we can oversee and manage our operations in the region. Besides that, Panama is connected by air to almost every major city in the US, and this year it will become connected to Beijing. As well it has one of the most developed infrastructure in the region and a high quality of life. And finally, there is a Multinational Corporation Headquarters law that provides benefits, both at a corporate and personal level, and thanks to which we have access to tax exemptions and special visas for personnel.

What is your opinion of public sector support in Panama?

Panama has a healthy economic environment and a high institutional support is offered for the development of infrastructure projects in the country. Proof of this is the government's strategic plan, where the public investment programs in infrastructure sectors are one of the central pillars. Currently the overall budget for the construction industry is approximately USD4 billion, which represents important public support for companies devoted to the construction sector. Regarding private investment programs, we are focused on the energy sector, where we expect to qualify to participate in PPPs and concessions for a hydroelectric plant and a transmission line.

What are your main projects in the country and what others are in the pipeline?

We are pursuing a number of projects in Panama in cooperation with local companies and foreign companies with a consolidated presence in LATAM. One of them is Line 3 of the Panama City Metro, in consortium with the Spanish construction company Acciona. This project is of greatest interest to us due to its scale and the technical challenge it represents. Such a partnership between a Spanish company and a Chinese company like ours creates a synergy that makes us a strong and reliable proponent, offering quality, technology, the understanding of the socio-cultural environment and language, and great financial capacity. Others are energy-related projects involving transmission lines and a hydro-power plant: the Transmission Line IV and Bocas del Toro hydro-power plant. Due to the scale of both projects, our strategy will be as well to form alliances with foreign company with strong presence in LATAM. We are assessing other medium-sized projects in the fields of social development with the aim of expanding the scope of work and becoming an important player in the development of Panama.

What are your projections for further China-Panama business in light of growing diplomatic relations?

I am extremely confident that in the coming years this market will be active for Chinese companies. With the government-to-government finance framework agreement already signed, it is very likely that funding from the Chinese government will come soon to promote infrastructure projects of major importance to Panama. This new context represents an excellent platform for trade and investment promotion. I have participated in a number of business forums held both in Panama and China and I can say that there are great business opportunities here that will definitely attract the interest of investors from China. There are also talks of a first direct flight between Beijing and Panama City which is said to start be operated at the end of March this year and will undoubtedly promote tourism by Chinese citizens. The establishment of bilateral relations creates a scenario suitable not only for economic and trade cooperation but also social, cultural, and educational cooperation in pursuing joint development goals. I have been working overseas for over 10 years and based on the country's potential I can see that in the future Panama will be among the most developed countries in the world.

What are your goals and priorities for 2018?

We are focused on developing an adequate capacity at headquarters for the support of the operations of the group in the Americas. We are aiming to strengthen our internal governance system. This is extremely important, as our philosophy is to manage the company and projects with people. In 2017 our numbers were great; we won about USD2.3 billion worth of contracts in this region and broke into the markets of four new countries: Panama, Brazil, Peru, and Guyana. In 2018 we expect to have around USD2.5 billion worth of business and to enter the Chilean, Dominican, and Paraguayan markets. We want to extend our business network to cover every corner of the Americas. Particularly in Panama we will bid flagship projects with estimated contract values between USD500 million and USD2.6 billion and our target is to secure at least one of these.