INDUSTRY OVERVIEW This section contains certain statistics, industry data or other information which have been derived from government, official or other public sources. We believe that the sources of such information are appropriate sources for such information and have taken reasonable care in extracting and reproducing such information. We have no reason to believe that such information is false or misleading or that any fact has been omitted that would render such information false or misleading. The information has not been independently verified by us, the Sponsor, the Joint Global Coordinators, the Joint Lead Managers, the Joint Bookrunners, the Underwriters, any of their respective directors, officers, affiliates, advisors or representatives, or any other party involved in the Global Offering, and no representation is given as to its accuracy. We, the Sponsor, the Joint Global Coordinators, the Joint Lead Managers, the Joint Bookrunners, the Underwriters, any of their respective directors, officers, affiliates, advisors or representatives, or any other party involved in the Global Offering make no representation as to the completeness, accuracy or fairness of such information and accordingly such information should not be unduly relied upon. OVERVIEW The Construction Industry in Hong Kong The GDP of Hong Kong demonstrates a steady upward trend over the past eight years from approximately HKD1,234.8 billion in 2003 to approximately HKD1,743.9 billion in 2010, representing a CAGR of approximately 5.06% according to the Census and Statistics Department of Hong Kong. The following table illustrates the GDP and GDP per capita of Hong Kong from 2003 to 2010: 2003 2004 2005 2006 2007 2008 2009 2010 GDP (HKD billion) 1,234.8 1,291.9 1,382.6 1,475.4 1,615.6 1,677.0 1,622.2 1,743.9 GDP per capita (HKD1,000) 183.4 190.5 202.9 215.2 233.3 240.3 231.6 246.7 Source: Census and Statistics Department of Hong Kong As boosted by the ten mega infrastructure projects announced by the Government in 2007, the GDP by construction increased by approximately HKD9.5 billion from approximately HKD40.6 billion in 2007 to approximately HKD50.1 billion in 2009, representing a CAGR of approximately 11.1%, which significantly outperformed the CAGR of the GDP of Hong Kong for the same period. Onsite construction works Construction works performed at construction sites mainly consist of two categories namely (i) buildings; and (ii) structure and facilities. In recent years, the construction of residential buildings has been the major growth driver for the total gross value of building construction. As stated in the 2011–2012 Policy Address, the Government is intending to ensure an adequate supply of land to produce about 40,000 flats each year. Moreover the Government will continuously increase the land supply in order to stabilize the market price of properties. Hence the construction of residential buildings is expected to grow. In 2010, –75– INDUSTRY OVERVIEW the gross value of construction of transport structures and facilities increased from approximately HKD3.6 billion in 2009 to approximately HKD10.9 billion in 2010, representing a CAGR of approximately 203%. It also accounted for over 50% of the total gross value of the total construction of the structures and facilities in 2010. In view of the ten mega infrastructure projects having been gradually activated, it is expected that the growth of the construction of the structures and facilities for the coming years will be significant. The following table illustrates the gross value of construction works in nominal terms performed by main contractors at construction sites analysed by detailed end-use group from 2005 to 2010: HKD Million 2005 2006 2007 2008 2009 2010 Buildings 34,005 29,680 33,353 37,900 39,742 40,839 Residential 16,945 15,518 16,064 20,613 22,804 22,588 Commercial 8,652 6,890 10,927 9,954 7,368 7,979 Industrial & storage 1,180 2,058 1,080 797 359 993 Service 7,228 5,213 5,282 6,537 9,211 9,279 Structures & facilities 14,686 12,311 10,123 10,934 12,516 20,683 Transport 9,813 8,148 5,803 5,178 3,595 10,852 Other utilities & plant 1,076 1,148 1,220 2,088 2,666 2,658 Environment 3,141 2,505 1,870 2,502 4,461 5,758 Sports & recreation 656 510 1,230 1,167 1,794 1,415 Source: Census and Statistics Department of Hong Kong The following table illustrates the gross value in nominal terms of construction works performed by main contractors from 2005 to 2010: HKD million 2005 2006 2007 2008 2009 2010 The gross value of construction works performed by main contractors 90,851 90,230 92,866 99,599 100,944 111,274 — private sector sites (1) 26,356 24,855 28,973 33,495 33,606 30,306 — public sector sites (2) 22,334 17,135 14,503 15,339 18,653 31,216 Source: Census and Statistics Department of Hong Kong Notes: (1) Private sector sites: Includes projects commissioned by private developers and projects under the Private Sector Participation Scheme; –76– INDUSTRY OVERVIEW (2) Public sector sites: Includes projects commissioned by the Government of the Hong Kong Special Administrative Region, MTR Corporation Limited, and Airport Authority. Projects under the Home Ownership Scheme which are commissioned by the Housing Authority are also included; Offsite construction works The Government and the public are more concerned with the safety of the ageing buildings in Hong Kong. The Government continuously issues mandatory building orders to the owners of the disqualified ageing buildings. According to the Comprehensive Building Safety Improvement Loan Scheme, the Hong Kong Government even grants allowance to the building owners to conduct repair and maintenance work on the disqualified ageing buildings. In early 2010, the building collapse in Ma Tau Wai Road further aroused public concern about the rising problem of ageing buildings. In recent years, general trades continues to be the major component of the construction works performed by the main contractors. General trades consist of decoration, repair and maintenance, and construction work at minor work locations such as site investigation, demolition, and structural alteration and addition works. General trades of construction works in nominal terms performed by contractors accounted for approximately 32.1% of the total gross value of construction works in 2010. The following table illustrates the gross value on general trades of construction works in nominal terms performed by main contractors from 2005 to 2010: HKD million 2005 2006 2007 2008 2009 2010 The gross value on general trades of construction works 28,485 36,289 37,422 37,618 34,427 35,695 Percentage of the total gross value of construction works 31.4% 40.2% 40.3% 37.8% 34.1% 32.1% Source: Census and Statistics Department of Hong Kong 10 Major Infrastructure Projects for Economic Growth 1) South Island Line Construction of the seven-kilometre rail line will start in 2011 and cost more than HK$7 billion. The South Island Line will be commissioned no later than 2015. 2) The Sha Tin to Central Link The Sha Tin to Central Link will connect the Northeast New Territories and Hong Kong Island via East Kowloon. According to the 2011–2012 Budget of the Government, the construction work is expected to commence in 2012 and the total project cost is expected to be over HK$60 billion. –77– INDUSTRY OVERVIEW 3) The Tuen Mun Western Bypass and Tuen Mun-Chek Lap Kok Link The construction cost for the Tuen Mun Western Bypass and Tuen Mun Chek Lap Kok Link is expected to be over HK$20 billion and will be commissioned no later than 2016. Upon completion, there will be a direct access linking up Deep Bay in Shenzhen, the Northwest New Territories and the Hong Kong International Airport. 4) The Guangzhou-Shenzhen-Hong Kong Express Rail Link The Hong Kong section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link will connect Hong Kong with the 16,000km ‘‘four vertical and four horizontal corridors’’ national high-speed rail network and will materialize the idea of one hour living cycle between Hong Kong and the Pearl River Delta region. The terminal of the Hong Kong section will be located at West Kowloon. The construction work commenced in 2010 and it is expected to be completed in 2015. 5) Hong Kong-Zhuhai-Macao Bridge The proposed Hong Kong-Zhuhai-Macao Bridge, being situated at the waters of Lingdingyang of Pearl River Estuary, is a large sea crossing bridge linking Hong Kong, Zhuhai City of Guangdong Province and Macau. It consists of a main bridge in the mainland waters together with the boundary crossing facilities and link roads within the three territories. The construction work commenced in late 2009 and it is expected to be completed in 2016. The total project cost is expected to be over HK$70 billion. 6) Hong Kong-Shenzhen Airport Co-operation In 2008, the Government and Shenzhen Municipal Government signed several agreements regarding the closer cooperation between the Hong Kong International Airport and the Shenzhen Airport. According to the agreements, the government of both sides will initiate major infrastructural projects to strengthen the connection between the Hong Kong International Airport and the Shenzhen Airport. 7) Hong Kong-Shenzhen Joint Development of the Lok Ma Chau Loop The Lok Ma Chau Loop, together with the old Shenzhen River section, has an area of about 100 hectares. The Loop was formed as a result of the training of the Shenzhen River and is now within the boundary of Hong Kong.