survey report on localization practices of chinese international ... · to improve awareness and...

Survey Report on Localization Practices of Chinese International Contractors in Africa

2013

Survey Report on Localization Practices of Chinese International Contractors in Africa 01

Preface

As the world experiences globalization and increasingly close international collaboration, the concept of international competitiveness has also changed. Corporate Social Responsibility (CSR) is now an important indicator that is part of a new-round of international com-petitiveness along with the traditional indicators, such as competition over price and competition over quality. As an integral part of trans-national enterprises’ social responsibility, the localization of operations not only has bearing on the success of their overseas business, but also on the sustainable development of the economies, societies and environments of the host countries.

Since the policy of reform and opening-up was adopted in China, more and more Chinese enterprises have been working hard to de-velop their business in the international market. As they participate in the global economy, Chinese enterprises are confronted with po-litical, economic, social and environmental challenges. As a result, it is imperative for Chinese international contractors to rapidly make improvements in terms of CSR and enhance their localization operations in overseas markets to ensure their sustainable development in the international market. This is also an important task for them to fulfill.

Africa has long been a market for Chinese international contractors, and Africa is an important pillar of their business development. When visiting Africa in March of this year, President Xi Jinping, the president of China, pointed out that Africa and China are actually a “community of common destiny”. He promised that the Chinese government would encourage its enterprises to expand investment in Africa and continue to require them to actively carry out CSR. In light of this, it is of great significance to understand the state of localiza-tion development of Chinese international contractors in Africa and provide more effective guidance to help them push forward localiza-tion operations on the continent.

Since 2007, the China International Contractors Association (hereinafter referred to as CHINCA), a national industrial association statu-torily and voluntarily established by Chinese international contractors, has made utmost efforts to urge its members to carry out CSR. At the same time, CHINCA has stipulated a plan for the advancement of CSR in the industry while mobilizing many campaigns in terms of education, example setting, standards establishment, and capacity building. These efforts have received positive response from mem-ber enterprises and external stakeholders alike. One activity that has been offered to CHINCA members is a seminar in August, 2013 on Chinese outbound investment and the Swedish Labour Management System, co-organised by CHINCA and the Centre of Corporate Social Responsibility of the Embassy of Sweden (hereinafter referred to as the CSR Centre).

To improve awareness and capability in localization operations in Africa of Chinese international contractors, CHINCA initiated the pro-ject called Survey about Localization Operations of Chinese International Contractors in Africa in the beginning of 2013. This report is based on that survey. The report, completed by analyzing the questionnaires filled out by Chinese international contractors and the inter-views of some contractors and through studying feedback from stakeholders, lays out the current state of localization developments in regards to Chinese international contractors in Africa. The report includes descriptions of the cases of a few enterprises that have stood out in this regard and contains suggestions for improving on deficiencies. The perspectives of awareness, organizations, employees, operating networks and community localization are utilized throughout the report. We hope the report can provide readers with more in-sight into the localization operations of Chinese international contractors in overseas markets, encourage enterprises to accelerate their own transformation and upgrading, and help them to improve capacities in terms of the achievement of sustainable development in the overseas markets. Moreover, the report can help Chinese and overseas stakeholders to gain a different perspective on the localization strategies of Chinese international contractors in their overseas operations while also helping these stakeholder to recognize the ongo-ing efforts and progress already made by these contractors in their localization operations and reinforce their trust and confidence in the Chinese international contractors.

The CSR Centre promotes increased knowledge and implementation of CSR and has therefore supported the initiative to make this study.GoldenBee (Beijing) Management Consulting Co., Ltd. provided technical support. We would like to acknowledge the relevant government agencies, organizations and contractors for their cooperation and support of the survey. We are looking forward to working with everyone concerned to promote the sustainable development of the Chinese international contracting industry while also promoting the balanced and healthy development of the economies and societies in the host countries in order to provide for mutual benefits and a win-win situation.

China International Contractors AssociationDec, 2013

02 Survey Report on Localization Practices of Chinese International Contractors in Africa

Summary

Between 2001 and 2012, the value of newly-signed contracts of Chinese international contractors in Africa rose from USD 2.46 billion to USD 64 billion, an astonishing 26 fold increase. The rapid development entails challenges in terms of CSR. It is crucial to ensure that the economic progress is accompanied by responsible business behaviour. While knowledge and technology transfer in many cases contribute to the improvement of infrastructure and increased standard of living, companies could further enhance involvement of local community and integration of CSR into their operations in Africa.

Study background and purpose

This report is an attempt to shed light on how Chinese contractors work on CSR in Africa. It presents the conclusions from a study on the localization performance of Chinese contractors in Africa. A questionnaire was sent to 149 Chinese contractors with relatively large business volumes in Africa and 66 replies were received, representing 57 companies. The values of newly-signed contracts and turno-ver of contracts achieved by the sample contractors were respectively 63.61% and 48% of the total value of that accomplished by the Chinese contractors operating in Africa.75% of them are state owned enterprises and 80% of them are located in West Africa. They rep-resent various industries, for example 77% are involved in construction industry, 54% in transport and traffic, 39% in water supply and sewage and 26% in mining. In addition, 258 external stakeholders, such as government representatives, NGOs, suppliers etc., in Africa have been interviewed.

The purpose of the study is to improve awareness and capability in localization operations in Africa of Chinese international contractors. It was initiated by China International Contractors Association (CHINCA), a national industrial association established by Chinese inter-national contractors. Since 2007, CHINCA has promoted CSR implementation among its members, by identifying best practice, draft-ing CSR standards and raising CSR awareness. These efforts have received positive response from member enterprises and external stakeholders alike. This study is another step on the way to understanding challenges and opportunities faced by Chinese international contractors overseas and how they can enhance their CSR performance.

The CSR Centre of the Embassy of Sweden promotes increased knowledge and implementation of CSR and has therefore supported the initiative to make this study, in order to raise awareness of how CSR can be applied by Chinese contractors in Africa. CHINCA alone has been responsible for conducting the study, analysing the material and writing the report.

Africa is an important market for Chinese contractors

Since Year 2000, when China adopted a “go international strategy” and entered WTO, Chinese international contractors have grasped new opportunities and built external and internal capacity to move ahead in the project contracting business. Chinese President Xi Jin-ping, when visiting Africa in March this year, promised that the Chinese government would encourage its enterprises to expand invest-ment in Africa and continue to require them to actively fulfil CSR.

Most of the companies covered in this study deem Africa as an important market for their global operations. At the same time, they also deem it as an important objective of localization development in Africa to focus on and promote local development and growth.

The importance of recruiting local staff

The majority of the Chinese contractors covered in the study realize the significance of recruiting local employees for the benefit of the company and the assimilation into the local community. Local workers are considered to have language advantage, valuable interper-sonal networks and good knowledge of local laws and regulations. Other factors contributing to a company’s choice to recruit local staff are that corporate expatriates entail higher costs and that all African countries have specified a ratio of yearly increase of local employ-ees in enterprises. Some African countries have even launched a policy aimed at restricting the entry of foreign workers to ensure the employment of local workers. In addition, acquiring labour visas from foreign countries is becoming more difficult for Chinese citizens, restricting the outward flow of Chinese workers to some extent.

The rate of employment of local workers is related to how long enterprises have been operating in the African market. Generally, the longer an enterprise has been in Africa, the higher its employment rates of local workers. Companies tend to develop their management methods over time, adapting to local culture. However, enterprises that are new to Africa have limited knowledge of local language and culture as well as lack of experience in local employee management. Consequently they are inclined to employ Chinese workers.


The study shows that Chinese contractors employ more local employees for labour work than for technical or management positions. African government representatives interviewed hope that Chinese contractors will improve the technology transfer and knowledge com-munication, improve employee skills through training and employ more local staff for higher positions in the companies.“Considering cost, management advantages, requirements of SASAC, group company policies and local laws, we will employ local workers and senior managers as much as possible after contracting the project,” says a person in charge of China Railway Construction Corporation Limited, Zambia branch.

Occupational safety and labour conditions – a work in progress

The Chinese international contractors covered in the study pay attention to the occupational safety of employees. In fact, all enterprises participating in the study said that they ensure occupational safety for the employees, 98% of the enterprises said that they compensate employees for overtime work, most of the enterprises pay various insurance premiums and pay bonus to the employees. Nearly 50% of the enterprises provide physical examination for the employees. In most cases, the Chinese contractors abide by local laws and regula-tions regarding occupational health and safety, but some Chinese companies in the study fail to provide medical aid, housing subsidy and similar provisions. Temporary contracts of some of the Chinese companies surveyed do not include illness leave, maternity leave or compassionate leave. In case leave is permitted it may be without pay.

Engaging in local community requires mechanisms for regular communication

Some enterprises have included overseas localization and social responsibility in their company strategies, which has received appreci-ation from local stakeholders. Some enterprises struggle to abide by the host country’s laws and regulations and meet the requirements of the client. They do not have a systematic approach to CSR issues. Many enterprises do not have adequate management and lack in communication with stakeholders, especially residents in the community and local civil society. Efficient community involvement requires mechanisms for regular communication.

Most of the companies in the sample cooperate with local enterprises. “It is convenient to purchase and use local equipment, because local suppliers/sub-contractors are more familiar with the local market and society,” says the Vice President of Overseas Department of China Communication Construction Co. Ltd. However, it is predominantly raw material such as cement or stone that is procured locally. Large equipment is mainly imported from China or western countries. The majority of their sub-contractors are Chinese contractors in Africa or China.

71% of companies in the sample say that they help improving the environment and 45% fund the establishment of hospitals and schools. However, their performance in environmental protection is less satisfactory to local stakeholders, which indicates that Chinese international contractors could be more proactive in this field.

Chinese contractors’ performance assessment on their branches or subsidiary companies or projects overseas is primarily focused on economic performance. Therefore, their branches or subsidiary companies pay more attention to the project operation and neglect their impact on local community and other stakeholders.

Suggestions on company actions for improved CSR performance

The study shows that even though many Chinese contractors in the sample are increasingly engaged in CSR, there is still room for im-provement. These are some suggestions based on the study findings on how companies may pay further attention to social responsibil-ity and minimize operation and management risks:

• Long-term planning covering all phases of a project, ensuring that each activity can be carried out in an efficient and sustainable way.• Entering the African market in the form of a joint venture, employing local workers and allowing for independent management adapted to local conditions.• Designing a competitive human resource management system, providing space for employee development, encouraging employee initiatives and improving the employee sense of belonging.• Collaborating with government and educational institutions in training local workers.• Handling cultural and language differences in a constructive way marked by respect and communication.• Using local raw materials, equipment and other resources as well as the production and sales network of partners. • Giving high priority to social responsibility and community relations, communicating with local government, community residents, social organisations, environmental protection organizations, media and other stakeholders.• Increasing disclosure frequency of information and enhancing operation transparency.• Establishing a mechanism for regular communication with local suppliers and offering them training to achieve the CSR objectives set by the company to enhance the social responsibility management of the supply chain, mitigating risks caused by non-compliance in the supply chain.


About this Report

BackgroundResearch Methodology and Scope Survey Overview

Major Findings

Chinese International Contractors and Their Development in Africa

International Contracting Projects, Major Path for Chinese Enterprises to Go International Chinese International Contractors are Developing Rapidly in African Markets

Localization Awareness: Serve Global Layout and Focus on Local Development

Localization, the Endogenous Force Promoting Local Development, the Major Target of Localization Political and Economic Environmental Influences on Localization Operations

Organization Localization: Support Business Operations and Improve Supporting Regulations

Half of Local Organizations Do Not Have the Authority to Operate IndependentlyRemake Rules and Regulations to Cater to Localization Operations in Africa

Employee Localization: Abide by Local Laws/Regulations and Emphasize the Rights and Interests

of Employees

Greater Domestic Demand for Labor and External PressureMore Local Laborers Than Local Technicians and Management Personnel are Employed Year-on-year Salary Increases Put Pressure on Sustained Business OperationsJob Skills, Health and Safety are the Key Focuses of Enterprise TrainingsEmployees Provided with Various Benefits in Accordance with Local Laws and Culture

Localization of Operating Network: Stronger Cooperative Willingness but Weak Cooperation Intensity

Focus on Partnering with Local Enterprises with Strong Desire Commonly-seen Partnership with Local Enterprises and Partnership Level Needs Improving Technical Factors Limit Local Partnership

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Contents


Case 1: POWER CHINA-Implementation of an Employee Localization Strategy

Case 2: CJIC-To be a “master”

Case 3: CSCEC5BC-Innovation in the Cultivation of Local Expertise

Case 4: CITIC Construction-Improving Building Materials Manufacturing Level in Angola Through

the Project Construction

Case 5: ZTE-The ETC Thousand-Talent Training Program in Ethiopia

Case 6: CSCEC-Multiple Ways out

Case 7: AVIC-Mobile Hospital in Zambia

Case 8: CGCOC-Signing an Agreement with an Environmental Organization

Case 9: CCECC-Communicate Fully with Community Residents

Case 10: NFCA-Creation of a Community Involvement Plan

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List of Cases

Community Participation and Development: Support for Community Development and

Communications Could be Enhanced

Vigorous Implementation of Community Service and ConstructionCommunity Construction Focuses on Practicability but Neglects Foreign CommunicationPublic Benefit Activities Lack Systematic Planning and Management

Conclusions and Suggestions

Appendix 1: Summary of Questions on the Questionnaire on Localization Practices of Chinese

International Contractors in Africa

Appendix 2: The Company Abbreviations

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These cases of Chinese enterprises that have excelled in regards to the focuses of this study have been

included to serve as inspiration for others.


About this Report

Background

Since China adopted its policies of reform and opening-up, and particularly since China’s entry into the WTO, a large number of Chinese enterprises have been encouraged by the “going inter-national” strategy of the country to get into almost every econom-ic field in the world and participate in international competition. Amid this process, Chinese international contracting business has been expanding rapidly. According to the statistics by Minis-try of Commerce People‘s Republic of China, from the beginning of overseas contracting business to the end of 2012, By the end of 2012, China had signed contracts for international contracting projects worth USD 998.1 billion and finalized USD 655.6 billion of them. Through this process, Chinese international contractors have made great developmental strides and become an important force in the international contracting market. Nevertheless, as newcom-ers to world market competition, Chinese international contractors have encountered challenges. The international community and the relevant stakeholders in the host countries have voiced various opinions on Chinese enterprises’ business and operations in Africa. Moreover, the CSR philosophies, practices and performance levels of Chinese enterprises have consistently been the objects of atten-tion for these various parties.

Due to rising labor costs, the soaring prices of raw materials and international shipping, sluggish demand in the international market, fierce competition, and other negative factors caused by financial crisis, Chinese international contractors face an increasingly challenging market situation. At the same time, African countries are paying more and more attention to foreign companies’ degrees of localization. They not only require foreign companies to abide by local laws and regulations and respect lo-cal customs, they also hope these companies can engage in the localization of production as much as possible so as to stimulate local economic and social development.

The nature of localization means transnational companies in-tegrate most sections of their operations, such as production, marketing, management, HR and others, into the economy of the host countries while fulfilling their CSR as faithful residents of the host countries and merging the corporate culture with or rooting

it in the local culture. Localization operations not only represent a management approach and management philosophy, but also an important social responsibility to be undertaken by the con-tractors. Social responsibility is defined as “the responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical be-havior”, according to ISO26000 (article 2.18).

In March of 2013, President Xi Jin ping, the president of China, visited Africa and emphasized, “China will always be a firm pro-moter for prosperity and development in Africa. The Chinese government will take proactive measures to encourage Chinese enterprises to expand investment in Africa and will continue to require that they engage in CSR.” CSR is an important factor in whether Chinese international contractors are able to attain sus-tainable development in overseas markets and establish them-selves as responsible companies in the world market. It is im-perative for Chinese international contractors to rapidly improve their level of CSR and enhance their capacities in regards to the localization of operations in overseas markets so as to ensure their sustainable development abroad. It is also an inevitable task for Chinese enterprises as they seek to go international.

Against this backdrop, CHINCA has conducted the project called Survey about Localization Operations of Chinese International Contractors in Africa to understand the localization level of Chi-nese overseas contractors, guide them to promote localization operations and improve their awareness and capacity of CSR. The purpose has been to study current development of localiza-tion operations made by Chinese international contractors in Africa and raise suggestions for localization improvement. The CSR Centre promotes increased knowledge and implementation of CSR and has therefore supported the initiative to make this study, in order to raise awareness of how CSR can be applied by Chinese contractors in Africa. CHINCA alone has been respon-sible for conducting the study, analysing the material and writing the report.


Research Methodology and Scope

Graph 1.1 Technical Route Plan

Collection of associated literature

Enterprise Questionnaire

Stakeholder Questionnaire

Interview with enterprises

Interview with stakeholders

Analyze questionnaires

Best practicesStudy of the literature

Project plan Questionnaires

Issue and retrieve

Survey report

Issue and retrieve

Field studies Practical cases

The implementation of this study has relied primarily on such approaches as literature study, questionnaire surveys and visits to the enterprises. The sample companies are primarily Chinese international contractors with large-scale business operations in Africa and their stakeholders. For the purposes of this survey, interviews were conducted at the head offices of representative companies and onsite visits were made to Ethiopia and Zambia where many Chinese international contractors operate. At the same time, the study has collected cases of Chinese enterprises that have excelled in regards to the focuses of this study so as to serve as reference for Chinese enterprises engaged in overseas contracting projects and that need to carry out localization opera-tions in Africa. (Note: “Chinese international contractors” in the

report refers to those sample companies who are involved in this survey)On the basis of the specific business attributes of Chi-nese international contractors, the study focuses on four aspects of localization. Through focusing on organizational structure and management regulations, the survey probes into the localization of organizations; through focusing on local employment and staff salary& welfare, the survey probes into the localization of em-ployment practices; through focusing on local procurement and support of suppliers/subcontractors, it probes into business net-work localization; and through focusing on community develop-ment and communications, it probes into community participation and development.


Survey Overview

Graph 1.2 Ownership type of sample contractorsGraph 1.3 Geographical location of sample contractors’ busi-ness undertakings in Africa

407.4 640.5 63.6%

196.3 408.4 48.1%

Value of newly-signed contracts (in USD 100 millions)

Achieved turnover(in USD 100 millions)

Type Enterprise Contractors in sample Chinese contractors in Africa Proportion

75.8%

10%

20%

30%

40%

50%

60%

70%

80%

0.0%

19.7%

4.5%

SOE and state-owned holding enterprises

Private enterprises

Foreign-funded enterprises, HK and Macau enterprises, others Taiwan Enterprises

Other

10%

20%

30%

40%

50%

60%

70%

90%

80%

62.1%

36.4%

80.3%

43.9% 40.9%

West Africa East Africa North Africa Central Africa South Africa

Source: CHINCA Report on Development of Chinese Contracted Projects in Overseas Markets 2012-2013

Source: Chinese society for the study of African issues, Chinese Enter-prises in Africa

A questionnaire was sent to the head offices of 149 Chinese con-tractors. We chose them from our member companies accord-ing to their business location and volumes. Statistics base was drawn from Ministry of Commerce People‘s Republic of China, showing overseas contract values and turnover of qualified Chi-nese contractors in every country. We chose 149 companies who have large business scales in many African countries. 66 replies were received, representing 57 companies (9 branches or sub-sidiaries of the contractors in Africa have filled out the question-naire in addition to the head office). Most of the respondents are manager/staff in overseas department. These 57 Chinese inter-national contractors have operations in most of African countries.

Through Embassies/Business Department and Chinese contrac-tors, a separate questionnaire was sent to stakeholders from Ethiopia, Zambia, Kenya, Ghana, Cameroon, Algeria and Mau-ritius. The questionnaires totalled 258. The respondents are em-ployees, communities, suppliers, economic and commercial offic-es/oversea government agencies. We also conducted interviews at the head offices of 7 companies or groups, including CCCC, CGCOC, CCECC, CJIC, ZIEC, CHEC and CSC(full name see Appendix 2), and made visits to CREC’s Addis Ababa Light Rail

Project Department in Ethiopia, the Ethiopia Road Bureau, the China-Zambia Economic & Trade Cooperation Zone, the Zam-bia State Power Corporation, and the WWF’s Zambia Office. Moreover, we organized symposiums for Chinese enterprises in the Economic Counselor’s offices of the Chinese embassies in Zambia and Ethiopia and had substantial discussions with the representatives of local employees, suppliers, governments, NGOs and other stakeholders about the localization operations of Chinese enterprises.

Survey of Chinese international contractorsRelevant literature shows that, in 2012, the number of Chinese companies in Africa is more than 2000. However, it is difficult to estimate the number of Chinese contractors in Africa to our re-sources. The values of newly-signed contracts and turnover of contracts achieved by the 57 Chinese international contractors in this survey were respectively 64% and 48% of the total value of the newly-signed contracts and total contract turnovers for the year accomplished by most of the Chinese contractors operating in Africa (see Table 1.1).

Table 1.1 Value of newly-signed contracts and contract turnovers accomplished by the Chinese international contractors in 2012


Survey of stakeholdersThe survey of stakeholders was targeted at the Chinese inter-national contractors’ employees, suppliers, and communities as well as the commercial offices of embassies and overseas gov-ernment agencies in Africa. The contents of the survey include the stakeholders’ evaluation of and expectations for legal and regulatory compliance, technology transfer, environmental pro-tection and involvement in community development in regards to the Chinese international contractors operating in Africa.

Graph 1.4 Local industries participated inby the sample contractors in Africa

Graph 1.5 Percentages of retrieved questionnaires from differ-ent stakeholders

10%

20%

30%

40%

50%

60%

70%

80% 77.3%

9.1%4.6%

25.8%

9.1%

54.6%

39.4%

9.1%

3.0%

22.7% 22.7%

Building and construction

Transport and traffic

Water supply and sewage

Power Mines Manufacturing and processing

Electronics and telecom

Environment industry

Petro and petrochemical

Space and aviation

Other

57.8%

24.4%

15.1%

2.7%10%

20%

30%

40%

50%

60%

Employees Communities Suppliers Economic and commercial offices/overseas government agenciesSurvey limitations

Owing to constraints in regards to time, resources and other fac-tors, as the first survey of its kind about the localization practices of Chinese international contractors in Africa, this survey has inevitable limitations: 57 sample Chinese contractors cannot fully reflect the overall picture of all Chinese international contractors who operate in Africa; most of the sample contractors are SOEs or state holding enterprises, and there are only a few private contractors in the sample; because some contractors might in-terpret the questions in the questionnaires differently, there may

be a gap between a small amount of the sample data and the actual data; due to the limitations of researchers in terms of their experience, expertise and disciplines, the survey procedures still need optimizing.


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92.42%

70 %

84.85%

Rate of sample Chinese in-ternational contractors that promote the development of local localization as the stra-tegic goal

Average number of local organizations established in Africa by each Chinese inter-national contractor

Average rate of local em-ployees employed by sample Chinese international con-tractors in Africa

Rate of sample Chinese in-ternational contractors that have partnered with local enterprises in Africa

Rate of community residents interviewed who are satis-fied with the infrastructure built by Chinese international contractors

92.06%

*The numbers in the margin can

be taken as representative of the

sample in this study.

Based on 66 questionnaires of China international contractor and stakeholders, face to face inter-views and on-the-spot investigation, these are our main findings:

Most of the Chinese international contractors include Africa in their stra-tegic market layout and are very conscious of the need to engage in the localization of operationsMost of the Chinese international contractors in the sample deem Africa as an important market in their global operations. Global market strategy has become the primary factor driving Chinese inter-national contractors to engage in localization operations in Africa. Most Chinese international con-tractors have laid out strategies for the advancement of localization in Africa. At the same time, they also deem the promotion of local development and growth as an important objective of localization in Africa. Most Chinese international contractors regard localization operations as an endogenous force that drives their development in Africa. Most of the sample contractors abide by local laws and regulations, respect local culture and customs, employ local staff as much as possible, cooperate with local organizations, participate in the building and development of local communities and strive to integrate into the local society.

Half of the organizations do not have the authority to operate independentlyFor the sake of project development and operations, Chinese international contractors covered in the survey establish branches, subsidiaries or offices in Africa. However, half of these organizations do not have the authority to operate in a wholly independent way. Neither do they have the authority to make investments or the qualifications to contract projects. The Chinese international contractors have adjusted or revised their regulations to realize compliance locally. The survey results show that most of the stakeholders in the localities surveyed are satisfied with the local compliance operations of Chinese international contractors.

High rate of local employees but employment structure needs improvementMost of the Chinese international contractors employ local employees and safeguard their legitimate rights and interest as required by laws and regulations. The average rate of employees that are local stands at about 70%. And the rate of local laborers is generally higher than that of local technicians and management personnel. For the Chinese international contractors to engage in localization operations in Africa, it is critical that they overcome cultural differences and improve management philosophies and levels.

Strong willingness to engage in partnerships with local enterprises, lots of fields of cooperation, depth of cooperation needs improvementChinese international contractors in the sample try their best to procure local raw materials, mainly bulk materials such as cement and stones. Most complete equipment is imported from China or Western countries. Projects are mostly subcontracted to Chinese subcontractors, either local branches or subsidiaries or are brought from China by the Chinese contractors. Technical factors, such as the lack of needed capabilities of local suppliers/subcontractors and different standards, are major barriers against in-depth cooperation between Chinese international contractors and local sup-pliers/subcontractors.

Make full use of their strong points and build infrastructure to boost local communitiesMost of the Chinese international contractors in the survey sample adhere to their promises of ben-efiting the host countries. On one hand, they invest in and develop construction projects to help improve community infrastructure and push forward local economic and social development. On the other hand, they actively engage in efforts to support local education, improve medical services, help impoverished people, provide disaster relief assistance and benefit community residents. However, most of the charity efforts of Chinese international contractors are individualized and spontaneous, as there is a lack of systematic planning. Moreover, they tend to be more focused on implementation than on verbalizing their contributions. They do not communicate fully with the community residents and NGOs, and thus are not able to disseminate and convey the social image of Chinese interna-tional contractors to the largest extent.

Major Findings


Chinese International Contractors and Their Development in Africa

International contracting projects, major path for Chinese enterprises to go international

Chinese international contractors are developing rapidly in African markets

Graph 2.1 Development of the Chinese contracting business in overseas markets from 2001 to 2012

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140%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Unit: USD 100 million

Value of newly-signed contracts

Contract turnover accomplished

Growth rate ofvalue of newly-signed contracts

Growth rate of realized turnover

Since the adoption of China’s reform and opening-up policies, the Chinese international contracting industry has been continu-ously expanding while its international competitiveness has been improving. This industry of China reaches over 180 countries and regions in the world. As of the present, these contractors have established a comprehensive, multi-level and wide-ranging market layout that is centered on Asia and Africa. Since the year 2000 when China adopted the “go international” strategy and en-tered the WTO, Chinese international contractors have grasped the opportunities before them and built up their external and internal capacity, thus ensuring the extraordinarily rapid develop-ment of China’s project contracting business. The scale of their business has expanded rapidly, as has the breadth of the fields of cooperation, the level of the projects improved, the diversity of cooperation, while the entities involved in these operations have experienced progressive optimization. At the same time, Chi-

nese international contractors have been capturing greater and greater attention in the international project contracting market, and international contracting has become one of the major forms of China’s “going international”.

Since 2001, the Chinese international contracting business has maintained rapid growth for 12 years in a row. In 2012, the Chi-nese international contracting project industry hit a record high. The value of newly-signed contracts reached USD 156.5 billion, up 10% on an annual basis. At the same time, contract turnover reached USD 116.6 billion, up by 13% YOY. Moreover, the com-petitiveness of Chinese international contractors continues to improve, and their capacities are constantly increasing. They are also contracting increasingly larger projects.

Africa and China have had long-term friendly relations. After the establishment of the Forum on China-Africa Cooperation, the sound multilateral cooperation mechanisms for Africa and China

have been consistently strengthening, providing an external environment fostering economic and trade relations between the two parties. At the same time, African countries and China,

Source: 2012-2013 Report on Development of Chinese Contracted Pro-

jects in Overseas Markets

Source: CHINCA Report on Development of Chinese Contracted Projects in Overseas Markets 2012-2013


Source: Report on Development of Chinese Contracted Projects in Overseas Markets 2012-2013

Graph 2.2 Development of contracting business of Chinese international contractors in Africa between 2001 and 2012

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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Unit: USD 100 million

Value of Newly-signed contracts

Realized turnover

Growth rate of realized turnover

Growth rate ofvalue of newly-signed contracts

During the early 21st century, the Chinese contracting business has developed rapidly, comprehensively and deeply in Africa. Graph 2.2 shows that between 2001 and 2012, the value of newly-signed contracts of Chinese international contractors rose from USD 2.46 billion to USD 64.05 billion, an increase of about 26 fold; contract turnover achieved rose from USD 1.52 billion to USD 40.84 billion in 2012, an increase of about 27 fold. The value of contracts signed between the Chinese contractors and African countries rose continuously year after year.

In 2012, the total value of Chinese international contractors’ newly-signed contracts within Africa in regards to transport, traf-fic, building construction, water supply, sewage, power and other infrastructure reached USD 49.69 billion. In the same year, the Chinese international contractors in these industries realized contract turnover of USD 30.79 billion in Africa, accounting for 78% and 75% of the total for most Chinese international contrac-tors in Africa.

President Xi Jinping said, “China-Africa ties have been forged and sealed in adversity, built on one concrete step after another. China and Africa have always been a community of shared des-tinies, and similar historical experiences, common development tasks, as well as shared strategic interests have bound the two sides together. ” The capital, equipment and technologies com-ing from China have effectively reduced construction costs in Africa, .Chinese contractors covered in the survey have continu-ally strengthened business cooperation and actively engaged in charitable efforts and have done a lot of work in regards to public

welfare facilities, medical services, culture and education, envi-ronmental protection and humanitarian aid. While seeking their own development, the Chinese international contractors are, at the same time, also helping Africa to improve its capacity for in-dependent development. Source:“Remaining Reliable Friends and Faithful Partners Forever”, Chinese President Xi Jinping made an important speech at the Julius Nyerere In-ternational Convention Center, March 26th 2013Information Office of the State Council The People’s Republic of China, China-Africa Economic and Trade Cooperation (2013)

most of which are developing countries, have maintained rapid economic growth. The ample capital, mature industries and tech-nical equipment of China have been joined with the abundant resources, market capacity and lower human resources costs in Africa. These evident complementarities and the vast needs of both sides have become the primary force for stimulating rapid trade growth between Africa and China. Economic growth in Africa has provided new space for the two parties to engage in a wider range and higher levels of cooperation

With the rapid growth of the African economy, the construction of infrastructure has become an urgent need of African countries. Chinese international contractors take advantage of their strong points in terms of technology, capital and other areas in order to actively help African countries to improve their infrastructure via working on projects. Such participation is in line with the priority developmental needs of African countries. It will also lay a foun-dation for the future economic and social development of African countries.


Localization Awareness: Serve Global Layout and Focus on Local Development

Localization, the endogenous force

Promoting local development, the major target of lo-calization

Graph 3.1 Importance of internal factors in Chinese international contractors’ engagement in locali-zation operations

Strategic layout in the global market

Comprehensive cost

CSR requirements

Personnel and property safety

HR structure

External image

Factors of historical development

1 2 3 4 5 6 7 8 9 10

3.8

3.3

4.3

3.7

3.5

3.0

6.2

As competition in the international contracting market becomes increasingly fierce and Sino-African cooperation increases, Chinese contractors are focusing their attention on the African market. Most Chinese contractors deem Africa to be a strategic market for their overseas operations. The survey found that the Chinese contractors engage in localization operations primarily because of their mar-ket layout strategy (see Graph 3.1: the numerals between 1-10 represent the importance of the indi-cators.Larger numerals mean greater importance.) and secondarily because of overall costs. There is little difference among the impacts from CSR, personnel and possession safety, HR structure, external image of the contractors and development history of contractors. This means contractors have realized the influence of localization operations from the perspective of a strategic layout in the global market more than other factors. They also realize the importance of localization operations for their sustainable development. The localization of operations has become a endogenous driving force for the Chinese international contractors.

Most Chinese international contractors involved in this survey deem Africa to be a region for their long-term operations and promoting local development as an important operational philosophy that they have adopted and included in their strategic development goals. As shown in Graph 3.2, most Chinese contractors, not only deem the promotion of local development, as a strategic goal of locali-zation, but also take action on the projects. 5% Chinese contractors only focus on the projects. We can see that most Chinese contractors in the survey sample realize that only by developing together with the local communities can they achieve sustainable development in Africa.

Localization is the imperative path for companies to realize their own transformation and upgrading through shifting the course of their development.

— CGCOC


Graph 3.2 Strategic goals of localization development of Chinese international contractors in Africa

0% 20% 40% 60% 80% 100%

84.9%

10.6%

4.6%

Make endeavor to promote local development

give appropriate attention to local development

Deem completion of project as the primary goal

Political and economic environmental influences on localization operations

Graph 3.3 Importance of external factors in regards to engaging in localization operations in Africa by Chinese international contractors

Local politicalenvironment

Stability of local foreign investment policies

Diplomatic relations

Market potential

Environment of market competition

Labor force resources

Natural resources 1.8

2.7

4.3

3.8

4.6

4.7

5.6

1 2 3 4 5 6 7 8 9 10

The company focuses on localization development, which means we have to go out, get in and move on. “Get in” means we should bring the Chinese management and technical resources and engage in compliance opera-tion in accordance with local requirements. “Move on” means we have to integrate into local culture and become a localized company

— Person in charge at the Ethiopia Branch of

SINOHYDRO

The implementation of construction projects requires long periods of time and is vulnerable to ex-ternal influences. The survey reveals that the Chinese contractors pay attention to politics, econom-ics, laws, regulations, policies and diplomatic relations between China and the host countries. The degree of Chinese contractors’ attention to the political and economic environment in Africa even exceeds their attention to the abundant natural resources and labor force resources on the conti-nent. (See Graph 3.3: the numerals between 1-10 represent the importance of the indicators.Larger numerals mean greater importance.)

In general, the political and economic environment of host countries and their diplomatic relations with China are uncontrollable variables for the Chinese contractors. A stable political and economic environment is the premise for the successful implementation of the contracted project and has bearing on the development of the localization operations of Chinese international contractors.


Organization Localization: Support Business Operations and Improve Supporting Regulations

Half of local organizations do not have the authority to operate independently

Graph 4.1 Organizations established by Chi-nese international contractors in Africa

Graph 4.2 Local organizations in Africa of Chinese international contractors known by commercial offices of embassies and overseas government agencies

Graph 4.3 Major duties of local organizations in Africa established by Chinese international contractors

50

100

150

200

250

300

159142

275

Office/Representative office

Branch company Subsidiary

0% 20% 40% 60% 80% 100%

83.3%

93.9%

78.8%

80.3%

59.1%

50.0%

Explore the local market

Communicate with stakeholders

HR management authority

Responsible for legaland compliance affairs

Qualifications tocontract projects

Independent financeauthority

The survey reveals that 57 Chinese international contractors have established 576 local organiza-tions in Africa, an average of 10 local organizations per contractor. Offices/representative offices and branch companies/subsidiaries are major forms of overseas organizations established by Chinese overseas contractors. These two categories have almost the same number of organizations associ-ated with them (see Graph 4.1). The results of the stakeholder questionnaires show that the com-mercial offices of Chinese embassies/overseas government agencies believe the Chinese interna-tional contractors mainly depend on the project departments to carry out their operations (see Graph 4.2). This reflects the fact that most Chinese international contractors set up local organizations to implement and provide services for the projects. At the same time, these offices engage in external communications in the name of the projects.

The contractors’ local organi-zations in Africa operate in the form of registered com-panies with independent fi-nancial and HR rights. Local companies are responsible for specific operations and the head office just provides guidance from the strategic perspective. This is good for localization management, which is able to fully attract local employees while getting away from an operational model targeted merely at completing the projects.

— Person in charge of a department of CGCOC

The local organizations of Chinese contractors have the following duties: explore the local market, communicate with stakeholders, engage in HR management, and deal with legal and compliance af-fairs (see Graph 4.3). Moreover, only 50% of these local organizations have independent authority in regards to finances and qualifications to contract projects. This demonstrates that their local organi-zations in Africa are mainly responsible for exploring the market and engaging in corporate manage-ment of project implementation.

71.4% 71.4%

100%

60%

20%

40%

60%

80%

100%

Office Local company Project department


Graph 4.5 External stakeholders’ satisfaction with legal and regulatory compliance of Chinese inter-national contractors

Remake rules and regulations to cater to localization operations in Africa

Graph 4.4 Types of regulations made by Chinese international contractors for their local manage-ment and operations in Africa

0% 20%10% 30% 50% 70% 90%40% 60% 80%

78.8%

63.6%

63.6%

89.4%

37.9%

69.7%

3.03%

Labor use regulations

Safety regulations

Procurement regulations

Environment protection regulations

Compliance oriented regulations

Regulations regarding communications with

stakeholdersOther

regulations

10%

20%

30%

40%

50%

33.3%

44.1%

18.3%

3.2% 1.1%

Very satisfied Satisfied Moderately satisfied Not satisfied Very dissatisfied

Because many African countries have legal systems that are different from that of China. Most Chi-nese international contractors have created specific regulations or adjusted their original regulations to adapt to the local laws and realities, in accordance with local laws, regulations, customs, religions and cultures. 90% of the sample contractors have created regulations about local employment is-sues because compliance with local labor employment is the first problem faced by them when they first enter the African market (see Graph 4.4). Many contractors have created regulations that are specifically oriented towards the characteristics of local markets. For instance, Tianyuan Group has created the Labor Employment Regulations in Chad and China Petroleum Jilin Chemical Engineer-ing & Construction Co., Ltd. has created the Labor Employment and Training Regulations.

The majority of Chinese international contractors in the survey have made different regulations that cater to local conditions in Africa, laying a solid foundation for ensuring the compliance of their op-erations on the continent. The survey found that most governments, community residents and other stakeholders interviewed are generally satisfied with the Chinese international contractors’ compli-ance with local laws and regulations, and only a few of them are not satisfied (see Graph 4.5).

The survey finds that most respondents of local stakeholders hold that the Chinese international contractors are not communicating sufficiently with community residents, NGOs and other stake-holders. This is partly because some contractors do not have regulations about communications with stakeholders.

The number of local organizations, to some degree, reflects how long a contractor has been en-gaged in overseas operations. The survey finds that contractors operating in the overseas markets for long periods tend to have more local organizations. For instance, Sino Hydro and CCCC have respectively established 35 and 44 overseas organizations. ZTE has established 40 offices. AFECC has established 22 subsidiaries, and CHICO has established 12 branch companies.

In general, Chinese interna-tional contractors perform well. They are diligent and make great efforts once a de-cision has been made; they learn fast and have great adaptability. Additionally, they are good at listening and are willing to accept the clients’ proposals and understand their needs.

— Person in charge of Ethiopia Road Agency


Employee Localization: Abide by Local Laws/Reg-ulations and Emphasize the Rights and Interests of Employees

Greater domestic demand for labor and external pressure

More local laborers than local technicians and man-agement personnel are employed

Figure 5.1 Chinese contractors’ reasons for employing African labor

70%

80%

75%

85%

95%

90%

84.9%

78.8%

89.4% 90.9%

83.3%

Save on employee costs

Locals have language advantages and knowledge of local conditions

As part of localization strategy

Adherence to local laws and regulations

Relieve local employment pressure

The majority of the sample Chinese contractors are able to understand the significance of employee localization to the development of the enterprise and local area and thus take the initiative to pro-mote employee localization. Since the expenses of bringing in employees from China are constantly increasing with the rise in the price of domestic manpower, saving on employee-related costs has become the primary driving force for the implementation of employee localization by enterprises. Additionally, the majority of African countries have specified an annually increasing ratio for the number of local employees within foreign enterprises, and some African countries have launched policies aimed at restricting the entry of foreign labor so as to ensure the employment of local labor. According to some Chinese contractors being interviewed in Ethiopia and Zambia, acquiring work visas from foreign countries is becoming more difficult for Chinese citizens, and the related proce-dures have been becoming increasingly complicated in recent years, restricting the outward flow of Chinese labor to some extent. So, the external pressure of African countries’ policies, laws and regulations is also an important reason that Chinese contractors have been implementing employee localization.

Local employees who have language advantages, interpersonal networks and knowledge of local laws and regulations are preferred by Chinese contractors. According to research, most Chinese contractors employ local manpower for jobs in human resources, finance and tax management in addition to ordinary laborer positions, and there are also some enterprises employing local labor to engage in public relations and market development.

A total of 165,930 African workers are employed by the 57 Chinese international contractors in the sample while 13,215 technicians and managers are employed by them. The ratio between these two numbers is 13:1. According to Figure 5.2, more African laborers than technical managers are em-ployed by Chinese contractors.

In line with cost, manage-ment advantages, the re-quirements of SASAC as well as group, company and local laws, we will employ local labor and senior man-agers as much as possible after contracting for the pro-ject. Currently, the number of our employees in Zambia is about 560, only 10% of which are Chinese employees.

— Person in charge at the Zambia branch of CRCC


Figure 5.2 Distribution of enterprises’ rates of employment localization

10%

20%

30%

40%

50%

60%

3.6%

57.1%

17.9%20.4%

17.9% 18.4%

32.1%

4.1%

0%－20% 20%－40% 40%－60% 60%－80% 80%－100%

28.6%

0.0%

The horizontal axis indicates the rate of the localization of employment

Laborers Technical managers

Vertical axis indicates the percentage of domestic

enterprises in each section

Case 1 POWER CHINA—Implementation of an Employee Localization Strategy

According to the findings of research, the rate of employment localization for Chinese contractors is about 70% in general, while the specific rate differs in line with the specifics of the projects. The em-ployment localization rate of projects requiring less technical skills is normally higher, for example, the employment localization rate for some civil work projects is over 90%. In comparison, the locali-zation employment rate for technical managers is lower. An objective explanation is the shortage in the number of local technical managers, while the subjective reason is that many enterprises still lack effective management incentive mechanisms for foreign high-level employees.

Moreover, the employment localization rate is related to how long enterprises have been operating in the African market. Generally, the longer enterprises have been operating in Africa, the higher their employment localization rate are. Effective management methods suitable for local employees have been formed in enterprises that entered the African market long ago and have undergone a process of exploration and cultural fusion, which contributes to their high degree of localization. However, enterprises that have only recently entered Africa have no knowledge of the local languages or local cultures and lack experience in regards to local employee management. These companies usually assign a large number of Chinese laborers for construction.

The ratio of Chinese employ-ees serving in the general staff and as senior managers in many Chinese enterprises is as high as 30%-40%. I hope Chinese enterprises can try to employ some local employees to undertake some key posts to facilitate technology transfer and the spread of knowledge.

— Person in charge at a department of Ethiopia

Road Agency

Enterprises shall integrate themselves into local envi-ronment, improve the quality of managers, respect and trust local employees as well as give them development space to make them feel that they have a platform on which they can give full play to their ability, which is beneficial to release local employees’ enthusiasm and potential and increase man-agement efficiency.

— Person in charge of a business unit of CCECC

POWERCHINA put emphasis on employing, training and promoting local employees to put employee localization into practice and increase the employment localization rate. We have stipulated a princi-ple for employee localization as follows: dismiss Chinese employees once we find local employees that are qualified to do their jobs. Each Chinese employee sent overseas has a mission, which is to train foreign employees who can replace them. We implement a two-step localization strategy, namely the localization of specific operations staff members and the localization of managers, espe-cially senior managers. Meanwhile, we send excellent domestic engineering and technical personnel to enhance the onsite training offered to local employees. On the other hand, we will accomplish the building of a domestic training base and creation of teacher resources for training excellent foreign employees who are chosen to participate in training in China and send the trained employees, who are organized into instructor groups by us, back to their country to train other local employees. In the future, a global training network will be constructed through the interactive operations of domestic and foreign trainings in order to ensure the effective implementation of the localization strategy.


Year-on-year salary increases put pressure on sus-tained business operations

Job skills, health and safety are the key focuses of enterprise trainings

Figure 5.3 Comparison of average salary of the local employees with the average local salary

Figure 5.4 Satisfaction levels of local em-ployees in regards to the salary provided by Chinese international contractors

The majority of the Chinese international contractors that have participated in the survey can comply with the local legal provisions in respect to the labor force by providing a salary to local employees of no less than the average salary for the area, signing formal contracts with employees and distrib-uting employee salaries in full and in time as agreed in the contract (see Figure 5.3). According to feedback from local employees, most of the local employees are satisfied with the salary provided by Chinese contractors (see Figure 5.4). According to the survey, with continuous improvement in terms of professional technical skill levels and proficiencies, employee requirements in terms of salary are also increasing continuously.

In Africa, trade unions often negotiate with the employer on behalf of the employees, requesting enterprises to increase salaries for employees regularly. The request rates of increase are generally around 15%, and can even be higher. Considering the situation differs a lot in China where trade unions have far less influence on the salary setting etc., this also presents challenges to Chinese contractors in local areas.

According to most Chinese international contractors in the survey, the local employees have low technology skills and consciousness in regards to safety. To this end, Chinese international contrac-tors generally lay emphasis on making improvements to employee work skills and occupational safe-ty management. The trainings provided by Chinese international contractors for the local employees are primarily oriented towards job skills and occupational health and safety, more than half of the Chinese contractors often carry out trainings in respect to enterprise culture, occupational quality, environmental protection and language in a way that is respectful of the local African customs and religious beliefs (See Figure 5.5) and establish a reasonable award system to encourage the local employees to work efficiently. By contrast, only a smaller number of enterprises carry out career de-velopment training, and this is a factor in the high loss rate of local employees.

0.0%

18.2%20%

40%

60%

80%

100%

Higher Same Lower

81.8%

36.1%

6.9%10%

20%

30%

40%

50%

60%

0.7% 0.0%

Very satisfied Satisfied Satisfied Dissatisfied Very dissatisfied

59.7%


Figure 5.5 Types of training provided by Chinese international contactors for local employees

39.4%

98.5%

20%

40%

60%

80%

100%

68.2%

27.3%

89.4%

51.5% 50.0%54.6%

4.6%

Job skills training

Occupational health and safety training

Enterprise culture training

Environmental protection training

Manage-ment skills training

Occupati-onal quality traijning

Language training

Career development training

Other training

Region determines cultural difference. Cultural blend-ing is an ongoing process. The enterprise that is going global should accept others with an open attitude and not seek to change the local culture and habits. Through a gradual and ongoing pro-cess, the concepts of both parties will gradually tend towards similarity.

— Person in charge of ZCCZ

The China Jiangxi Corporation for International Economic and Technological Cooperation acknowl-edges the importance of local worker training. In Zambia, the company trained a worker to be the first “master”. The worker developed from an apprentice bricklayer to a skilled engineering equip-ment operator. To date, this “master” has trained more than 100 local apprentices.

Case 2 CJIC—To be a “master”

Most of the local employees interviewed are satisfied with the training provided by Chinese contrac-tors (see Figure 5.6). According to the survey, the African government organs interviewed hope that the Chinese contractors can improve in regards to technology transfer and the transfer of knowl-edge. They also hope for the improvement of the employees’ technical skills through training and that local employees are asked to assume some important posts.


During the course of the cultivation of local expertise overseas, CSCEC5BC carried out an activity called “apprentice mentoring” and cultivated local employees through strictly controlled, long-term and continuous professional skills training before, during and after the specific training periods. The company established a tutor-apprentice relationship with test personnel of each professional module in the form of “many to one”. This facilitated the joint studying of the standards and specifications and shaping of a common system of language through very close on-site teaching. Meanwhile, by virtue of the barrier–free communications and close relationships fostered between people of different eth-nic backgrounds, the test supervisors and their employees, the company encouraged employees to consult and communicate with those supervising them, effectively improving the effectiveness of the training. After focusingon the cultivation of a group of employees with strong learning abilities and receptiveness, the company provided 1-2 back-up personnel for them and asked the apprentices to cultivate the back-up personnel, thereby forming a sustainable and virtuous-cycle cascade cultiva-tion model and avoiding the problem of “chain breaking” owing to a high loss of employees.

Case 3 CSCEC5BC-Innovation in the Cultivation of Local Expertise

Figure 5.6 Satisfaction of local employees in regards to the training and development op-portunities provided by Chinese international contractors

The Chinese contractors have often organized production and technical trainings to cultivate the local technical talents and employ the trained employees permanently in a targeted way. However, due to the urgency of particular construction deadlines and the heavy demands of some projects, the enterprises have not always had enough time to carry out job skills trainings for the employees.

20%

30%

10%

40%

50%

18.1%

36.1%

44.4%

1.4%3.5%

Very satisfied satisfied Average Dissatisfied Very dissatisfied


Most of the enterprises that participated in the study provided labor protections for their employees according to the laws. 98% of the enterprises paid overtime pay for their employees. Most of the enterprises paid various insurance premiums and distributed bonuses to their employees, and nearly 50% of the enterprises provide physical examinations for their employees. Similar to the satisfac-tion noted above with regard to salary, most of the local employees were satisfied with the benefits provided by the Chinese enterprises. According to the survey, the local African laws stipulate that the employees enjoy various benefits, such as accommodations, transportation benefits, lunch subsidies, medical expenses, burial subsidies (when the employees, their spouses or children die, the employer should provide such benefits as coffins, transportation subsidies for the roundtrip to and back from the cemetery, cash and flour), etc. The Chinese contractors generally provided cor-responding labor protections and provided various benefits for their employees in accordance with the provisions of local laws and regulations, but some Chinese companies did not provide medical aid, housing subsidies and other benefits. Furthermore, the temporary contracts of some Chinese companies seldom included discussion of the workers’ annual sick leave, maternity leave, compas-sionate leave and whether the employees permitted leave should be paid, etc.

Employees provided with various benefits in accord-ance with local laws and culture

Figure 5.7 Benefits provided by Chinese international contractors for local employees

Figure 5.8 Satisfaction of employees in regards to the benefits provided by Chinese international contractors for the local employees

20%

40%

60%

80%

100%100% 98.5%

48.5%57.6%

83.3%77.3%

16.7%

Labor protection

Overtime work pay

Insurance Bonus Annual leave Physical examination

Other

20%

10%

30%

60%

40%

50%

0.0%

33.3%

59.7%

10.4%

0.0%

Very satisfied satisfied Average Dissatisfied Very dissatisfied


Business network localization can reduce operating costs, expand the scale of overseas projects and improve operating efficiency to some extent. Chinese international contractors have realized the importance of business network localization, so their willingness to cooperate with local enterprise is strong. According to the survey, 92% of Chinese international contractors in Africa have developed cooperative relationships with enterprises in Africa (see Figure 6.1), while local African enterprises accounted for 76% of the most enterprises that the contractors cooperated with (see Figure 6.2).

Localization of Operating network: Stronger Cooperative Willingness but Weak Cooperation Intensity

Focus on partnering with local enterprises with strong desire

Figure 6.1 Cooperation of Chinese interna-tional contractors with local enterprises

Figure 6.2 Type of local enterprise Chinese international contractors engaged in coopera-tion with

In the process of cooperation with local enterprises, sample Chinese international contractors lay emphasis on the evaluation of whether the suppliers fulfill social responsibilities, rather than only conducting localized purchase on the basis of quality and cost of products and services. Ac-cording to the data, 77% of Chinese international contractors not only take cost and quality into account, but also focus on factors that include environmental protection and morality, among others. (see Figure 6.3).

Figure 6.3 The principles that Chinese international contractors base their selection of local enter-prises for cooperation on

0% 40%20% 60% 80%

1.5%

1.5%

24.2%

77.3%

Only consider cost and quality without regard to other factors

Focus on cost savings with little regard to other factors

Treat cost and quality as the primary factor, with proper regard for environmental protection, morality, etc.

Besides cost and quality factors, also take environmental protection, morality, etc. as key factors

Utilizing local resource facili-tates improving profits and efficiency.

— CMEC

It is convenient to purchase and use local equipment, be-cause local suppliers/sub-con-tractors are more familiar with the local market and society. Therefore, as an enterprise, we prefer to purchase locally.

— An Executive Vice-President of Overseas

Department , CCCC

20%

40%

60%

80% 75.8%

30.3%

Local enterprises Multinational corporations

20%

40%

60%

80%

100%

7.6%

92.4%

All None


As for the three main fields of business network localization, materials procurement, equipment leasing and purchasing, and design and construction subcontracting, Chinese international contractors have es-tablished extensive cooperative relationships with local enterprises. In regards to materials procurement in particular, the localized purchasing rate of most Chinese international contractors is between 0%-50%.In regards to equipment leasing and purchasing and design and construction subcontracting, the degree of cooperation with local enterprises is lower, and over 50% of enterprises have localized purchasing rates between 0%-25%. (See Figure 6.4)

Commonly-seen partnership with local enterprises and partnership level needs improving

Figure 6.4 Depthof localized cooperation between Chinese international contractors and local enterprises

Basic materials generally purchased from the local areaThere are abundant resources on the African continent, which enjoys exceptional advantages for the procurement of raw materials at low cost and good quality as well as primary processed products. The majority of Chinese international contractors purchase base materials, such as cement and stones, locally as needed for their projects. When there are local shortages of raw materials, urgent needs, or when the quality of local materials fails to meet the standards, Chinese international con-tractors turn to surrounding countries or China for their purchases. According to Sino hydro Group Ltd., it will take different measures in accordance with the characteristics of different countries and regions while comprehensively taking cost factors into account and purchase from local countries and surrounding countries as much as possible.

10％

20％

30％

40%

50%

60%

1.5%4.6%

12.1%

27.3%

51.5%54.6%

25.8% 24.2%

18.2%

28.8%

16.7%15.2%12.1%

None 0-25% 26%-50% 51%-75% 76%-100%

4.6%9.1%

The horizontal axis shows the rate of the localization of procurement

The vertical axis shows the percentage of

enterprises in each group

Raw material supply Equipment leasing and purchasing

Design and construction subcontracting


Among the factors that restrict cooperation between Chinese international contractors and local enter-prises, technical factors play the dominant role (Figure 6.5). On one hand, historical factors have caused differences in technical standards. Differences in African and Chinese laws and standards have made co-operation slightly more complicated. On the other hand, weak infrastructure and uneven product quality result from the limitations of African production capacity, and these factors also hinder the development of their production capacity in turn. In 2009, Africa’s Infrastructure: A Time for Transformation a document issued by the World Bank indicates that while there has been improvement in African infrastructure, the weak infrastructure in Sub-Saharan African regions slows economic growth by 2% per annum of national economy and results in productivity that is 40% lower than it could be. Weak infrastructure has been a significant obstacle for Chinese international contractors in regards to local engineering construction and has blocked the advancement of the localization of their business networks to a certain extent.

Technical factors limit local partnership

Importation generally relied on for the procurement of complete equipment The study shows that although there are abundant resources on the African continent, the majority of areas, especially the Sub-Saharan African countries, are still in the initial stages of industrializa-tion without the complexity of industrial structures needed and with limited processing capacity. As such these countries cannot produce enough technology-intensive products. Therefore, the degree of cooperation between most Chinese international contractors and local enterprises in regards to equipment leasing and purchasing is lower, and they frequently purchase materials from China or Western countries.

The degree of engineering sub-contracting is relatively lowIn regards to local design and contracting services procured, Chinese international contractors’ de-gree of cooperation with local enterprises is relatively low. Plenty of small and medium-sized enter-prises enter the African market in the wake of the entry of large-scale Chinese enterprises into the market, and these other enterprises capture a certain amount of the market share. Many Chinese international contractors become accustomed to sub-contracting projects to Chinese sub-contractors that have come from China or that have offices locally in Africa. The sample Chinese international contractors believe that compared with Chinese sub-contractors, the technical levels and construc-tion capacities of local sub-contractors are limited, and their scale is small. Thus, it is hard for them to take on extensive sub-contracting projects. Therefore, cooperation between Chinese international contractors and local sub-contractors in this regard takes place primarily with respect to relatively simple building projects and encampment construction.

Materials are basically pur-chased locally; in terms of equipment, about 20-30% of purchases are made lo-cally, and 70% of equipments brought with us. The scale of local sub-contractors is small and their capabilities limited, so it is difficult to give them complicated business projects. Generally, the Company will maintain good relationships with local sub-contractors and sign a contract with them when there is a project that the sub-contractor can undertake. No more than 30% of sub-contract-ing is local.

— A Senior Manager of CGCOC


Graph 6.5 Current issues in Chinese international contractors’ cooperation with local enterprises

When implementing the construction of KK Project (Phase I) and RED project in Angola, with the di-rect or indirect investment and other forms, CITIC Construction had built 104 stations, including stone material factory, sand factory, brickyard, aluminum alloy doors & windows factory, nursery garden, concrete mixing factory, concrete pipe factory, lime-sand brick factory, coating factory, water mixing factory, asphalt mixing factory, wherein, the aluminum alloy doors & windows factory possesses 4 ad-vanced production lines for aluminum alloy doors & windows, with the annual output of over 300,000 square meters, thus becoming the largest aluminum alloy doors & windows factory in Angola.

The local stations built by CITIC Construction not only provide the project with all-around material support to ensure the project quality, but also provide the local suppliers with both financial and tech-nical support, which greatly promote the building materials manufacturing level in Angola and drive the development of the local building materials markets.

Case 4 CITIC Construction-Improving Building Materials Manufacturing Level in Angola Through Project Construction

20%

40%

60%

80%

62.1%

28.8%

45.5%

36.4%

56.1%

50.0%53.0%

43.9%

4.6%

Different technical standards

Weak infrastructure standards

No capacity for providing services

Different business practices

Different cultures and religions

Irregular product quality

Insufficient legal protections

Language communica-tion barriers

Other

ZTE has established representative offices and branch companies in 51 African countries and pro-vide communication products and after-sales service. ZTE is focused on long-term development in Africa and has set up four training centers there. They are located in Egypt, Algeria, Ethiopia and Ghana and have cultivated lots of high-level telecommunications engineers, who have come to serve as the local technical backbones for many African countries. ZTE also shares its successful global communication network construction and operations management experiences with Africa and ac-tively assists African countries in the formulation of network development plans for the next 5 years or more.

ZTE created the Thousand-Talent Training Program in Ethiopia. Through this program, they offered train-ing for 1,000 engineers of Ethiopia Telecom for free. The ZTE-ETC&CTIT Training Center was jointly established by ZTE, ETC and CTIT (a communications academy of ETC).The center was provided with various training equipment by a subsidiary corporations of ZTE in Ethiopia and with training infrastructure by CTIT. CTIT took full charge of the implementation of training. By the end of 2012, the Thousand-Talent Training Program had already completed its goal of training 1,000 engineers.

Case 5 ZTE- The ETC Thousand-Talent Training Program in Ethiopia


Most of the Chinese international contractors covered by the survey, on the basis of the project, carry out local community service and construction that is concentrated on the three aspects of edu-cation, medical treatment and infrastructure construction. Making donations is also an important way by which they participate in community development (see Graph 7.1). Chinese contractors who con-struct projects overseas are actually making contributions to infrastructure construction and promot-ing local development at the same time. Additionally, Chinese contractors also make use of their pro-fessional advantages to promote the development of supporting infrastructure and industries, which includes the maintaining of local electric power facilities, the building of such community facilities as parks, hospitals and schools. They also make improvements in regards to transportation links within communities, health care, electric power and water conservancy, and other basic community needs.

Community Participation and Development: Support for Community Development and Com-munications Could be Enhanced

Vigorous Implementation of Community Service and Construction

Graph 7.1 Contributions of Chinese international contractors to local development

While engaged in the No.1 National Highway Project in Congo, CSCEC found that residents along the path of the project always drank unsanitary river water. In order to provide clean water to over 20 villages, China Construction built wells for villagers along the path of the project, and the company also built two medical clinics to provide for the disease treatment needs of community residents. The project team also completed many projects aimed at the convenience of residents, such as sidewalk cover plates and driving plates in villages and intersection broadening. CSCEC has also funded the construction of some roads that branch off of No.1 National Highway to reach villages, improving the road network connections between villages.

Three years ago, the area where the No.1 National Highway begins was a barren land, yet after the opening of the first-stage of the project to traffic, factories, marketplaces and towns bloomed along the road. The construction of roads has facilitated transportation, and the infrastructure along the course of the project has also brought convenience for community residents. CSCEC has also re-ceived respect and affirmation from local government and community residents, expanding the com-pany’s influence there.

Case 6 CSCEC- Multiple Ways Forward

10%

20%

30%

40%

50%

70%

80%

60%

90%

45.5%

36.4% 34.9% 34.9%

75.8% 71.2%

83.3%

Donations Infrastructure construction

EnvironmentalImprovementAssistance

Funding the establishment of hospitals/schools

Help developing specialty industries

Providing educational opportunities

Provision of free medical services


As shown in the graph, those benefitting are generally satisfied with Chinese international contrac-tors’ involvement in the promotion of local development. Their highest degree of satisfaction is in re-gards to infrastructure construction, and their degree of satisfaction in regards to medical treatment and education is relatively high. In contrast, they are less satisfied with environmental protection, which indicates that Chinese international contractors must make more efforts to proactively protect local environments.

Graph 7.2 The evaluation of community residents on Chinese international contractors’ promotion of local development

AVIC INTERNATIONAL customized a “tailor-made” mobile hospital project for Zambia together with the Export-Import Bank of China. The project provided the Zambian government with loans with favorable terms, equipped each province with a mobile hospital that includes seven functional sub-groups, including an outpatient service car, an X-ray service car, an operation service car, a testing service car, a drug and medical instrument supply car, a living service car, and a water and power supply car, as well as a first-aid ship. All service cars are equipped with four-wheel or six-wheel cross-county type chasses and specially customized tires with good climbing performance in order to meet the challenges of remote areas in Zambia.

As of 2012, the mobile hospital has received and treated 210,000 patients and operated on over 13,000 patients, making it significantly easier for local residents to seek treatment. In the future, the mobile hospital project will continue to provide the people in villages and remote areas of Zambia with medical services and bring medical care to every corner of Zambia.

Case 7 AVIC-Mobile Hospital in Zambia

10%

20%

30%

40%

50%

60%

46.0%

54.0%52.4%

11.1%

19.0%

7.9%

22.2%

6.4%3.2% 3.2% 1.6%

0.0%0.0%

0.0%0.0%

33.3% 33.3%

20.6%

39.7%

46.0%

Very satisfied

Medical and health services

Infrastructure construction

Protection of local environment

Educational support

satisfied Average Dissatisfied Very dissatisfied

The proportion of Chinese contractors is increasing year by year, and they make great contributions to infrastructure construction in Zambia.

— WWF worker stationed in the Zambia office


When contracting to construct projects abroad, Chinese international contractors focus on practica-bility but neglect the exhibition of their progress a broad. Inadequate communication is presented as one of the important obstacles in community participation. When mistakes happen during operations, contractors may be misunderstood by stakeholders if their response to outside queries is not timely or the information provided is not sufficient. Not good at communicating with community is one of the important reasons of average localization performance, but some Chinese contractors need to fur-ther improve their integration into local community, promoting local community development.

Moreover, Chinese international contractors communicate frequently with local governments, but not often enough with community residents, social organizations and other stakeholders. This is be-cause the client for most infrastructure projects is the local government. So, in general, Chinese in-ternational contractors actively establish channels for information communication with clients during the course of projects in order to exchange related engineering information in a timely way. However, the contractors typically neglect communications with community residents, social organizations and other stakeholders, as shown in Figure 7.3(the numerals between 1-10 represent the importance of the indicators. Larger numerals mean greater importance.). In addition, generally, the headquarters’ of Chinese international contractors mainly focus on economic performance in their effectiveness assessments, which leads overseas establishments to pay attention to economic performance but neglect the influence of project operations on community residents and other relevant stakeholders.

Community construction focuses on practicability but neglects foreign communication

Figure 7.3 Significance of the influence of stake-holders on the operations and development of Chinese international contractors in Africa

Figure 7.4 Satisfaction of community in re-gards to the establishment of communication channels by Chinese international contractors

70%

60%

40%

30%

20%

10%

50%

23.8%

61.9%

6.4% 4.8% 3.2%

Very dissatisfied

Dissatisfied

Average

satisfied

Very satisfied

Com

munity

resident

Media

Various local organizations

Supplier and

sub-contractor

Em

ployees

Client

Local governm

ent4.3

1

2

3

4

5

6

7

8

9

10

5.56.2

3.13.6

4.1

1.4


Before holding public benefit activities in local places, we come to understand local needs through communicat-ing with government, for example in terms of which in-frastructure is outdated. Then we make do nations. How-ever, we hardly communicate with community residents, non-governmental organiza-tions and other stakeholders.

— Person in charge of SINO-HYDRO Zambia Subsidiary

The DODOLA Junction-GOBA highway upgrade project in Ethiopia contracted by CGCOC involved the first bituminous pavement crossing through the Bale mountain chain into the Bale region. As many densely populated areas and protected natural areas were involved in the project, protec-tingthe surroundings and minimizing the project’s influence on the surroundings were among the focuses of contractors during construction.

In the earlier stage of the project, the enterprise actively visited local government and environmental protection organizations and signed an agreement with an American environmental protection or-ganization and committed 500,000 US dollars annually for the protection of local wildlife. During the implementation of the project, the enterprise acted in accordance with the site selection principle of keeping away from residential areas, schools, churches, nature protection areas and handled con-struction waste and household garbage in accordance with the appropriate standards .They did not establish shortcut through forest, tried to minimize the destruction of trees, excavated slopes in sec-tions with high mountains and planted local cold-resistant grass and saplings to prevent water and soil loss. The company implemented various measures for protecting the ecological environment and wildlife during its work, which led to appreciation from local government, communities and envi-ronmental protection organizations.

When CCECC Nigeria Ltd. constructed an engineering project in a local place, it would communicate with local government and important members of the community near the project location in advance and would keep in close touch with them. During the implementation process of the Akko railway project, the project department always visited communities, governments, tribal chiefs and residents along the railway and discussed the significance of the project with them in regards to the building up of the country and local communities. At the same time, the project department listened to their related requirements and suggestions and encouraged them to participate in the construction. In the design process of some projects, the project department listened to the opinions of communities and incorporated reasonable requirements that they put forward into the design scheme. For example, during the construction process of Akko railway, the project department actively communicated with local elders and representatives of the general public and adjusted their plans for station layout. The sections received high praise from local community residents, and the local community facilitated the project construction in many ways and established a good external environment for its completion.

Case 8

Case 9

CGCOC-Signing an Agreement with an Environmental Organization in Ethiopia

CCECC-Communicate Fully with Community Residents


Figure 7.5 Management departments established in Africa by Chinese international contractors to coordinate relations with communities

NFCA, subordinate to China Nonferrous Mining Co., Ltd., incorporated community involvement into the development plans of the enterprise, planned a program for supporting community development, identified funds for the support of the plan and engaged in thorough communications with local gov-ernment and communities. At the same time, it worked to establish good relations with the public. In 2012, NFCA focused on local livelihood issues and invested more than 550 thousand dollars for im-provement projects aimed at improving the condition of drinking water in mining area, donated class-rooms for Chanbish High School as well as ambulances, electric generators and motorcycles for Karooroossi City. These actions received high praise from communities, government and residents and established a good image for Chinese enterprises.

Case10 NFCA- Creation of a Community Involvement Plan

0% 60%20% 80% 100%

13.6%

81.8%

4.6%

Medical and health services

No special department but relations managed by a related

department

No special department and relations managed by operations

department

Have special department

Although many of the sample Chinese international contractors have invested very significant funds, time and materials to promote local development in Africa, they have received little recog-nition from stakeholders. The survey found that the public benefit activities in Africa held by Chi-nese international contractors are not systematized. Generally, the enterprise makes donations or participates in construction and provides technical support to respond to the requirements of local government or fill needs in communities as discovered during the course of the projects. On the other hand, Chinese international contractors are insufficiently committed to the estab-lishment of departments that participate in community development and insufficiently committed to personnel allocation and training aimed at this issue .As such, there are deficiencies in the management of public benefit activities. We also found that most Chinese international contrac-tors have not established special management department to coordinate relationships with the community. Most contractors have arranged for the general management department, human resource department, public relations department or commerce department to manage these relationships. Only a few companies have established special management departments to co-ordinate relations with the community and organize and manage the enterprises’ participation in community activities and take responsibility for conveying the associated image of the enterprise to the public. (as shown in Figure 7.5)

Public benefit activities lack systematic planning and management


Through 66 China international contractors and their stakeholders questionnaires, face to face interview and on-the-spot investigation, the following are conclusions:

Chinese international contractors are important partners for the development of Africa. In recent years, Chinese enterprises have participated in African transnational and cross-regional infrastructure construction and operations management through investment and financing, assistance, and cooperation. Based on research, we found the projects undertaken by the Chinese in-ternational contractors have short construction periods and are efficient. Thus, Chinese international contractors are able to offer high-quality at a low cost, which meets Africa’s current development requirements and makes Chinese international contractors important partners in that development.

Chinese international contractors, which enter into Africa earlier, have gradually formed a set of management method and sys-tem. Over the years, many Chinese international contractors have engaged in extensive cooperation with their clients in many African countries and have established good relations with them. Enterprises that entered into the African market earlier on have had the time to gradually realize the importance of localization in the process of their development there. After a series of exploration and cultural in-tegration processes, those enterprises are more likely to have established management methods and systems that conform to the local modes of operation and culture and have achieved results and made progress in integrating into the local society and sharing develop-mental achievements with the local areas.

There are individual differences among Chinese international contractors in terms of the localization of operations and further improvement is needed. According to the survey, there are individual differences among Chinese international contractors in regards to the localization of operations overseas: Some enterprises have added overseas localization and social responsibility into their overall strategies, actively carried out localization in various aspects and have thus won the appreciation of stakeholders. At the same time, some enterprises have only been able to pledge to abide by the host country’s laws and regulations and meet the contracted require-ments of the client without systematically thinking about localization. Many enterprises have only low levels of localization management and lack the awareness to communicate with stakeholders and need to aim for constant improvement. The larger companies which have been established in the African market for a long time tend to perform better in localization than smaller companies with a short lo-cal operating time. Clearly, the localization practice level is related to the development stage of enterprises.

Chinese international contractors have paid more attention on localization and carried out series of practical activities. Accord-ing to our research, the sample Chinese international contractors attach great importance to the strategic objective of “localized develop-ment” and are trying to hire and train more local employees. Meanwhile, Chinese international contractors attach importance to commu-nicating with stakeholders, including local non-governmental organizations and others, to understand their concerns and expectations and improve the enterprise’s image. Believe that as time goes on, the accumulation of experience and practice, China contractors will continue to make progress and get more recognition.

Conclusions


We have listed the urgent problems discovered during the course of our research that need to be solved by Chinese contractors during the present stage and created a route diagram containing corresponding suggestions for making improvements. Hopefully, it will help Chinese international contractors to make progress in terms of their localization efforts in Africa.

Institution localizationWe suggest that Chinese international contractors hand over decision-making authority for daily operations to their associated overseas institutions so that the overseas institutions can give full play to their roles through independent operation. We suggest that companies enter the African market through joint ventures in order to benefit from local manpower, raw materials and other resources as well as preferential policies by virtue of the production and sale networks of partners and reduce the operational and management risks of op-erating locally. We suggest the addition of special departments aimed at social responsibility and community relations coordination, in order to communicate with local government, community residents and environmental protection organizations and respond to the ex-pectations and appeals of stakeholders.

Employee localizationEnterprises should cultivate local expertise by cooperating with government and educational institutions and integrating various of re-sources. They should create new training methods in line with the local circumstances and attributes of local employees in order to ef-fectively improve the technical management levels of local employees.

The enterprises should respect the local employees, fully trust in and invest authority in them in order to give full play to their initiative and potential. Enterprises should employ local senior management personnel to manage the local employees and reduce the conflicts caused by cultural barriers and different languages. They should establish modern enterprise systems or project management systems to reduce arbitrariness in management and to guide and control employees’ behaviors through systems. They should also design com-petitive human resource management systems, provide space for employee development, and improve employee sense of belonging within their organizations.

The enterprises should strengthen cultural fusion between employees, respect the local culture, implement cross-cultural training, and enhance local employees’ understanding of and identification with the enterprise. At the same time, enterprises should seek to strength-en the communication abilities of employees and realize cultural fusion during the course of communications.

Business network localization Enterprises should establish mechanisms for periodic communications with local suppliers and improve the service capabilities and service level of local suppliers by carrying out training, discussion and other means. They should enhance social responsibility manage-ment of supply chains, improve motivation and promotion policies to encourage localized purchasing to develop the local economy and effectively mitigate risk within the supply chain.

Enterprises should actively share advanced technology and management experience with local personnel and make use of local equip-ment, manpower and other resources in order to realize the fusion of technology and local resources.

Community participation and developmentEnterprises should strengthen the management of public benefit activities, including by utilizing scientific planning in the early period, rigorous implementation during the middle period, and comprehensive conclusion-drawing in the late period. As such, each activity could be carried out in an orderly way, and the activity could be closely integrated with enterprise operations.

Enterprises should strengthen communications with community residents, social organizations, media and other stakeholders, establish normal mechanisms for communications with stakeholders, increase the frequency of information disclosure, enhance communications capabilities between the company and society, increase operational transparency and increase integration with the local society.

Suggestions


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Questionnaire 1: Questionnaire on Localization Practices of Chinese International Contractors in Africa (Chinese international contractors)

Appendix 1:Summary of Questions on the Ques-tionnaire on Localization Practices of Chinese Inter-national Contractors in Africa

Brief description of the enterprise being surveyed

1

4

The main industries that the enterprise’s business undertak-ings in Africa belong toThe main types of business the enterprise is engaged in within AfricaThe main regions that the enterprise does business in with-in AfricaThe importance of internal factors in the localization of en-terprise operations in AfricaThe importance of external factors in the localization of en-terprise operations in AfricaThe enterprise’s strategic objectives for development in Af-rica for the next 3 to 5 years

1

2

3

4

5

6

1

234

1

2

3

45

12

34

5

1

234

567

8

Enterprise has established itself locally in AfricaThe main responsibilities of the enterprise’s organizations (agencies or representative offices) established within AfricaThe method of selecting or cultivating the enterprise’s managersWhether the enterprise has set up an administrative depart-ment overseas for community relations coordination or a department responsible for social responsibilityThe management system established by the enterprise that is aimed at the African region

Whether the enterprise cooperates with local enterprises in regards to its business networksThe types of enterprises involved in localized cooperation The problems faced in cooperation with the local enterprisesThe principles used for selecting local enterprises for cooperation

The importance of the stakeholders to the enterprise’s op-erations and development in AfricaThe present circumstances of the enterprise’s interactions with the local communityThe ordinary channels through which the enterprise com-municates with stakeholdersThe contributions made by the enterprise to local development What do you think the enterprise should do in the future to integrate more closely with the local people

Please provide a brief description of what government and industry associations could do to promote the localization of operations by the enterprise

The number of local African employees hired by the com-pany and the ratio of local employees to all employeesThe minimum age of the local African employeesThe reasons why the enterprise hires local African employeesThe channels the enterprise goes through for the recruiting of local African employeesThe benefits provided by the enterprise to local employeesThe training provided by the enterprise to local employeesThe frequency that the enterprise delays the payment of lo-cal employee wagesComparison of local employee wages with average wages

2 Development strategy in Africa

6

7

5

3 Institution management

Business network localization

Community participation and development

Short response question

Employee localization


Questionnaire 2: Questionnaire on Localization Practices of Chinese In-ternational Contractors in Africa (Governments/Chinese embassies in foreign countries)

Questionnaire 3: Questionnaire on Localization Practices of Chinese In-ternational Contractors in Africa (Suppliers)

Which stakeholder category of Chinese international contractors do you fall intoTo your knowledge, do Chinese international contractors have any records of being punished by local governments due to envi-ronmental protection violation, security violation, business bribery or illegal operation in AfricaTo your knowledge, is there any negative local or Western news about Chinese international contractors in AfricaTo your knowledge, what are local business units of Chinese contractorsHave you ever visited local companies or projects of Chinese international contractors in AfricaAre you satisfied with Chinese international contractors’ contributions to local employment and taxationTo your knowledge, how often do labor disputes involving Chinese international contractors occurTo your knowledge, do Chinese international contractors have any special departments to settle local complaints or disputesWhat do you think of Chinese international contractors in terms of respecting local cultural traditionsWhat do you think of Chinese international contractors in terms of supporting medical and health undertakings of communities to raise local health levelsWhat do you think of Chinese international contractors in terms of helping communities with infrastructural construction to raise local living standardsWhat do you think of Chinese international contractors in terms of protecting community environment to minimize the negative impacts on community environmentWhat do you think of Chinese international contractors in terms of paying attention to and helping disadvantaged, discriminated and marginalized groups What do you think of Chinese international contractors in terms of supporting educational undertakings of communities to in-crease education opportunities for community residentsDo you think there is any gap between Chinese international contractors and their Western peers in terms of performance in AfricaWhat is your overall evaluation on the local operation of Chinese international contractors in AfricaWhat are your expectations on Chinese international contractors

The country you are in Please list Chinese international contractors with which you are familiar or have business connections, as well as their key con-tracted projects in AfricaTo your knowledge, do Chinese international contractors have any records of being punished by local governments due to envi-ronmental protection violation, security violation, business bribery or illegal operation in AfricaTo your knowledge, is there any negative local or Western news about Chinese international contractors in Africa

12

3

4

12

3456789

10

11

12

13

14

151617


What do you think of Chinese international contractors in terms of quantities of local equipment, materials and services pur-chased in AfricaWhat do you think of Chinese international contractors in terms of purchase contract and subcontract signing and payment collectionWhat do you think of Chinese international contractors in terms of safeguarding lawful rights and interest of African suppliers and subcontractorsWhat do you think of Chinese international contractors in terms of supporting the development of African suppliers and subcontractorsDo you think Chinese international contractors have rigorous standards and requirements for suppliers and subcontractorsDo you think Chinese international contractors have taken into account factors such as environmental protection, energy con-servation and morality when purchasing local equipment, materials and services in AfricaWhat are your expectations on Chinese international contractors

5

67

89

10

11

Questionnaire 4: Questionnaire on Localization Practices of Chinese International Contractors in Africa (Employees)

The country you are inThe enterprise you work in Do you think Chinese international contractors use labors according to local labor laws? Do they have any violation of labor useTo your knowledge, do Chinese international contractors have any records of being punished by local governments due to envi-ronmental violation, security violation, business bribery or illegal operation in AfricaTo your knowledge, is there any negative local or Western news about Chinese international contractors in AfricaAre you satisfied with Chinese international contractors’ equal employment and standard use of labor in AfricaAre you satisfied with wages paid to local employees by Chinese international contractorsAre you satisfied with benefits provided to local employees by Chinese international contractorsAre you satisfied with training and development opportunities provided to local employees by Chinese international contractorsTo your knowledge, what is the minimum age of African employees of Chinese international contractorsAre you satisfied with payment time of wages to employees by Chinese international contractorsWhat do you think of the average wages of African employees of Chinese international contractorsAre you satisfied with holidays and festivals offered to local employees by Chinese international contractorsAre you satisfied with health and safety protection provided to local employees by Chinese international contractorsAre you satisfied with communication and participation channels established for local employees by Chinese international contractorsWhat are your expectations on Chinese international contractors

1

23

456789

101112131415


Questionnaire 5: Questionnaire on Localization Practices of Chinese International Contractors in Africa (Communities)

The country you are inTo your knowledge, do Chinese international contractors have any record of being punished by local governments due to envi-ronmental violation, security violation, business bribery or illegal operation in AfricaTo your knowledge, is there any negative local or Western news about Chinese international contractors in AfricaWhat do you think of the engineering quality of Chinese international contractorsWhat do you think of Chinese international contractors in terms of abiding by local laws and regulationsWhat do you think of the harmony between Chinese international contractors and community residentsWhat do you think of Chinese international contractors in terms of establishing channels for communication with communities and residentsWhat do you think of Chinese international contractors in terms of their performance in promoting local developmentHave you ever visited local companies or projects of Chinese international contractors in AfricaWhat do you think of Chinese international contractors in terms of respecting local cultural traditionsWhat do you think of Chinese international contractors in terms of supporting medical and health undertakings of communities to raise local health levelsWhat do you think of Chinese international contractors in terms of helping communities with infrastructural construction to raise local living standardsWhat do you think of Chinese international contractors in terms of protecting community environment to minimize the negative impacts on community environmentWhat do you think of the degree of the impacts of Chinese international contractors on the normal life of community residents in terms of construction time and planningWhat do you think of Chinese international contractors in terms of paying attention to and helping disadvantaged, discriminated and marginalized groupsWhat do you think of Chinese international contractors in terms of supporting educational undertakings of communities to en-hance teaching quality and increase education opportunities for community residentsWhat are your expectations on Chinese international contractors

12

34567

89

1011

12

13

14

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Appendix 2: The Company Abbreviations

AVIC — AVIC International Holding Corporation

CCCC — China Communications Construction Company Ltd.

CCECC — China Civil Engineering Construction Corporation

CGCOC — CGCOC GROUP Co., Ltd.

CHEC — China Harbour Engineering Company Ltd.

CJIC — China Jiangxi Corporation for International Economic and Technological Cooperation

CITIC Construction — CITIC Construction Co., Ltd.

CMEC — China Machinery Engineering Corporation

CRCC — China Railway Construction Corporation Limited

CSC — China State Construction International Co., Ltd.

CSCEC — China State Construction Engrg. Corp. Ltd

CSCEC5BC — CCFEB Civil Engineering Co., Ltd.

NFCA — Non-Ferrous Corporation Africa Mining Plc.

POWER CHINA — Power Construction Corporation of China

SINOHYDRO — SINOHYDRO GROUP LTD.

ZCCZ — Zambia-China Economic & Trade Cooperation Zone

ZIEC — Zhongding International Engineering Co.,Ltd.

ZTE — Zhongxing Telecommunicaiton Equipment Corporation

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