But global economics can be a fickle game, and a slew of negative headlines are casting doubt on the quartet's glorious future.
- Brazil is struggling to finish—or in some cases even start—the BRL65 billion in construction and infrastructure projects it ordered to host the 2014 World Cup and 2016 Olympics.
- Russia has seen a drastic slump in its exports of crude oil, which together with natural gas accounted for about 50 percent of its budget revenue in 2011.
- India's economic growth slowed to 5.3 percent, its lowest rate in nearly a decade; in June, Standard and Poor's warned that the country may lose its investment grade rating.
- China scaled back its economic growth target to 7.5 percent, the lowest point in two decades.
Despite the setbacks, it's clear the BRIC countries will retain a powerful influence on the global economic—and, in turn, project—scene for years to come. Consulting firm PwC predicts that by 2050, China and India will surpass the United States to become the world's largest economies, with Brazil rising to fourth and Russia holding its current sixth position. Goldman Sachs predicts the four countries will account for almost 40 percent of global GDP by then, too.
As its economic clout increases, so too has BRIC's conception of itself as a unified force. Leaders from the four nations asked the International Monetary Fund for greater voting powers as a reflection of their increased influence, and a BRIC bank is in the works to offer credit in local currency for trade and project financing. Trade among the BRIC countries stands at US$307 billion and is set to reach US$500 billion by 2015, according to business news website Livemint. Even as BRIC's sway over the world's economy grows, though, project owners still contend with the potential quagmires of bureaucracy, regulation, interventionism and corruption.
All of these trends—both positive and negative—affect the project landscape in each country. Organizations must apply due diligence to pick the right project in the right place at the right time. As is so often the case, it comes down to a balance of risk and reward.
| BRAZIL 2011 GDP GROWTH (RANK): 2.7% (133) // CURRENT GDP RANK: 7 // PROJECTED 2050 GDP RANK: 4 // EASE OF DOING BUSINESS RANK: 126 // MEDIAN PROJECT PROFESSIONAL SALARY: US$70,491 |
BRAZIL: TIME TO LIVE UP TO THE HYPE
After years as Latin America's most powerful player, Brazil finds itself squarely in the global spotlight as it prepares to host the World Cup and the Olympics in the next four years. The massive influx of expected tourists has kick-started the country's investment in stadiums and sorely needed roads, airports, ports, sewers and other urban necessities.
“The main project opportunities today in Brazil are infrastructure projects to support the events,” says Paulo Ferreira, PMP, head of 6Sigma Projects, a project management consultancy in São Paulo.
But with only two years before the first World Cup match, a lack of project progress is sparking concern that Brazil may not be quite ready for the global stage. As of May, 41 percent of the projects planned for the tournament were still in the planning stages or awaiting the start of construction; only 5 percent were complete, according to a report by Brazil's Sports Ministry.
Brazil also lags behind its BRIC peers in upgrading its overburdened and crumbling infrastructure. Its overall investment in infrastructure development averaged about 17 percent of the GDP in recent years, compared to 44 percent in China, 38 percent in India and 24 percent in Russia, according to a Morgan Stanley report.
The main challenges for projects are politics and taxation, with layers of bureaucracy and sign-offs pushing efforts off schedule and over budget, Mr. Ferreira says. “There are always lots of meetings around every meeting, contract and procurement steps, and that adds time and money to the process,” he adds.
Project owners must also contend with a lack of trained talent. The onslaught of infrastructure projects comes after years of little investment, which pushed young people to pursue careers outside of engineering and building. “That led to a 10- to 20-year gap in the talent pool,” says Eleanor Allen, Latin American regional director for water projects at CH2M Hill in Rio de Janeiro.
AS OF MAY, ONLY
5 PERCENT OF PROJECTS PLANNED FOR THE 2014 WORLD CUP WERE COMPLETE.
Maracana Stadium, Rio de Janeiro, Brazil
Image courtesy of The Government of Rio de Janeiro, brazil
As demand for engineering and project management expertise soars, project owners must pay premium salaries. “Right now the country is at full employment, there is a shortage of technical talent, and people jump jobs all the time,” says Ms. Allen.
CH2M Hill, for example, often has to bring in engineers from outside the country. “Even though we have to pay high taxes on that work, the salaries are lower, and we can get the job done,” she says.
[CLOSER LOOK] A High Price to Pay
Travel and transportation for project teams and materials can be very expensive in Brazil, making logistics a constant financial balancing act. High taxes and complex regulations add further cost and risk to delivering any infrastructure project in Brazil.
“It's not easy to do business here,” says Eleanor Allen of CH2M Hill. “Even though we've been here 15 years, we still have lessons to learn.”
In May, for example, the firm had to give local field workers hazard pay. “Hazard pay requirements are generally understood, but that it was required on this certain project was a surprise,” Ms. Allen says. “It was only discovered after this job was in progress, resulting in additional unplanned cost.”
This wasn't the first time the company has run into an added cost or delay due to complex laws and regulations in the country. “Brazil has one of the most complicated tax structures in all the 40-plus countries we work in,” Ms. Allen says. Indeed, the country ranks an abysmal 126 on the World Bank's Ease of Doing Business index.
To avoid costly mistakes in the future, Ms. Allen created a Brazil-specific commercial checklist, including references to regulations, labor laws, and sales, import and withholding taxes. “You need to account for all of that in a project bid, or you can lose your profit,” she says.
The company also tries to reduce risk by partnering with local firms that can help navigate the business environment and foster connections with clients. “Some clients only want to talk to Brazilians, while others like non-Brazilian experience,” she says.
“We have to know our clients, understand their needs and pick appropriate teams.”
For CH2M Hill and Ms. Allen, the opportunities in Brazil far outweigh the obstacles. The company is currently pursuing project proposals for a new sewer system in Rio de Janeiro, renewable energy projects and rapid transit lines. “Every one of these is an iconic project,” she says. “They will be very hard to win, but if we do, they are the kinds of things you build your career on.”
| RUSSIA 2011 GDP GROWTH (RANK): 4.3% (91) // CURRENT GDP RANK: 6 // PROJECTED 2050 GDP RANK: 6 // EASE OF DOING BUSINESS RANK: 120 // MEDIAN PROJECT PROFESSIONAL SALARY: N/A |
RUSSIA: KEEPING THE “R” IN BRIC
IMAGE COURTESY OF BELLONA
After Russia's GDP plunged nearly 8 percent in 2009, analysts questioned its place alongside the next generation of global economic leaders. Though it rebounded over the next two years, due in large part to massive energy exports, the European Union's fiscal meltdown could cause Russia's economy to contract again this year.
“It's doing relatively well,” says Lilit Gevorgyan, Russia expert for consulting company IHS Global Insight, London, England. “But this growth is driven mainly by the energy sector. The country is heavily reliant on oil and gas exports, it doesn't have a diversified economy, and there is the perception that it is a difficult place to do business.”
There may be something to that perception: Russia ranks a dreadful 120 on the Ease of Doing Business index. “Pervasive corruption and ineffective bureaucracy are curbing the economic and entrepreneurial potential of the country, and Russian businesses need a friendly business environment to grow and compete with the foreign firms,” a November 2011 IHS report noted.
Even though Russia has pushed through high-profile hydrocarbon and tech projects to encourage investment, the overall efforts have been inconsistent. “If a project is of national importance, such as the development of hydrocarbon resources in the Arctic Ocean, it gets a lot of attention from the government and faces relatively fewer obstacles,” Ms. Gevorgyan says. “But smaller projects can easily get buried in bureaucratic red tape.”
RUSSIA'S GDP PLUNGED NEARLY 8 PERCENT IN 2009 BUT REBOUNDED OVER THE NEXT TWO YEARS,
DUE IN LARGE PART TO MASSIVE ENERGY EXPORTS.
Organizations shouldn't give up on Russia, however. Despite its setbacks, the country—which covers one-eighth of the world's land area—is rich in natural resources and energy development opportunities, and its auto and banking industries are thriving. Backed by a tech-savvy workforce, the country has also carved out a niche as a high-end IT outsourcing hub.
In addition, Russia will soon become a member of the World Trade Organization, a status that the government has pursued for 18 years in the hopes of attracting more foreign investment.
[CLOSER LOOK] A New Standard
Improving Russia's business culture—and its global reputation—will require a renewed focus on even the most basic of project management principles.
“At many companies in Russia today, it is common to begin work on projects without detailed documentation of scope or plans, which makes it very difficult to get tasks done,” says Dmitry Shevchenko, PMP, project director at EnergoStroyTelecom, a systems integrator company in Moscow.
“If a project is of national importance, such as the development of hydrocarbon resources in the Arctic Ocean, it gets a lot of attention from the government and faces relatively fewer obstacles. But smaller projects can easily get buried in bureaucratic red tape.”
—Lilit Gevorgyan, IHS Global Insight, London, England
Mr. Shevchenko is currently working on a project to build high-voltage electrical grids and a dispatch center using an in-house team and five sub-contractors in different regions of the country. Already, the project has suffered schedule overruns due to confusion over roles and responsibilities.
“We lost 15 days because two of the teams were working in parallel on the same electrical schemes,” he says. Because the task wasn't clearly defined in the scope and communication between the teams wasn't consistent, both produced the same documents with the same results.
“Russian companies need to invest more effort in creating descriptive rules for project management so that all team members understand what they are expected to do,” Mr. Shevchenko says.
As in many emerging markets, it can be difficult to find the level of engineering talent necessary for projects of greater complexity.
For its part, EnergoStroyTelecom is attempting to overcome the project management knowledge gap by training talent in-house, seeking best practices from global companies through online networking groups, and consulting with experts from around the world Leningrad Nuclear Power Plant 2, Sosnovy Bor, Leningrad Oblast, Russia in project design and development, says Mr. Shevchenko.
Looking to hedge any added risks that come with the talent gap, Mr. Shevchenko has learned to include extra time in his project plans. “We don't have the experience on our team to deal with some of the complex software and equipment integrations necessary, so we plan for delays,” he says. “When that extra time is built into the schedule, we are better able to adapt.”
Leningrad Nuclear Power Plant 2, Sosnovy Bor, Leningrad Oblast, Russia
| INDIA 2011 GDP GROWTH (RANK): 7.8% (15) // CURRENT GDP RANK: 3 // PROJECTED 2050 RANK: 2//EASE OF DOING BUSINESS RANK: 132 // MEDIAN PROJECT PROFESSIONAL SALARY: US$31,390 |
INDIA: WHERE CHANGE IS ALWAYS PART OF THE PLAN
India faces an unusual quandary. Even as much of the world stumbled through a recession, the country maintained an annual GDP growth rate of 7 percent. But questions linger about the bubble bursting. Looking to battle back any perception of a faltering economy, India continues to flood money into physical and technological infrastructure projects across the country.
In the past 10 years, India has doubled its infrastructure investment to US$500 billion. In May, Minister of State for External Affairs E. Ahamed announced plans to secure investment of almost US$1 trillion over the next five years for new highways, power plants, mass transport systems, ports and airports. India is also increasing the percentage of private investment in these projects from 15 percent in 2002 to 50 percent in 2017.
The projects are big—although so are the risks, says Pawan Maini, managing director of CH2M Hill's office in New Delhi. “That's a huge opportunity for any sector, but it also requires a very fast learning curve.”
A lack of oversight leads many Indian teams to cut corners on quality and safety, he says.
As in all the BRIC countries, lack of expertise can further hinder project success. “The quantity of talent in India is available, but the quality is lacking,” Mr. Maini says. “And the project management skills are fairly rudimentary.”
To overcome that skills gap, his team puts new hires through engineering and project management training courses before a project even begins. He also customizes the project management approach to accommodate any skills gaps.
“It's fine to have a global project management process, but you've got to localize it,” he says. In India, that means managing projects at a macro scale, then empowering higherlevel managers on the front lines to adapt to changing conditions when problems come up. “Changes happen on a daily basis here,” Mr. Maini says.
Those changes often alter the entire economy.
The days of India serving merely as a low-cost destination for IT outsourcing projects are long gone. The country is now home to a diverse economy, including a booming car industry that posted a 14.25 percent jump in 2011, according to the Society of Indian Automobile Manufacturers.
That growth brought a greater need for project management standardization. “We want commonalities in global business practices and methodologies because it can save operational costs,” says Gangadhar Reddy Yasam, PMP, PgMP, delivery manager for Ford IT in Chennai, India. “For Ford, the key going forward is to roll out the same project management practice across the globe.”
IN THE PAST 10 YEARS, INDIA HAS DOUBLED ITS INFRASTRUCTURE INVESTMENT FROM US$250 BILLION TO US$500 BILLION.
At a major multinational like Ford, local teams have to be able to work with dispersed stakeholder groups across Asia, Europe and the United States. Team members must learn to handle different languages, cultures, time zones, communications preferences and even chains of command. “It's more about cultural sensitivity,” he says.
Companies interested in making project inroads must view them as long-term investments. Adapting to the culture and business processes in India takes time and effort. “If you think you are going to come in and make a quick buck, it won't happen,” Mr. Maini says. “But if you invest in the community and put down roots for the long term, there are tremendous opportunities.”
[CLOSER LOOK] Slashing Through the Red Tape
Government agencies and regulations in India can't always keep up with the country's rapid growth.
Pawan Maini of CH2M Hill is overseeing expansion of the Mumbai Airport, a US$2 billion project scheduled for completion next year. The original plan called for the use of 300 acres (121 hectares) of government-owned land to expand the runways. However, the land is occupied and the government hasn't been able to clear it.
“In China, the government might just relocate people,” Mr. Maini says. “But India is very democratic. Even though the land is government-owned, the settlers have rights, and it takes longer to get the land for the specific project.”
Tata Motors' plant, Sanand, Gujarat
IMAGE COURTESY OF TATA MOTORS
Project leaders must also contend with uncertainty about which government agency to consult, which can add significant time and hassles to a project plan. If his team wants to build an access road to the project site, for example, the public-works agency may need to approve construction of the road, but a different agency will decide whether the team can add a traffic light. “It's never clear who the ultimate authority is for each decision, and there is no one to guide you,” he says.
Project teams should conduct as much due diligence as possible before launch so they're aware of potential obstacles and can allot extra time.
“Rather than revising the schedule and plan every time something happens, we train mid-level managers to deal with the issues that come up but then also to adjust the schedule,” Mr. Maini says.
| CHINA 2011 GDP GROWTH (RANK): 9.2% (7) // CURRENT GDP RANK: 2 // PROJECTED 2050 RANK: 1 // EASE OF DOING BUSINESS RANK: 91 // MEDIAN PROJECT PROFESSIONAL SALARY: US$23,207 |
Sources: CIA World Factbook, PwC, World Bank, PMI Project Management Salary Survey—Seventh Edition
CHINA: A WEALTH OF OPPORTUNITY AMID LAYERS OF COMPLEXITY
It may be stumbling, but China—the world's second-largest economy—is still experiencing a scale of growth that would make any other country envious.
As in India, China's government is fast-tracking infrastructure projects, particularly highways, railways and power plant construction. That leaves plenty of opportunity for private-sector organizations—but only if they can navigate the bureaucracy and avoid the corruption China is known for, says François Duchastel, managing partner at Voodoo Associates, a commercial real estate development advisory firm in Shanghai.
“In China, foreign nationals and foreign firms face the typical challenges that every project manager faces delivering projects on time and on budget,” he says. “Then you add to that the additional complications of an unfamiliar culture, language and regulatory environment, and project tasks that should be simple—such as acquiring land or securing permits—become much more complicated.”
BECAUSE A FOREIGN FIRM CAN'T BE THE MAJORITY OWNER OF ANY PUBLIC PROJECT,
FOREIGN COMPANIES MUST WORK WITH JOINT-VENTURE PARTNERS.
Because a foreign firm can't be the majority owner of any public project, foreign companies must work with joint-venture partners, introducing multiple levels of stakeholders with often-conflicting organizational cultures and goals.
Before launching Voodoo in March, Mr. Duchastel, who is a native of Canada and a Swedish citizen, spent two years overseeing infrastructure and transportation projects in China for Pöyry, a global engineering firm based in Helsinki, Finland.
Based on his experience in that role, he recommends foreign-owned companies treat their Chinese partners as equals. “Set clear responsibilities, work as a team and respect the expertise they bring to the project.”
Xiangjiaba hydropower station, Yunnan Province, China
IMAGE COURTESY OF CHINA'S GREAT SCIENCE AND TECHNOLOGY
Project leaders shouldn't assume Chinese teams lack the skills to do the job. “It's not like 50 years ago,” he says. “The expertise gap is not that big, and Chinese experts understand the culture and have the connections needed to get things done.”
Still, the commitment to quality and safety isn't always as high as some global companies would like, says Mr. Duchastel. He learned this lesson in 2011 while overseeing tunnel drilling and related efforts for high-speed rail projects in the Fujian, Shaanxi and Hunan provinces. Early in the project, his group recognized that local teams were setting rebar aggregates at the wrong angle and performing unequal lining of tunnels, which allowed water and gas to leak.
“The expertise gap is not that big, and chinese experts understand the culture and have the connections needed to get things done.”
—François Duchastel, Voodoo Associates, Shanghai, China
To address these problems, his team pushed for additional safety and engineering training for joint-venture members, contractors and the client organization. He says at first it created conflict and tension between the partners, especially because it would add time and cost to the project.
That attitude changed after a July 2011 high-speed rail crash in the city of Wenzhou killed 40 people and prompted the government to conduct a sector-wide review of projects. “Our project leaders were able to show that they were being vigilant from the start in their approach to safety because of our demand for training,” Mr. Duchastel says.
[CLOSER LOOK] Working Under the Table
Dealing with corruption is often part of the reality of project management in China. From September 2009 to March 2011, prosecutors uncovered bribery cases related to infrastructure projects involving more than CNY2.99 billion, according to the Ministry of Supervision. In the first eight months of 2011 alone, 6,800 officials were prosecuted for corruption on infrastructure projects across China, according to anti-graft Central Commission for Discipline Inspection.
Following a fatal train crash in Wenzhou, railways minister Liu Zhijun was dismissed first from his position and later from the ruling Communist party amid allegations that he took bribes and created an environment of corruption throughout the railway system.
Such high-profile crackdowns have generated headlines, but corruption remains a lingering issue. Bribes can make up 5 percent to 10 percent of an infrastructure's project budget, according to a report in China Daily. And the effects span every aspect of a project plan, from land-use approval to the bidding process to the purchase of materials and equipment.
“The processes to complete projects legally are in place, and the government can't arbitrarily refuse to grant permits,” says François Duchastel of Voodoo Associates. But it can take a long time to approve them, so project leaders should allot extra time in the schedule.
Project teams often face unequally applied and unevenly enforced regulations, which can add months to the most basic project steps. “If you don't build a buffer into your schedule, you may miss your project target,” Mr. Duchastel warns. “A lot of the corruption seems to have to do with things needing to be done in a hurry.”
As global firms and the central government become more stringent about banning unethical behavior, such corruption and demands for bribes could ebb in China. “The culture will change,” he says, “but it will likely take 10 or 15 years.”
For now, it seems it's business as usual, as the state-owned Global Times editorialized in May: “The public must also understand … the objective fact and reality that China has no way of entirely suppressing corruption without sending the whole country into pain and confusion.”
As China ascends to the top of the global economy, that's a delicate balancing act the country's leaders will be forced to address.PM