Foreign companies are scrambling for the single biggest business opportunity ever offered by China: the 2008 Olympic Games. Since Beijing won the bid last July to host the event, thousands of senior executives have come to the capital lobby for Olympic-related contracts.
In April and May of this year alone, there were three high-powered delegations. In mid-April, Donald Evans, US Secretary of Commerce, came with dozens American firms to meet with the Beijing Organising Committee for the Olympic Games (BOCOG). Not to be upstaged, John Prescott, Britain's deputy prime minister, came a few weeks later with members of the British Consultants and Construction Bureau, to pay their tributes to the committee.
Another delegation in May was led by Sandy Hollway, head of the Sydney organising committee for the 2000 Olympic Games. In the last year, Hollway, now a business consultant, has made 10 trips to China to help Australian firms secure business opportunities.
The interest of foreign companies is growing stronger because BOCOG will soon farm out contracts for Olympic-related construction projects and sponsorships. In total, Beijing is likely to spend US$23bn on specific Olympic projects, as well as on the capital's infrastructure and environmental improvements. "This is a very big cake, with lots of business opportunities for both foreign and Chinese companies," says Hollway.
"The business interest is unprecedented," says Michael Payne, marketing director of the International Olympic Committee (IOC). The Beijing Olympics promises to be the IOC's biggest marketing programme in its history, thanks to global interest in the China market and the country's recent accession to the World Trade Organisation. "China is a hot commodity now," says Scott Kronick, managing director of Ogilvy Public Relations in China. "It is a good story, of growth and opportunities."
On March 29 this year, BOCOG announced a three-phase action plan. The preparatory phase will last until June 2003, the development phase from then until July 2006 and pre-Games operations will be held between July 2006 and 2008.
Foreign companies can participate in three major ways: building the venues, sponsoring the Games and offering other Olympic-related services and products. In early April, the first batch of many projects was put out to tender, providing a glimpse of how things will develop in future. BOCOG invited bids for a US$250,000 contract for the conceptual design of the Olympics Green Park and another US$80,000 one for the Wukesong (Five Pine Tree) Culture and Gym Centre. The response was overwhelming: 177 bidders, including more than 40 Chinese firms.
The 1,135-hectare Olympics Green Park is the main venue for the 2008 Games. There will be a forest area, an Olympic village with apartments and other amenities for the athletics events.
Beijing Mayor Liu Qi said that all 19 of the Olympic venues would be open for public bidding in the coming months. Aside from the two already put to tender, the others include stadiums for hockey, tennis, shooting, track cycling, football, softball, basketball, swimming and gymnastics.
Another commercial area where foreign firms will play a big part is sponsoring the Games. Under the IOC's partner programme, there will be 10 major sponsors. Coca-Cola, Kodak, Schlumberger Sema, Swatch and US insurance giant John Hancock have already signed up. Industry sources say each has committed to pay US$110m, in cash and kind, to be a partner sponsor.
The other five sponsors could be Chinese companies, although few are likely to have the resources or inclination to spend such a large amount on a single sponsorship. "One or two big local brands could go to the forefront of the bidding," says Kronick of Ogilvy, noting that more local companies are asking his firm to help them develop their brands.
BOCOG will be looking for its own sponsors and companies in sectors such as automobiles, breweries and petrochemicals are thought to be likely candidates. Then, there will also be the licensing of the right to use the Games emblems. The fee is likely to be set at 10-15 percent of the revenue generated from merchandise sales.
In total, international sponsorship is expected to generate US$600m, while domestic sponsors could provide an equal amount. The sponsors will probably include companies that financed Beijing's bid campaign last summer. Among them were multinational firms General Motors, Heineken, Acer and Telstra, and Mainland corporate giants China Telecom, China Construction Bank, China Netcom, Citic Guoan Group, Li Ning Sports and Beijing Founder Electronics.
Sponsorship and building of the venues aside, the other commercial opportunities for foreigners will be found in the vast range of goods and services that local companies cannot provide. "The procurement list is a long one," says Hollway, speaking from his experience in organising the Sydney Games. One such example is the joint venture recently established by the Fata Group of Italy and Capital Steel Plant of Beijing to produce painted steel for use in the Olympics.
Then, there is Beijing's multi-billion dollar urban renewal effort, which will require overseas help in many areas. The capital is building five new subway lines, a light-rail system, two new ring roads, 300km of freeway and a new terminal that will expand the capacity of the capital's airport from 25m people to 48m a year.
Much of the actual construction will be done by local companies, but there will still be many opportunities for foreign design and engineering firms, especially those that can arrange cheap financing for the projects.
Another major task for Beijing is to clean up its environment by 2008 and it has listed 127 environmental and ecological projects involving US$3.63bn. Japan's Mitsubishi Corporation has won one of these contracts, building jointly with Anglian Water Plc of the UK a 75km pipeline to bring water from northern Beijing to the city centre.
What is Beijing looking for when it offers a contract to a company? Ian Cocking, a lawyer at Simmons and Simmons who was with the British trade delegation in May, says that the Chinese want the best technology and highest quality for their money. A second consideration is the commercial prospects after 2008, when the Games are over.
Mayor Liu made this clear at a recent press conference: "The massive construction projects will be technology-based. But they will be practical and not lavish, just enough to meet the requirements set by the IOC. In addition, full account will be taken in their design in terms of their post-Games use."
BOCOG has already considered converting the five-pine project after the Olympics into a cultural and sports centre, comprising sports facilities, restaurants and shops. Other conversion ideas include transforming the 19,000-seat indoor stadium for gymnastic events into a national circus centre, and replacing the temporary seats of the swimming centre with an artificial beach, complete with palm trees and a water playground.
In this context, Australian companies believe they can offer valuable experience. "With the Sydney Olympics, facilities that we would have no long-term use for were built deliberately to last temporarily," says Richard Churches, director of the Sydney- Beijing Olympic Secretariat. One example was the volleyball venue built on the beach and dismantled after the Games. By contrast, the 80,000-seat grand stadium has been converted into a football pitch, at a cost of US$33m. "All this is of great interest to the Chinese," he says.
Beijing is also keen to learn from Sydney how it managed the grand stadium. "There is a very close comparison between the Beijing Olympics Green and Sydney Olympic Park" says Hollway. "Ours was the first huge stadium to be built for the Games since 1972. With many venues in one very big space, the whole event was more dynamic and enjoyable, but the operational side was made more difficult. The Chinese want to know how we managed our park successfully."
Pledge for public supervision
For all companies wanting to get a piece of the action, one big concern is how fair and transparent China will be in farming out the contracts. Mayor Liu has assured the public that there will be no scandals or corruption. The government has set up a 21-member supervision committee to audit and supervise the Olympics projects. BOCOG "is keen to involve the general public in supervision through the press, a hotline and an e-mail box," says Liu, adding that foreign experts will be invited to serve on the organising committee if necessary.
Many believe China will do its best to keep corruption at bay. "The Olympics has far too high a profile and importance for the Chinese to take chances. It is clear that they want to have a great Olympics and they will want to have the best," says Cocking of Simmons & Simmons.
"Just like China's accession to the World Trade Organisation, the Olympics will be used to lift the country to another higher level of business practices."