YOU ARE HERE: LAT HomeCollections

THE ASIA BOOM : Pacific Rim Movers and Shakers : 'Our company doesn't want to operate hotels and own office buildings. We just want to do construction work.' Kazutoshi Torikai, manager of overseas planning and strategy, Kumagai Gumi


TOKYO — In Hong Kong, when you think of tunnels, you think of Japan's Kumagai Gumi company.

Although the colony's British rulers gave the contract for the first tunnel under Hong Kong harbor--a subway--to a British firm, Kumagai established a foothold for itself when it led construction of the second tunnel--for automobiles.

Working on a "build-operate-transfer" basis, the tunnel builders were given 30 years to recoup their investment and reap a profit before transferring ownership to the Chinese government, which will take over Hong Kong in 1997. Plans called for construction to be completed in 42 months, but Kumagai did it in 38 months.

"Time is money," said Yukio Fujishima, a Kumagai spokesperson. And in this case, the four extra months the joint venture tunnel company got through the quick construction translated directly into extra toll revenue.

Since then, Kumagai hasn't been left out of any of three subsequent harbor tunnel projects. It also won contracts to build two of Hong Kong's new landmarks--the 70-story Bank of China Tower and the city's Cultural Center at the tip of Kowloon Peninsula.

Kumagai, which also has built an extensive business network in Taiwan, Indonesia, Thailand, Malaysia and China, is not plunging headlong into construction in Asia. But it does expect its foreign--especially Asian--business to increase by 35%, to about $770 million annually within the next three years, said Kazutoshi Torikai, manager of overseas planning and strategy.

That sum will amount to only about 7% of the company's total, he said.

Burned badly by a collapse of the real estate markets in the United States and Australia in the late 1980s, Japan's sixth largest construction giant, with 8,000 employees and $8.4 billion in sales last year, is "suppressing" its involvement in real estate development--one of the major growth sectors in Asia construction, Torikai said.

"Our company doesn't want to operate hotels and own office buildings," he said. "We just want to do construction work."

From the mid-1980s until the early 1990s, Kumagai's overseas business soared to 30% of its total revenues as it constructed such buildings as the financially troubled 50-story Americas Tower in New York. Last year, however, foreign contracts fell to only 6% of its total.

Losses incurred through sales of overseas and domestic real estate investments helped drive down Kumagai's profits to $10.8 million in 1993 from $90.5 million in 1992. Including its subsidiaries, the firm suffered a deficit of $65.1 million last year.

The company remains wary of investing its own money in development projects in China because of the legal system, which Torikai described as "not yet fitted out."

"In China, we don't know what the law is. There are things we can't see. The risk is too big," he said.

Overseas Chinese, relying upon personal relations with mainlanders, are investing their own money in construction projects in China, but "we are not as aggressive as they," Torikai said.

Already working on one tunnel 330 feet underground in Yokohama, the firm has developed computer-controlled drilling devices and robots to such a degree that humans barely need to enter a tunnel construction project. Research is now being conducted to enable the firm to go as deep as 450 feet, Torikai added.

Los Angeles Times Articles