Theses 6: David Tudor Evans

A DISSERTATION
Achieving EPC Quality in a Developing Country
Submitted to the University of Liverpool
In partial fulfillment of the requirements for the degree of
MASTER OF BUSINESS ADMINISTRATION
28 October 2007
Student Name: David Tudor Evans
Student Number: 10319032
Programme Manager: Heather Tucker
Dissertation Advisor: Dariusz Jemielniak
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A Dissertation entitled:
By
David Tudor Evans
We hereby certify that this Dissertation submitted by David Tudor Evans conforms to
acceptable standards, and as such is fully adequate in scope and quality. It is
therefore approved as the fulfillment of the Dissertation requirements for the degree
of Master of Business Administration.
Approved:
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The University of Liverpool
2007
CERTIFICATION STATEMENT
I hereby certify that this paper constitutes my own product, that where the language
of others is set forth, quotation marks so indicate, and that appropriate credit is given
where I have used the language, ideas, expressions, fantasies or writings of another.
Signed
David Tudor Evans
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Abstract
by
David Tudor Evans
Are Expat personnel necessary to achieve the required level of quality in the
Engineering, Procurement and Construction (EPC) industry operating in developing
countries?
To study this question the countries of Indonesia, China and Thailand are taken as
illustrative cases; the author has worked in these and other Far Eastern and Middle
Eastern countries, and currently resides in Indonesia.
There is a perception that a problem exists in achieving quality in developing
countries (DC) for EPC contractors, and that there remains a requirement for very
expensive expatriate personnel to achieve the desired results.
This dissertation examines the hypothesis:
“Western Expats are required in an EPC project in a developing country to achieve a
Western level of quality”.
The conclusions reached by the dissertation include:
• Locals and expats view responsibility differently, with locals assuming there
are far fewer problems in these areas than expats do.
• That while expats are not an absolute necessity to build even the most
complex of plants, if western investment is involved there will almost
inevitably be an expatriate presence in the management of the project.
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• The nature of the modern engineering business and specialization of
equipment makes it inevitable that there will be some western involvement in
even the most local personnel intense projects.
• If there can be said to be a deficit in some aspects of developing countries
engineering effectiveness, this is due to a cultural bias away from individual
decision making, a less rigorous approach to time and less transparency in
commercial dealings.
• The creation of cultural synergy is the best strategy for producing world class
projects in the developing world.
• An optimum mix of expats and locals would depend on the nature of the
project. The newer the technology, the more expats are likely to be required.
If the project has unusual requirements compared to a standard plant, then
more expats would be required.
• Quality needs to be continually, diligently and stringently monitored if the
benefits a properly implemented quality management program can deliver,
including profitability for the company, are to be realized.
• There should be greater involvement in decision making processes for local
engineers. This will increase their sense of ownership and participation will
become more intense and effective.
• Improvements in industrial training and education are vital if the EPC industry
in the developing world is to aspire to the same standards as the developed
world.
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Acknowledgements
I would firstly like to thank my wife for her patience while I produced this dissertation,
without which it would not have been possible to complete the work.
I would then like to thank the following people who gave me great support, provided
guidance in to the subject matter and helped with many insights for which I am very
grateful: Mr. Mark Barnbrooke, Mr. Peter Harling, Mr. Chris Reeves, Mr. Glenn
Southall, Mr. Fayez Okdeh, Mr. Thomas Chandra, Mr. Agus Ariffianto, Mr. Yosep
Ismail, Mr. Kun Haryono, Mr. Angus Wildie and Mr. Ferhat Aziz.
The following people gave invaluable input as respondents to the surveys:
Adityo, Alfred Wilke, Karang, Okto W. Lukito, Made, Manthovani, Okto, Pasindak
Situmeang, Singgih, Sudayat, Wisnu, Yayak, Amat Kuwat, Angus Wildie, Benny
Thamrin, Bongky Sutarjo, Chris Reeve, Chuck Robertson, David Shelley, Dilah
Hastari, Esti Slamet, Fayez Okdeh, Glenn Southall, Charles Mason-Smith, Ian
Gordon, James Ni, Jari Moilanen, Jerry Hamilton, Jim McLelland, Jindal Navneet,
John Stafford, Joko Subekti, Kamal Senasinghe, Karl-Hermann Mosner, Kundhi
Harjanto, Kusnu Hariyanto, Lung Mulia, Marcel Payens, Mark Barnbrook,
Muhammad Bilal, Muhammad Taufiq, Neil Burton, Peter Duethorn, Peter Harling,
Peter Weih, Priyo Sudarsono, Rasjid Ridha, Richard Graves, Ron Gijberstse, Shaun
Lim, Steve Krupa, Yudith, Zia ul Haq.
Thank you all very much for taking part.
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Table of Contents
1. INTRODUCTION ................................................................................................. 1
1.1. What is the Western Expat? .......................................................................... 1
1.1.1. A long tradition ........................................................................................ 1
1.1.2. Characteristics of the expat .................................................................... 2
1.1.3. Where are the expats?............................................................................ 3
1.2. Why are western expats in the developing world anyway? ........................... 4
1.2.1. It’s developing world companies that pay the expats .............................. 4
1.2.2. Pertamina Indonesia ............................................................................... 5
1.2.3. Venezuela and Bolivia ............................................................................ 6
1.2.4. Iran.......................................................................................................... 7
1.3. How is a “developing country” defined?......................................................... 8
1.4. What is the EPC Industry? ............................................................................ 9
2. QUALITY........................................................................................................... 11
2.1. Defining Quality in an EPC Environment ..................................................... 11
2.2. Issues that illustrate the problem ................................................................. 12
2.3. Total Quality Management Implementation ................................................. 15
3. LITERATURE REVIEW..................................................................................... 19
3.1. Difficulties with the Search .......................................................................... 19
3.2. EPC Literature in Developing Countries ...................................................... 20
4. METHODOLOGY AND DATA COLLECTION .................................................. 23
4.1. Dual Surveys ............................................................................................... 23
4.2. Interviews .................................................................................................... 24
4.3. Correspondence .......................................................................................... 24
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4.4. Literature Search ......................................................................................... 24
4.5. Personal Experience ................................................................................... 24
5. RESULTS OF SURVEYS AND OPINIONS ...................................................... 26
5.1. Communication............................................................................................ 28
5.1.1. Standard Questions .............................................................................. 29
5.1.2. Supplemental Question......................................................................... 31
5.1.3. Conclusions .......................................................................................... 31
5.2. Responsibility .............................................................................................. 32
5.2.2. Supplemental Questions ....................................................................... 33
5.2.3. Conclusions .......................................................................................... 35
5.3. Quality ......................................................................................................... 36
5.3.2. Supplemental Question......................................................................... 37
5.3.3. Conclusions .......................................................................................... 39
5.4. Knowledge................................................................................................... 40
5.4.3. Conclusions .......................................................................................... 43
5.5. Experience .................................................................................................. 44
5.5.3. Conclusions .......................................................................................... 48
5.6. Commitment ................................................................................................ 49
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5.6.3. Conclusions .......................................................................................... 51
5.7. Motivation .................................................................................................... 51
5.7.3. Conclusions .......................................................................................... 54
5.8. Integrity........................................................................................................ 54
5.8.3. Conclusions .......................................................................................... 57
6. CULTURAL ASPECTS ..................................................................................... 58
6.1. Culture......................................................................................................... 58
6.1.1. Thai Cultural Aspects............................................................................ 58
6.1.2. Indonesian Cultural Aspects ................................................................. 60
6.1.3. Chinese Cultural Aspects...................................................................... 61
6.1.4. Western Cultural Aspects ..................................................................... 62
6.1.5. Cultural Synergy ................................................................................... 63
6.2. The Dark Side.............................................................................................. 63
6.2.1. Indonesia .............................................................................................. 64
6.2.2. International Involvement to Allay Fears with Safety............................. 67
6.2.3. The Fight against Corruption in Indonesia ............................................ 74
6.2.4. China .................................................................................................... 75
6.2.5. Thailand ................................................................................................ 76
6.2.6. The West .............................................................................................. 77
6.2.7. The real reasons expats are in the developing world:........................... 80
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6.2.8. “Aid Money”........................................................................................... 81
7. THE ASIAN CONTEXT ..................................................................................... 84
7.1. Why are there differences in Quality within Asia?........................................ 84
7.2. Effectiveness of the Workforce .................................................................... 84
7.3. What effect does the attitude of Authority have? ......................................... 85
7.3.1. Government .......................................................................................... 85
7.3.2. Education .............................................................................................. 87
7.3.3. Company .............................................................................................. 88
8. THE TRANSFER OF KNOWLEDGE IN INDUSTRY ........................................ 91
8.1. Are Expatriates needed in the Developing World? ...................................... 91
8.1.1. East and West....................................................................................... 91
8.1.2. Toyota: A Case of Knowledge Transfer ................................................ 93
8.1.3. Is it all a “Western” Plot? ....................................................................... 96
8.1.4. Is Knowledge Cultural? ......................................................................... 97
8.1.5. Can the expats be replaced? ................................................................ 98
9. CONCLUSIONS AND RECOMMENDATIONS................................................100
10. GLOSSARY .....................................................................................................101
11. APPENDIX 1 EXPAT SURVEY QUESTIONS .................................................102
11.1. Communication .......................................................................................102
11.2. Responsibility ..........................................................................................102
11.3. Quality .....................................................................................................102
11.4. Knowledge ..............................................................................................102
11.5. Experience ..............................................................................................103
11.6. Commitment............................................................................................103
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11.7. Willingness and Motivation......................................................................103
11.8. Integrity ...................................................................................................103
12. APPENDIX 2 LOCAL SURVEY QUESTIONS .................................................105
12.1. Communication .......................................................................................105
12.2. Responsibility ..........................................................................................105
12.3. Quality .....................................................................................................105
12.4. Knowledge ..............................................................................................105
12.5. Experience ..............................................................................................106
12.6. Commitment............................................................................................106
12.7. Willingness and Motivation......................................................................106
12.8. Integrity ...................................................................................................106
13. APPENDIX 3 ....................................................................................................107
13.1. Survey results Expats..............................................................................108
14. APPENDIX 4 ....................................................................................................112
14.1. Survey results Locals ..............................................................................112
15. APPENDIX 5 ....................................................................................................118
Supplemental responses from expats ..................................................................118
15.1.1. Communication.................................................................................118
15.1.2. Responsibility ...................................................................................120
15.1.3. Quality ..............................................................................................122
15.1.4. Knowledge........................................................................................123
15.1.5. Experience........................................................................................125
15.1.6. Commitment .....................................................................................127
15.1.7. Motivation .........................................................................................129
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15.1.8. Integrity.............................................................................................130
16. APPENDIX 6 ....................................................................................................132
Supplemental responses from locals ...................................................................132
16.1.1. Communication.................................................................................132
16.1.2. Responsibility ...................................................................................132
16.1.3. Quality ..............................................................................................133
16.1.4. Knowledge........................................................................................134
16.1.5. Experience........................................................................................136
16.1.6. Commitment .....................................................................................136
16.1.7. Motivation .........................................................................................137
16.1.8. Integrity.............................................................................................138
17. REFERENCES .................................................................................................140
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List of Tables
Communication Responses Figure 1........................................................................ 29
Responsibility Responses Figure 2 .......................................................................... 32
Quality Responses Figure 3 ..................................................................................... 36
Knowledge Responses Figure 4............................................................................... 40
Experience Expat Responses Figure 5 .................................................................... 44
Experience Local Responses Figure 6 ..................................................................... 45
Commitment Responses Figure 7 ............................................................................ 49
Motivation Responses Figure 8 ................................................................................ 52
Integrity Responses Figure 9.................................................................................... 54
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1. Introduction
This dissertation is concerned with the achievement of quality in the EPC
environment in the developing world, and this question is bound up with the role the
expatriate (expat) plays. We will concentrate on the reasons why the expat is
necessary rather than trying to explain the nature of quality control and Quality
assurance. There have been many studies done on the achievement of quality per
se. Not many have addressed the reason why, given that human beings have equal
potential wherever they are found, it is necessary to have western educated expats
working on projects in the developing world. Anecdotal evidence abounds of what
could happen if there wasn’t international supervision and oversight of some projects.
This dissertation aims in a small way to explore some of the reasons expats are in
the positions they are in; and what the perceptions of locals and expats in regards to
each other are. A dual survey was carried out querying local and expat engineers
about their experiences and opinions and this gave some interesting insights to the
perceptions around the question: “Are expats needed?”
1.1. What is the Western Expat?
1.1.1. A long tradition
The west has had a long tradition of sending its engineers and administrators
overseas to operate in other regions of the world. An example of one such is Sir
Stamford Raffles, who although he only spent less than a year in Singapore, had a
profound effect on the city state. Establishing free trade, his influence is still felt
today. He was not working for the British government at the time, but was working
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for the East India Company, and he set up a trading post at a strategic position for
both the Indian and Chinese trade, dealing mostly in tea and opium. Some would
see this as an example of colonialism, and so it was, as it was the bedrock of empire
building. There is still something of this colonialism in the presence of expats in the
developing world today.
1.1.2. Characteristics of the expat
The expat is usually an experienced engineer from a western country, usually male,
who has already completed projects similar to the one he is working on in the
developing world either at home or in other developed countries. The companies in
the developing world will usually insist on a university education, many years of
experience and for some positions, post graduate training. The qualifications of the
expat are normally closely scrutinized, and references are often taken up, the amount
of checking depends on the level of seniority in the job, and the culture of the
company in the developing world.
The average expat engineer tends also to be a lot older than the average engineer in
the developed world, for two reasons. Firstly the experience requirements of the
companies who normally require more than a decade of relevant experience for a
role make it impossible for young engineers to get a position, unless the home
company decides to second them to a project as part of rotation. This was common
in some EPC companies who were interested in developing their own staff in the
1970s and 1980s, but it is less common now). This obviously precludes young
engineers, no matter how technically able they may be. An exception to this is the
specialist “vendor” engineer, who is brought in to commission specific equipment.
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This type of engineer will come from the supplier company in the developed world but
is not in a true “EPC” situation.
Secondly, a significant proportion of expat engineers have made it a lifestyle choice
to live abroad, and as time goes on, find they have little urge to return to their home
country, and remain permanent expats, usually moving from one posting in the
developing world to another. Quite often, the lifestyle is such that they could never
afford to live in the same style in their home country, and these days, with high
property prices in places like the UK, could not even afford to buy a house. The older
an expat is, the more this becomes a trap. There are many expats who, even if they
wanted to return home, can’t afford to.
1.1.3. Where are the expats?
Today the western expat is ubiquitous in the developing world on EPC projects
ranging from oil refineries, petrochemical complexes and gas pipelines to water
irrigation to developing financial systems. The expat works on every continent, and
across the political divides. There are western educated engineers working in
Russia, China, India, Pakistan, South America, South East Asia and Africa. The
conditions vary, but one of the key roles the expat plays is to make a difference.
One of the recurring themes in this dissertation is to try and understand why the
expat is needed in so many different places, in so many different industries and in the
many roles he is required to play.
Are they required to be in these places because the World Bank, IMF or other Project
Investors insist on expatriate content, or is it because foreign companies have been
awarded the contract? Or even, is it because local companies feel the need for
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international experience? Whatever the reasons, and there are as many as there are
expats working in the developing world, it appears to be true that they are needed.
But why? The future may be different, but unless the present situation is understood,
there is no way of predicting the future requirement of western educated expatriates.
This dissertation aims to answer some of these questions, and draws on the author’s
experiences of working as an expat in countries of the Middle and Far East to do so.
1.2. Why are western expats in the developing world anyway?
1.2.1. It’s developing world companies that pay the expats
Why do companies in the developing world pay the salaries and benefits of the
expensive expats if they could get locals to do the same work, to the same
standards?
This must be either because:
1. they have no choice (dictate from the bank or finance)
2. The locals have proved in the past not to be up to the job.
There must be many reasons that the local company would want the jobs, money,
expertise and opportunities to remain in local hands; chauvinism, xenophobia and
national pride being among them. Apart from those less savoury motivations the
benefits to a society of increasing its skill base are many and profound.
In some countries such as Saudi Arabia, there is a move to develop the skills in
country, using a small “seed bed” of expats, for example in the EPC company
Clough, its local branch CZFP was involved with Saudi Aramco on the so-called
“Saudisation” program, where for the first time, the EPC was to be in country. The
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jobs to date are small, usually debottlenecking or minor expansions, but larger
projects such as trans-country pipelines are planned.
So there must be very good reasons why companies in the developing world are
willing to pay engineers from the west around 15 times the amount they pay locals.
But what are they?
It is possible it is reason 1, and that certainly accounts for a lot of projects where the
funding is coming from foreign “development” money or joint ventures with a large
western corporation like an oil company. There are however many projects where
this is not the case.
1.2.2. Pertamina Indonesia
Take the example of Pertamina in Indonesia. For many years the State owned
company had a total monopoly on Oil and Gas exploration and downstream, yet had
not made significant gains or built up expertise within the local contracting firms. All
the expertise was hired in, again and again, so the opportunity to grow an indigenous
industry was lost. Educational resources were not built up using the energy
revenues, and the development of native expertise was hampered, with a lack of
resources and teachers.
. This dissertation aims to explore that hypothesis and to determine the impact other
factors like the general economic development of the country itself has on the
effectiveness of engineers in the country. It seems that the well being, self respect
and dignity of professionals is helped by a better standard of living, and a feeling that
when people have greater things expected of them, their performance rises.
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One of the major problems for a country like Indonesia is keeping its best engineers
and teachers at home. Once people gain valuable experience, they go abroad for a
better standard of living, the “brain drain”. In a very real way, improving the lot of
teachers and engineers in Indonesia would lead to an improving state of the
indigenous EPC industry. It is not something that can happen overnight, and would
need a concerted effort of between 15 and 20 years to have significant impact.
1.2.3. Venezuela and Bolivia
Another topical example is developing in the actions of Venezuela and Bolivia as they
exclude the international oil and gas companies from developing the energy
resources in their countries. It will be interesting to see if the Venezuelans and
Bolivians can actually develop these resources successfully without the expat. It
does seem to be a politically driven rather than an economically sound decision
however, so this author does not expect any great success, and predicts the
international oil and gas companies will be received with open arms once the current
incumbents are removed from power. This presupposes that the behaviours behind
the reasons the oil companies were unpopular in the first place are changed, and the
wealth is shared more equitably.
There has to be long term investment in education and training before an indigenous
industry can take on what are usually “world class” challenges as proposed. This
simply has not been done to a sufficient level in Venezuela, and to an even lesser
extent in Bolivia. So the expat engineer and administrator are likely to return to these
countries once the political points have been made, because the economics of the
industry will mean that the countries cannot achieve the wealth redistribution they
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desire if there is no wealth to redistribute in the first place. If Venezuela is not to
become another poverty stricken Cuba, then the expat will be back, unless a rapid
development of engineering education and training takes place.
1.2.4. Iran
Why are expensive expats needed? One test is to look where they are not allowed to
participate. A clear example of this is Iran, which has not seen western companies or
western expats operating in the country since the rise of the ayatollahs in 1979. This
has not been good for the economic well being of the people, but as David Blair in
the Daily Telegraph reports:
“Iran has now endured economic stagnation for almost 30 years. Unemployment
exceeds 20 per cent and 800,000 young people enter the job market every year.
Even with the oil boom, the economy is not expanding fast enough to absorb
them. Instead, the Islamic Republic must ration petrol because its dilapidated
refineries can only produce enough fuel to meet about 60 per cent of domestic
consumption. Deprived of foreign investment and expertise, Iran cannot rebuild
its refineries and the government is trying to reduce reliance on imported petrol
by limiting motorists to 100 litres per month. While oil money has paid for a new
international airport and numerous highways in Teheran, ordinary Iranians have
not benefited.” (Blair, D. 2007)
This an indication that, assuming the ayatollahs do not want to deliberately turn Iran
back into a stone-age economy (although that is by no means clear), that the refining
infrastructure is being allowed to fall into disrepair because of a lack of foreign
investment and expertise. The critical point here would be expertise, since there
seems to be the money to pay for airports and highways. There is another reason
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that the Iranians are having difficulties with maintaining their refining capacity and
that is a shortage of spares.
This was caused by the restrictions placed on Iran by the US in 1979. These were
broad economic sanctions that forbade US oil companies and subsidiaries from
operating in Iran as a result of the hostage crisis. UN sanctions were imposed as a
result of Iran’s revelation of its Natanz nuclear facilities in 2003. In any event, without
access to the western technology, Iran has been unable to maintain its refining
capacity, so now, a country with the second largest known reserves of oil after Saudi
Arabia, must ration petrol for its people.
To recover its economy, Blair concludes that Iran must open up to the world, thereby
making international expertise available once more, and to do that must reform its
political system. In Iran too, the expats will be back
1.3. How is a “developing country” defined?
A developing country is defined as one that has not yet joined the Organization for
Economic Cooperation and Development (OECD) group of 30 nations, and has little
immediate prospect of being invited to do so. This means that most countries in the
world are in a development phase. Of the countries discussed in this dissertation,
Indonesia is on the short list of countries likely to be invited soon, as is China.
Thailand is not likely to be invited soon, since it is neither a large economy, such as
India or China, nor is it particularly wealthy. Iran, Venezuela and Bolivia are also not
in the OECD club.
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1.4. What is the EPC Industry?
The Engineering, Procurement and Construction industry is the descriptor for the
development of usually large scale engineering projects in the processing sector.
Civil projects such as roads, bridges and dams are also EPC projects. The
comments and background to this dissertation is derived more from experience in the
chemical processing industries, including oil and gas.
Quality is critical at every stage of an EPC process, and this quality will at various
stages and degrees, determine to what extent the project is a success. It will also
have an impact on the safety of the project, during its construction, operation and
eventual disposal. Quality needs to be intrinsic at each stage of the EPC process.
The international EPC industry is dominated by a few large players. These have until
fairly recently been almost exclusively western, and more particularly, from the US,
the UK, and Western Europe. The language of the industry is overwhelmingly
English, and most of the commonly accepted standards are written in English, and
some are bilingual with French being the second language. Many nations have their
own standards, and some of these are extensive, such as those from Germany. But
in the main, the Anglo-American standards have been adopted worldwide in the EPC
industries.
This language emphasis, and underlying way of thinking can play a large role in the
understanding of the standard in countries whose language and patterns of thought
do not resemble English. The determination of how this effects quality is outside the
scope of this study, it is felt however that this is a subtle factor in the resulting quality
achieved in the developing world.
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2. Quality
2.1. Defining Quality in an EPC Environment
There is a perception that a quality problem exists in the EPC industry in developing
countries, the dissertation examines this school of thought, using as sample countries
China, Thailand and Indonesia.
The assumption that the West does not have the same level of quality issues is a
common belief among expats, who see the higher levels of corruption, poverty and
failed infrastructure as indicative of the problem. These perceptions will be tested by
use of two similar surveys, one for expats in developing countries, the other for
locals, in this case, in Indonesia, and the dissertation aims to determine whether the
expats are a necessity to achieve the desired level of quality.
The Free Online Computing Dictionary defines quality a number of ways, but the
definition most appropriate for this industry is:
“Quality
The totality of features and characteristics of a product or service that bear on its
ability to satisfy stated or implied needs.” (Free Online Dictionary of Computing,
2007)
The key words here are “satisfy stated or implied needs”, quite often the
specifications in a project’s early stages may not spell out everything that is required,
but a quality project will provide these “implied needs”, during the life of the project.
What is meant by quality in an EPC context? Many people working in the EPC
industry would agree with the following statement:
“A quality project is one where the project is completed on time, under budget and
according to specifications to the satisfaction of all stakeholders”

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A project must naturally meet the specifications and come in on time and on budget.
But to be a successful, “quality” project, it must also be accepted by its customers, its
shareholders, its workers, and its neighbours in the community.
So a truly successful project is a holistic success, where the shareholders are
satisfied, the customers are satisfied, the workers and local community are satisfied,
and there is no negative environmental impact.
2.2. Issues that illustrate the problem
The “quality” we refer to in this dissertation is not the same as a manufacturing
product. The main difference is that the issues are one-off unique design or
procedural problems that are not open to easy statistical manipulation. The following
instances are examples of the type of problem that needs to be addressed.
1. The need to repeat the same instructions many times in order to achieve a
result, such as getting a delivery to site made from a factory. There is always
the possibility that there is an underlying hidden problem, usually related to
finance, for example a payment has not been made.
2. Finding it difficult to get companies to come to complete integration testing
even if specifically in the contract. The tendency is to offer only the standard
service, which consists of selling the hardware and installing at site. Even if in
the contract, exhaustive testing and integrating with other systems is usually
left until site integration, where if it is a peripheral system such as a fire and
gas system, it may never properly integrate with the main control system.
3. Reluctance for people to take initiative on matters relating to their company if
not specifically their department or direct area of expertise. There is little
12
incentive for people to say that they will handle it within their company and get
the right people involved. Often the response will be “I’m sorry that is not my
department and I know nothing about it”.
4. Inaccurate work, for example steel dimensions at site, even after large
meetings promising accurate work and drawings exchanged.
5. Large, formal meetings with no follow up, only an “action list” that is reviewed
at the next meeting, with no intervening expediting. (co-ordination meetings)
6. Large formal meetings where the results have already been decided and the
meeting itself is just for show. These are usually used to re-affirm the
authority of those in charge, but real issues can be missed because there is no
room on the agenda, and no way to introduce a new issue. The answer might
not be clear so an opportunity to solve problems is lost.
7. Comments on documents ignored. Never questioning before re-issuing
documents, so that they are commented again, repeating the cycle. (Master
document list)
8. Standard operating procedure to use vendor standard documentation and not
do functional testing before delivery to site. (No tests planned for a dew point
analyzer)
9. Paying lip service to safety training, and site security.
10. Lack of motivation for the employees, (specifically, no training).
11. Late issue of documents, completion of manufacture, and shipments
accepted.
12. Unusual to find people taking the initiative, everything must be pushed along.
(Replacing the Operating system on a PC)
13. Miscommunication, between members of same nationality (cabinet wiring was
all green, after mishearing a translation).
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14. Miscommunication between management and people on the ground (state of
metering skid)
15. Miscommunication between companies, even with co-ordination meetings.
16. Contract requirements that never get implemented because delays make
delivery to site of equipment more important to overall project (training before
FAT)
17. Lack of standard specifications such as for instrument cabinets.)
18. Not being able to focus on many issues and make workable schedules.
19. Seeming inability to import methods and specifications from vendor’s home
country (in developed world)
20. Lack of commitment from Vendor (experienced engineers with developed
world experience not deployed even when “promised”)
21. Quality control apparently a new concept (no serious checking even of
fundamentals like title or revision number)
22. Worker’s pay being withheld (strikes and blockades of works frequent)
23. Lack of progress due to organizational holdups (no loop check data because
only one man trained at height)
24. Reluctance to address issues directly, rather leave them until it either goes
away, or can be overridden by a more pressing schedule need (mixed cable in
conduit)
25. Unfamiliarity with standard design documents and methods, for example
operating philosophy, cause and effect matrices. (Chinese Design Institute)
26. Difficult for Developed world engineers to appreciate the different culture of
using self made tools. (For example, flexible split bamboo sledge hammer
handles – these work well if the worker is standing on top of a wall he is
14
demolishing and sets the sledge swinging like a pendulum. Little effort is
required but it looks dangerous to the western eye).
27. Using a brick instead of a welding clamp to attach welding electrodes to steel
work when welding. This can lead to faulty welds if the contact is not good
and potential fractures.
28. Sunglasses were being used by welders instead of welding goggles; this will
lead to eye injuries.
29. Power “hooked on”, the Chinese electrical engineers merely made hooks of
the incoming power to the control room (meaning US Supervisor who had
never previously worked outside of US, refused to start work on the grounds of
safety and quality)
30. Misunderstanding basic concepts (pipe support added where dangerous by
CDI)
31. Lack of all round experience (no-one responsible for the total picture)
2.3. Total Quality Management Implementation
Most of the types of problems illustrated in the preceding section are symptoms of a
low quality culture and unregulated working methods. In the UK in the 1980s a
system of quality management was being introduced with the British Standard BS
5750. The ideas were not new, having originated with US military procedures in the
1950s. The implementation in the application software industry became a
commercial issue as Client companies were insisting that companies executing work
for them became “accredited” for BS 5750. The requirements of BS 5750 at the time
consisted of having a demons ratable quality control system, that was auditable and
with clearly kept records. The concern with application programming for items such
15
as safety systems and control systems based on PLCs (Programmable Logic
Controllers) was that there wouldn’t be untraceable code, the incorrect code and
hidden bugs in the code. There was even an interpretation that required duplicate
coding on totally separate and different type of systems for the same application.
The main problem perceived with BS 5750 was that the code could be satisfied by
keeping to a quality control scheme, proving quality control scheme was adhered to,
and having an auditable record trail. The product itself however need not be fit for
purpose. This was put right when BS 5750 became ISO 9000.
The benefits of having a system in place became clearer as more and more firms in
the engineering sector became certified. It was difficult for firms to compete if they
were not certified, and the certificate was renewable every three years subject tot a
successful audit. The author is not sure how effective in reality this was however,
after witnessing how an English Auditor reviewed a Dutch language project first hand.
He could not understand the documentation, but was reassured by the project
manager that all was in order. The Dutch project manager was relating the
experience with some glee in the canteen after the auditor left, because he couldn’t
believe his luck at getting through the audit, and was bemused at the credulousness
of the English auditor.
However flawed the system might have been it is clear that the effects were being felt
in an improvement in quality and productivity. A development termed “Total Quality
Management” was gradually being implemented, building on the requirements of BS
5750 and attempting to close the loop to use feedback from quality control which
checks for defects and then attempts to fix the process to improve the products using
quality assurance. The quality assurance employs methods to fix faulty working
procedures and improve the efficiency of the organization by eliminating error. When
16
properly implemented TQM has delivered many benefits, and in a paper in the mid
1990s, after the introduction of quality systems in Wales UK, Anoop Patel describes
how responses to a survey showed that TQM was having good effects on industry as
follows:
“The first four benefits, resulting from TQM that all the companies ranked from a list
of 11 were:
(1) Greater efficiencies 86 per cent.
(2) Improved product quality 76 per cent.
(3) Reduction in cost 76 per cent.
(4) Improved staff motivation 72 per cent” (Patel, A. 1994)
That the product quality was not the most important effect is significant, as it made
the companies not only more attractive to their customers, but helped the internal
efficiency of the organization. It was clear that by focusing on quality; a lot of other
important benefits to the profitability of the companies were achieved.
These benefits will only accrue however if the TQM or quality management program
is conscientiously, diligently, stringently and consistently applied over the long term.
This is an important point for the developing country to realize. It is no good if it just
happens at the beginning of the program, or suddenly jumps back to life when a big
shot shows up, it is something that must become a natural and integral part of the
company culture if it is to generate the benefits it is capable of delivering.
As Patel concludes in his paper, where he said that TQM was helping Welsh
companies to boost the effectiveness in the market, and even in the prevailing
recessionary environment of the times, was proving a winning strategy in the country.
Patel makes the point that TQM is more than just the quality function and:
17
“TQM is far wider in its application than the practice of assuring product or service
quality. It is a way of managing the whole business or organization to ensure
complete customer satisfaction at every stage, internally or externally.”
18
3. Literature Review
3.1. Difficulties with the Search
There is not a great deal of literature on the subject of EPC quality in developing or
third world countries. There is material on the industry in certain countries; studies
were found investigating the industry in Iran, the Middle East, Indonesia and
Vietnam. However, a specific study of this nature, trying to determine the cultural
reasons why the EPC industry was not found in the literature resources available.
There are possibly three reasons for this.
1. The EPC industry is notoriously secretive about its failings, and in particular,
Clients will not permit data to be made public
2. The research area may be considered “inappropriate” by some in the
educational establishment
3. The resources available via the Library are not wide ranging enough
In any event, using the “Athens” portal yielded few results, and even a wider
cast of the net on Google produced little authoritative work.
The search “EPC quality in the Developing world” yielded no result, whilst removing
the quotations produced many irrelevant articles and papers. The type of searches
was refined including the following in attempting to determine previous work in this
area. Examples:
“EPC quality”
“EPC Quality in developing countries”
“Quality Assurance”
“Quality Control”
19
“Construction in Developing countries”
In addition to the Literature search, one of the most useful sources of information
about the country the author currently resides in, is the Indonesian daily newspaper,
“The Jakarta Post”
While useful, it is recognized that overreliance on newspapers and other non
academic sources may not provide authoritative material, although in the context of
this dissertation, which is slightly out of the mainstream, it was appropriate.
3.2. EPC Literature in Developing Countries
The literature search indicated that there were some “Critical Success Factors” (CSF)
that were identified in developing countries, for example in their pragmatic paper,
Nguyen et al used a survey of stakeholders in the EPC industry to develop a list of
factors without which a project would fail. They too determined failure or success on
the basis of budget, schedule and quality- the achievement of specifications. The
critical factors were:
“(1) a well-organized and cohesive facility team
(2) A series of contracts allowing to encourage the various specialists to behave as a
team without conflicts and to allocate risk and reward correctly;
(3) experience in various aspects of similar facilities;
(4) timely, valuable optimization information from related parties in the planning and
design phases.” Nguyen et al, 2004)
If these factors are in place the project should at least stand a chance of success.
The projects in this study were smaller, in the 10s of millions of USD than those
considered usual in the international EPC project where projects of over 1 billion USD
are not uncommon.
20
A further set of CSF were identified in the Vietnamese paper as:
“A competent project manager, adequate funding throughout the project,
multidisciplinary/competent project team, commitment to project, and availability of
resources”
The issues of competence, resources and commitment are recurrent themes in the
EPC industry worldwide, and often where expat personnel are drafted in, either to
provide the competence, or to secure the resources.
The study did not mention expats.
In another study, “Cultivating technological innovations in Middle Eastern countries
Factors affecting firms’ technological innovation behaviour in Iran” Bagherinejad used
a survey approach to elicit the industrial professional’s insights into technical
innovation in Iran as an example developing country (DC). The capabilities required
for technical innovation are very similar in nature to those required for EPC projects,
especially in the early stages. The conclusions reached by Bagherinejad were that it
was better for DCs to follow a “know how” rather than a “know why” approach to get
ahead faster in technology, since there was not the strong basis in science and
industrial base to make the leap from the knowledge to the practical knowledge.
(Bagherinejad, 2006) He makes the point also that “shop floor” knowledge is not
appreciated as it should be. It should be noted that to move from an academic to a
technically practiced knowledge base would require time to garner the experience if it
was to be done internally, therefore the experience needs to be brought in.
There are other articles found detailing EPC quality issues and cultural issues and a
paper discusses quality in Wales and in particular work in a changing industrial
environment (Patel, 1994) The cross cultural issues in an Iranian environment where
factors affecting firms’ technological innovation behavior is examined. The author
agrees that this is an area where more research could be carried out as he states:
21
“a detailed reading of the literature shows that there has been little examination of the
determinants of technological innovation and the essential factors for successful
industrial innovation in developing countries (DCs) in general and Middle Eastern
countries in particular.”
(Bagherinejad, 2006)
Finally in this literature search we look at some “lessons learned practices in the
engineering, procurement and construction sector”, where it is now becoming
common in the developed countries to build up a database or “lessons learned”,
based on four leading questions:
(1)What did we set out to do?
(2) What actually happened?
(3) Why did it happen?
(4) What are we going to do next time?
(Carrillo, 2005)
22
4. Methodology and Data Collection
4.1. Dual Surveys
The main data source for this dissertation was the survey of local and expat
personnel working in the EPC industry, the interviews conducted with colleagues and
a discussion with the nuclear industry spokesman for Indonesia, in addition to the
literature search and the author’s own experiences of 28 years in the industry.
The survey respondents included personnel form the client organization, the
consultant, the contractor and subcontractor, and equipment vendors.
The surveys were then analyzed using the “Surveymonkey” data collection tools and
tables. The data was then extracted to Excel to enable direct comparisons to be
made, which were not possible with the SM system, as two separate surveys were
brought together. This method graphically highlighted differences in perceptions
between the two groups.
The main approach was qualitative, with some attempts at correlating the results with
expat or local personnel. Further data could be extracted from the survey than was
possible since correlation with age was not done in this dissertation.
A negative aspect was that the local group in the survey only containing Indonesian
respondents, it would have been more instructive if nationals form other countries
such as Thailand and China had responded but the addresses were probably out of
date.
23
4.2. Interviews
Informal interviews were conducted with both expat and local personnel to gauge the
feeling of the survey results, and these comments have been taking into account in
the analysis of the survey data.
4.3. Correspondence
There was some correspondence with the author of a newspaper article that
concerned perceptions of safety and quality in a proposed EPC project in Indonesia,
This was included with the author’s permission as it gives an insight into some of the
issues revolving around EPC projects, particularly of a sensitive nature, in developing
countries.
4.4. Literature Search
The literature search was quite difficult as there is not a lot of previous work on this
subject. There were some ideas and practical suggestions for executing EPC in
developing countries but no comparison between local and expat was found.
4.5. Personal Experience
The author has spent most of his working life in the EPC industry in one or other
roles, and has worked half of this time in developing countries ranging from Africa,
Eastern Europe and Asia.
24
25
5. Results of Surveys and Opinions
The full survey questions are in Appendices 1 and 2 for expats and local respectively.
The results of the survey are in Appendices 3 and 4 for expats and local respectively.
To find out how the two groups, expat and local feel about working with each other
the following individual surveys were carried out. One for expats working in
developed countries and another for locals, in this case, local Indonesian workers.
The response to the survey was very good, with more than 65% of the people invited
to join taking part. The number of people who provided expanded answers was not
that high, and there were not that many examples given, although there were many
prompts to expand on the answers given. There are a number of reasons why this
should be so, including a reluctance to give specific information about companies or
projects, and this is understandable.
The survey aimed to uncover a more subjective viewpoint and asked questions
related to attitudes to work regarding:
• communication
• responsibility
• quality
• knowledge
• experience
• commitment
• willingness and motivation
• integrity
26
The surveys attempted to solicit a good response from the people in the industry, for
their perceptions. Data on the failing of the EPC industry, cost overruns, budget
overruns and accident rates which would be invaluable for making comparisons, is
proprietary information and difficult to obtain; also that study is outside the scope of
this dissertation. There is anecdotal evidence to support the hypothesis that there is
a quality deficit in developing countries’ EPC industries, but it is too easy to view the
situation from a subjectively from within the industry.
The surveys were called:
Expat Experiences of Working in Developing Countries
Experiences of Working with Expats
The surveys were designed to ask very similar questions of two separate groups, and
to try and elicit responses that would give some indications of the perspectives held
by the two groups. The questions asked were aimed at finding out what each group
thought of each other about various aspects that affect efficient operation of a
business with a local / expat mix.
There was a good response to the request for survey as follows:
• 47 expats invited, 27 responses (57%)
• Of the 45 locals invited, 34 responses (75%)
The Surveymonkey website was used to produce the survey. (Surveymonkey, 2007)
The production of the survey itself was easy to use but the administration of the email
27
lists proved to be cumbersome, and one expat actually was included in the local list.
Since there are a total of 61 responses this does not represent a significant error,
although it must be reported.
The locals response rate was higher it is thought because nearly all were in Jakarta
so could be contacted personally. A majority of the expats invited was from the
author’s previous postings, and some had moved on or were otherwise unreachable.
That said, the response was enthusiastic.
Most questions had a supplemental section where the respondent could add free
format comment on the topic. These responses are gathered and presented in
Appendices 5 and 6 for expats and locals respectively.
Not every question was answered because there is the option to skip the question,
and some of the respondents reported difficulties navigating the survey. The
numbers responding to each question are given at the bottom of the charts.
The responses do not add up to 100% because there could be as many choices
selected as the respondent wishes. The percentages on the y-axis show what
proportion of respondents who answered the question selected the particular
response.
5.1. Communication
28
Do you have Communication Problems?
60
50
40
% respondents
Expat
30
Local
20
10
0
Not at All Slightly Somewhat Greatly Absolutely
Expat responses: 26 of 27
Local responses: 34 of 34
Communication Responses Figure 1
5.1.1. Standard Questions
There was a very clear difference of perception between expats and locals when it
comes to communication problems. The expat curve was skewed towards the
“slight” to “somewhat” response region while the locals were skewed to the not at all
to slight area of the graph.
The vast majority of both groups of respondents selected “slight” or “somewhat”.
This is to be expected since the businesses couldn’t function if the majority of people
felt there effectiveness was “greatly” or “absolutely” hindered by miscommunication.
What is surprising is the high number of locals who responded “not at all”.
29
Even though the native language of the majority of expat respondents is English, and
business in Indonesia and elsewhere is conducted in English, it was the expats who
perceived the greater communication problems. About 25% of the local respondents
selected “not at all”, while no expat reported “not at all”. The majority of expats said
communication was somewhat of a problem; with a few saying there was a great or
absolutely a problem with communications.
Those locals who claimed they “absolutely” had problems with communication may
well have had particular instances with a communication issue.
However to see if there was a reason, the individual responses were studied, but of
the 15% of locals who provided a supplemental answer for this question, none had
answered “absolutely”.
This could be due to a different view of the categories, or a greater sensitivity to
communication’s importance on the part of the expats. The smallest group of expats
responded “absolutely” and this could be due to a reluctance to admit they had an
absolute problem with communications. After all, it is the expat who is the visitor and
even if he doesn’t learn each local language (it would be practically impossible), with
experience one does get better at listening to people. For some of the locals, they
will not have had the experience of working in English before.
30
5.1.2. Supplemental Question
The supplemental question revealed a few telling problems in the area of
communication.
The expat group mentioned accent was a problem.
Among expats there was a perception that locals would often say “yes” or say
they understood when it could be they meant “no”, or did not in fact
understand.
Not getting instructions properly carried out was the most common complaint
from the expat group.
The local group also mentioned accents as being a problem, and some expats
do have “non-standard English” accents.
Some expats use too much slang or idiom which can be difficult for even a
proficient speaker of English, if they do not know the idiom.
5.1.3. Conclusions
In conclusion it can be seen that while there are outlying opinions, the optimistic
outliers are all local, and the pessimistic outliers are equally local and expat. The
results indicate a realistic appreciation of the problems communication can bring, and
31
it would probably be worthwhile having a communication awareness program, where
clear and concise written communication within the companies could be encouraged.
The biggest problem seems to be in verbal communication and people should be a
bit more aware of who is receiving their verbal messages, and try to use clear
Standard English.
No-one mentioned the telephone as a source of misunderstanding, but a common
problem with the telephone is there are no visual aids to the communication (non-
verbal communication). There is also the problem that in a lot of cultures, it is normal
to make a “sound” that does not identify the person receiving the call. The “sound”
can be “hello” (Thailand) “wei” (China) or “Yes” in a lot of places. This can lead to
problems if the caller is not sure of the called party’s identity.
5.2. Responsibility
Does everyone have the same attitude to Responsibility?
50
45
40
35
30
% respondents
Expat
25
Local
20
15
10
0
Not at All Slightly Somewhat Greatly Absolutely
Figure 2 Responsibility Responses
32
There was also a clear difference between expats and locals on the perceived
attitudes to responsibility. The expats thought diametrically opposed to the locals,
that there was a big gap in the attitudes to responsibility. The locals mostly thought
there was a good deal of similarity on attitudes to responsibility. The biggest expat
response was “somewhat” indicating a degree of empathy between the groups, but
nowhere near as strong as the perception of the locals. No expat thought there was
“absolutely” the same attitude, while the locals did express to a lesser extent the view
that there was ”not at all” the same attitudes to responsibility.
Maybe the expats considered they had a higher responsibility to the job, and the
majority of the locals apparently also thought that. There were some locals who saw
expat responsibility as different from their own, but this could be either because they
considered their own level of responsibility higher than that of the expat, or just as
likely, that the expat had a higher sense of responsibility because he was paid more,
had a higher integrity, higher commitment or was more experienced.
5.2.2. Supplemental Questions
Expats:
Some responders thought that the responsibility shown by locals was
dependent on the seniority in the company, and the higher the level, the
33
greater the responsibility. Could this be because the rewards are higher? But
isn’t being truly responsible independent of reward?
A common comment was that locals try to avoid responsibility to avoid being
blamed when (not if?) things go wrong; they may loose their livelihood.
Responsibility may be taken or assured at the beginning, but if it starts to go
wrong, many try to back out, leading to misunderstanding. For the same
reasons as above, entirely understandable. The states can be very high for
those with family responsibilities.
Some locals have as high a sense of responsibility as any expat thought a
minority of expats. This is a fair observation and can be due to the fact that
the local may well be a senior or ambitious member of a client organization.
Locals:
My Responsibility is as per job Description and can be a part as team work.
Clearly a “do as I’m told” response to fit in with the team. This indicates that
the responsibility is not being instilled within, but is directed by the firm, and
peers. This would not lead to an individual taking responsibility, but instead
indicates that any decisions not specified in the job description would arise out
of team work, rather than an individual response to a situation.
“All the personnel should be on procedure”. This is similar to the response
above, in that responsibility is defined as following the procedure. But who
34
writes the procedure? Would the local take responsibility for writing the
procedure?
“Because not clear introducing by the high management. As expat personnel,
you should give responsibility to local staff and give a chance to local staff to
present their responsibility and their capability”. Here it is implied that there
should be clearer instructions from management. Often, the expat would think
he is ”giving” responsibility and “delegating” to someone, when the local’s
perception is that he has been given unclear and incomplete instruction, and
there should be an agreed procedure from the start.
“State of a mind that we have to do activity by rule we agreed.” Once again
this response indicates a team culture or an agreed procedure where the
responsibility is to the team, and to agreements made. What if the
circumstances change and it is no longer possible to achieve a group
consensus?
5.2.3. Conclusions
There was a totally different response from the expat and local groups. The expats
emphasised the individual taking or more often not taking responsibility, but identified
the obvious reason for this: the states are much higher for the local. If he looses his
job, there may well be serious hardship ahead, whereas this is less of a problem for
most expats.
35
Locals concentrated on how responsibility should be given, particularly in the context
of the responsibility. This importance given to identifying responsibility in a
framework was evident.
It is clear that locals need more structured frameworks in which to have their
responsibilities defined for them. The expat is far more fluid in his approach to his
responsibility and may just take on extra without anyone telling him to do so.
5.3. Quality
Figure 3 Quality Responses

What Quality has been Achieved in your Experience?
60
50
40
% respondents
Expat
30
Local
20
10
0
Dangerously Low Low Reasonable High Excellent Cannot Generalize
The responses on quality were quite similar between expat and local, although no
expat was satisfied enough to report “excellent” quality was achieved in his
36
experience. There was the highest proportion of both expat and local who agreed
with “reasonable” quality being achieved and this is not surprising since quality has to
be reasonable before the project is over. Only on rare occasions would one expect
to see “dangerously low” quality, but a few expats thought this was the case, and
some locals did too. The expats in general thought quality achieved was lower than
the locals, but an encouraging similar number of locals and expats thought quality
achieved was “high”, and this marginally outnumbered those from the combined
groups that thought quality was “low”.
More locals than expats selected “cannot generalize”, and this was the second
highest response from locals after “reasonable”. It is fair to conclude from the raw
results that while expats felt quality was ranging from reasonable to dangerously low”
locals were more optimistic although there may be a local bias not to criticize in the
high number of responders selecting the non-committal “cannot generalize”
response.
5.3.2. Supplemental Question
For both expat and local: What does quality mean to you?
Expat:
There is a problem in trying to impose a 1st world perception of quality on
personnel who have no concept of the link between quality, safety and
reliability. Here the responder is assuming there is no awareness of this link,
but in fact, many developing world engineers are only too conscious of this
link, it is one thing to be aware, quite another to have systems in place to
implement a quality procedure that works.
37
Alignment of client and EPC contractor expectations of quality is essential.
“Quality can mean a combination of technical specification and commercial
attraction and for certain countries quality means lowest price with stated
technical compliance irrespective of whether "stated" means "actual".” In
other words, in some places, the contracts can be awarded to companies who
promise, but do not deliver. There is then the problem of rectification later,
and this may not be done.
QHSE has been expanded beyond its original role in order to create an
extended role for itself. The quality function is becoming an industry in itself in
the view of this respondent. There can be too much focus on petty rules, and
this can be dangerous because if people are made to wear personal protective
equipment in areas where it is in reality not required, it can lead to disrespect
for the rules, which can then lead to non-compliance in areas where it is vital.
“Quality means meeting the project specifications in design and construction
with minimum to re-work. A quality company would recognise where there are
some deficiencies in the clients’ requirements and advise and implement
appropriately.” This is an important point because sometimes there may be
potential issues in a very early stage design,
“Generally Asians are much better at following processes than Westerners.
Where they need help is in problem-solving and arguably drive/leadership”,
according to one expat view. Once again as with responsibility it does seem
38
true that if the procedure is in place, locals can follow it well. The problem is in
following a procedure slavishly, or even blindly.
Local:
Understanding client wishes and delivering them on time and in budget Is a
pretty good definition of quality, although what the client needs should also
figure.
Making excuses rather than high quality products is a disappearing trend one
would hope, but there has to be a cultural behavioural change for that to be
the norm in some situations.
The expectations of quality will differ depending on the customer and the
industry. There is always the lower end, and there are industries where quality
cannot be sacrificed.
Listening to the client is important, because if the client was ignored on even
minor points, they weren’t minor to him and this will colour his perception of
the quality of the whole.
5.3.3. Conclusions
There was greater agreement on the level of quality reached, but expats were still
more pessimistic than locals. The supplemental questions raised a variety of
comments about quality. Many of the comments from expats centred around
expecting developed world standards in the developing world, and a difference of
39
expectations. There was also an expat opinion that Asians were better at following
procedures than expats, but this ties in with the local responses for responsibility
where the locals placed high emphasis on following procedures. One of the main
problems with wanting to follow procedures however, is having them in the first place.
One of the major drawbacks in the DC environment is adequate procedures. Quite
often, the previous job’s procedures are taken, and just “topped and tailed” for the
new project.
5.4. Knowledge
Figure 4 Knowledge Responses
Is there a Knowledge Gap?
80
70
60
50
% respondents
Expat
40
Local
30
20
10
0
A massive one in some areas Never an issue No-locals are No-Expats are Yes- Locals need Yes- Expats need
knowledgeable knowlegable more knowledge more knowledge
The responses to the question on experience were very similar between the two
groups as clearly shown in figure 4. The option for “a massive gap” was only
40
selected by a small proportion of expats, while the opposite extreme was selected
only by a similarly small group of locals. Expats need more knowledge was a little
surprising, since more expats than locals selected this. Only a small number of both
expat and locals thought it was never an issue. The vast majority felt that there was
a gap in some areas. What is not clear form this data is who the respondents feel
needs to have more knowledge, since both expats and locals agree they all need
more knowledge. Expats generally in this survey felt that more knowledge was
needed than did the locals. Is this another indicator of the “higher standards” set by
expats, even for themselves? There is not enough data here to determine that, and
the responses to the supplemental questions were not that illuminating on this point
either, unfortunately.
Expat:
There were approximately 50% of the responses mentioned that the locals lack
experience. Another common them was that the level of education may be the same
on paper, but in reality a degree from a western university is “better” than one from
an African or Eastern one.
One respondent put it succinctly:
“Education does not equal knowledge and experience”
This is perhaps a result of the culture of learning; the passive data gathering versus
proactive research. This author is not convinced this is true at say a Masters level,
41
but there may be something in this idea at a Bachelor level, which is where most
engineers say goodbye to formal education.
One opinion expressed was that once expats are no longer able to educate the local
workforce, because technology has moved on, then they will no longer be required.
That idea is true on one level, pure technology transfer, but that is not the only
reason why expats are in the developing world by a long shot. There are cultural
issues: locals tend not to clearly state opinions, sometimes for fear of losing face, and
in others, for seeming to be pushy. The “work ethic” was touched on by some
respondents, and difficulties in communications were also mentioned here.
Local:
There were many responses to this question from the locals, and most felt that there
was not much if a knowledge gap in practice, but there may be specific product
knowledge or sometimes greater experience that could make it seem there was a
gap. Some responses said that the local were as good as the expat, and in terms of
local conditions, work practices and how to get things done in the environment this is
true in the authors experience also.
Most respondents took the view that if there were differences, these were slight and
that management should take note of putting the right man in place, expat or local.
“Basic knowledge of the local staff is same with expats, but local staff has less
experience around the world and slightly communication and understanding with
international language (English)” This comment demonstrates that once again,
42
communication is a problem even if it is slight. The local staff will always have this
problem if they wish to move internationally, because in that case, where say
Indonesians are working in Saudi, they lose the “home team” advantage, and must
operate in a foreign language in a foreign environment.
Lastly, a common thread was a greater level of independent thought and self
confidence among expats. This could be because to be an expat in the first place,
he is not representative of his home population, the vast majority of who are “stay-at-
homes”, much like the majority of locals.
5.4.3. Conclusions
The perception among expats is that there is a knowledge gap; it is both cultural and
experiential, but the locals can catch up quickly. The locals did not see the same gap
at all, and thought that any perceived gap had more to do with experience, self
confidence and an independence of thought.
There should be more work done in this area to determine how great this gap is, and
what can be done to address it. Education is one of the obvious answers, but as in
the example of the Iranian study, it is not just education, but what is taught, and how
it is taught, “know how” rather than “know why”.
Practical knowledge is what is clearly lacking, as there is not a good incentive for
talented local engineers with real practical know how to stay in country and to teach,
either by mentoring in industry or in universities. The rewards are all too often
43
greater abroad. Developing countries have to find ways to retain their own local
talent.
5.5. Experience
Figure 5 Experience Expat Responses
Are Local Senior Staff Sufficiently Experienced? - Expat Responses
70
60
50
% respondents
40
Expat
30
20
10
0
Nowhere near Some Good No problems Cannot Experienced but Positive Negative
experience experience generalize not learning from outcomes outcomes
it
44
Figure 6 Experience Local Responses
Experience - Local Responses
70
60
50
% respondents
40
Local
30
20
10
0
Locals and Expat more Local staff lack Expat staff Expat staff do There are Expat staff not Local & expat Expat staff are
Expats have experienced opportunity to share not share negative necessary to staff of similar more
equal demonstrate experience experience outcomes guide local age have experienced
experience experience because of staff similar because they
lack of skills experience are older
For this question the questions asked of the local and expat group were different, as
the perception of experience and why the opportunities to demonstrate experience
are different for the two groups. Most expats, not all it must be said, are already
experienced in their own or similar countries when they venture out. Locals are
usually less experienced, younger, and view working with expats as almost being
abroad. In fact they are right. For the local engineer, working with expats is already
working internationally.
Expats
The expats in general felt that local engineers had some or good experience, with
over 80% falling into that category. Good experience was dwarfed by “some”
experience in the responses, with “cannot generalize” being the second biggest
45
response. For the design of the survey, this response was not helpful and would not
be included in a future survey. Small outliers for “no problems” and “nowhere near”
responses are to be expected. A teaser option “experienced-but not learning from it”
was included because just because someone has done something before, it doesn’t
mean they won’t make the same mistakes again, and this response was selected by
25% of expats. The positive and negative outcomes options were answered equally,
reflecting the wide range of experience found on EPC projects. There would be
interesting correlations to be made between those citing positive outcomes and other
factors, such as knowledge and responsibility. There is not room here to deal with
those correlations in this dissertation unfortunately.
Locals
There was a bias in the questions, and here it is shown that “expat staff share
experience” was selected by over 60% of local respondents and was by far the most
popular choice. Expat “more experienced” was equaled by “local staff lack
opportunity to demonstrate experience” which indicates that if local staff were given
more responsibility, they could gain more experience, or perhaps prove what they
themselves already knew, that they have the necessary experience to perform
successfully.
The age question was clear, in that locals feel expats are similarly experienced at a
similar age. The author is not convinced this is actually the case, because to expats
often get a chance to work abroad with their company at an early stage of their
careers, because some companies se that as good training, and have the overseas
projects running to be able to send their young staff to. At this stage in Thailand,
46
China or Indonesia for example, the same opportunities do not generally exist.
Compared with the expat group, the control question “there are negative outcomes
because of lack of skills” was not selected by any local. Expats thought there were
negatives.
Expats
Many expats felt that the locals had experience but what they lacked was
experience in making decisions. This is maybe because decision making is
more of a group exercise in a lot of Asian cultures.
Many commented that the locals had good and valid experience, with some
feeling that certain disciplines like civil engineering were better handled by
locals because of familiarity with codes and so on
Some expats mentioned that respect for the elder had a bearing on the
attitudes to expats who may be older, and therefore seen as more
experienced, but there were young expats who felt that they had no problems
at all in leading teams.
The sub contractor experience level was found to be the most serious problem
by some respondents, and they pointed out that this was a more serious
problem than deficiencies in the client organization, as it directly affected
project quality.
47
One respondent found that avoiding blame is very important, and:
“As long as the team is positive and not promoting a blame culture, they will
improve. “
Locals
Few of the local group responded (only 4 responses) to the supplemental
question on experience. The responses were split some stating that the
experiences of locals were unique and valuable, which is certainly true and a
view shared by many expats. Others felt that expats were more experienced
because the technology was from the west, and therefore it is only natural that
older westerners would have more experience in that technology.
There were comments that age was not an issue, where young people had
more energy for example, or the older expat may not have experience the local
younger staff have.
5.5.3. Conclusions
It is clear that there are sensitive issues around the question of experience, but
it seems that expats do recognize that locals have valuable experience and in
some areas, superior relevant experience. The sparse response from locals
makes it difficult to say too much about the perceptions of experience, but it
would seem that locals feel on the defensive when it comes to discussing
experience, and this is probably not necessary, since there is recognition
amongst expats of where locals play a determining role. The real lesson here
is that each has his own experience to bring to the project, and a successful
project will need the input of all members of the team.
48
5.6. Commitment
Figure 7 Commitment Responses
Commitment
50
45
40
35
30
% respondents
Expat
25
Local
20
15
10
0
Both expats and Locals lack Expats lack no lack of There is great There is There is
locals lack commitment commitment commitment enthusiasm on the commitment to the commitment to
commitment project firm, but not the fellow workers
project
There is generally an excellent attitude to the project from both groups, with the
locals perhaps being more positive about the project on one hand, but in the control
question, but higher commitment on the firm.
Locals’ lack of commitment was selected by expat and local alike, and this is
probably to be expected, given that for any given project the expat has invested a lot,
moved house, country schools for his kids, to be on that particular project. If he is not
on that particular project, he has to move house, country, and school again. Not so
the local. So for a local the penalty for moving is less. This is balanced by the nature
of the expat job cycle, normally, an expat will complete the assignment and then look
for another, using the search period as a holiday (if a somewhat stressful one unless
he is a permanent employee).
49
No local selected “expat lack commitment”, although a minority of expats selected
this option. Around 7% of locals felt both expat and local lacked commitment; this is
not that significant but does contradict the control question “expats lack commitment”
a little.
An encouraging sign from the expats was the high number of respondents who felt
there was commitment to other team members. This bodes well for team building,
and especially if this includes commitment from locals to expats and vice versa.
Expats
Expats felt that the commitment to the project was higher for expats than
locals because of various factors, locals being “protected” by unions or
nepotism in some cases, thus having to work less hard to keep their jobs; and
also not being so expensive would be a factor.
Many respondents mentioned personal satisfaction with completing the work
as important, and this applies to both local and expat.
Some felt that organization size had a bearing on the level of commitment,
with higher commitments to smaller organizations. This point is an interesting
hypothesis, and it is by no means clear what the results would be, weighing
up opportunity (often limited in small firms), versus personal loyalty.
Locals
50
There were only 2 responses to this supplemental question, and there were
three interesting different points of view. One respondent felt that the expat will
commit to the hiring company, usually the consultant or contractor, while the
local, even if he works for the consultant or supplier, will want to relate more to
the end user. There is logic in this because the local will most likely remain in
place, and the most permanent entity is the end client. He will still be there
with new projects and different suppliers, consultants and contractors.
His other point was that the local has a lower commitment because he has
much less pay than an expat, and may resent this perhaps?
The second respondent felt that expats had a culture of commitment.
5.6.3. Conclusions
The most striking result here was the enthusiastic response from both groups for the
commitment to the project and also to fellow workers. This is an optimistic result
even if in the supplemental responses there were some warning notes sounded,
especially with expats perceptions that locals are somehow protected, and expats
have an innate tendency to commit to the job. It is felt that economic factors, as
pointed out by one local respondent have the biggest influence to personnel
commitment to the project. Howe this can be made better for local staff is clear,
those that need to be retained for the success of the project should be identified by
management and be encouraged to stay with security, better opportunity to gain
valuable experience and maybe, more pay.
5.7. Motivation
51
Figure 8 Motivation Responses
Motivation
80
70
60
50
% respondents
Expat
40
Local
30
20
10
0
Money is the main Advancing my career Gaining experience is Respect of my peers is A sense of Money does not
motivator is most important vital most important achievement motivate me
The expat response here was quite clear; the biggest motivation for coming to work
everyday is not money, but a sense of achievement, but money drives the expat.
The local responses were uniform, with respect of my peers “the” most important
being the lowest selected for both groups.
Money is a major motivator for both groups and any other response would be
suspect. No-one said money does not motivate them.
Expat
The expats most common response was to make a success of the project and
to make a difference. Some felt that satisfaction could be gained by giving
52
colleagues the benefit of experience. The motivation would also depend on
the stage of the career, with more satisfaction being derived form motivators
other than money in the later stages.
Being able to direct the project through critical stages was also an important
motivator, as was contributing to the success of the project, in terms of quality,
schedule and budget.
Goal achievement and peer recognition were also significant motivators.
Locals
The locals’ perception of the main motivator was also not money but the
opportunity to gain experience. This experience would provide a more
prosperous future by enhancing employment opportunities in the future.
One comment was that while money itself may not be the biggest motivator, if
someone was being paid less than others, this discrepancy could be a big
demotivator.
A few commented that the motivation of recognition for performing a job well
was important.
The feeling of working in a successful team was also reported as being
important.
53
5.7.3. Conclusions
The overall perceptions were remarkably similar between the local and expat
groups, with money being an obvious motivator, but not the main motivator for
either group. Money, if not correctly applied can be a big demotivator.
A sense of achievement seems to be the biggest motivator people admit to,
but no-one mentioned power as a motivator. The comment about “directing
critical stages of the project” as a source of satisfaction is the nearest one gets
to the admission that power is a motivator. Possibly the sense of achievement
could be a result of having exercised power in the course of a successful
project.
5.8. Integrity
Figure 9 Integrity Responses
Integrity
70
60
50
% respondents
40
Expat
Local
30
20
10
0
Expat low Local low Local neutral Expat neutral Expat high Local high More complex
54
There were some interesting results here. Not surprisingly the expat group felt that
expats had high integrity, but the greatest number of expats selected the local neutral
option, but few though locals had low integrity.
More locals than expats selected “local low”, while a small number less than 5%
selected expat low.
No expat selected “expat low”
More locals selected “expat high” than “local high”.
Similar numbers of locals and expats thought it was more complex than could be
described in the simple options offered.
It is clear from these results however, that the local group tended to view the expats
as having higher integrity, while expats also took the same view. There is a
perception, especially among the local group, but not exclusively, that integrity is
somehow linked to income. The higher the income, the more likely one is able to
“afford” a high level of integrity.
Expats
There were a number of comments on the theme of integrity being affected by
income, or at least making it difficult too decide if an expat has the same level
of integrity when his pay level is much higher than locals.
55
Expats can tend to have a “short term” mentality, whereas the locals have a
longer view. This may well be true, because they will remain in the location
and thus need to build relationships with end clients.
Both groups tend to commitment until a better offer comes along. When
people leave before project completion, this can cause severe problems at
critical times if the wrong people are not persuaded to stay. This means that
the incentives to remain on the project until it is really complete need to be
examined. “End of contract” bonuses have been used to overcome this
problem.
Some commented that it depends on the culture of the country, but did not
elaborate on the aspects of the culture that had a bearing on integrity. Some
cultures, where it is common to have a haggling system can lead to an
acceptance that you can “get away with what you can”. This is not necessarily
correlated with poverty; some cultures that are not in poor countries have a
cynical view of doing business.
Some made the point that integrity was a personal trait, and that there was in
effect an absolute measure of integrity that was not dependent on culture.
The success of a project is dependent on the integrity of both expat and local.
Locals
Expats pay rates make them have a higher level of integrity.
56
Expats always need to maintain their track record by keeping a high level of
integrity.
The success of a project is dependent on the integrity of both expat and local.
Integrity is not dependent on nationality.
5.8.3. Conclusions
There was close agreement between the groups, common points were that
expat and local both needed to have high integrity for successful projects, and
that integrity was not dependent on nationality.
There was also a feeling in both groups that integrity was linked to income,
The clearest perception from the survey of both groups was that expats
exhibited higher integrity, but that this was probably due to the high expat
salaries rather than any innate integrity.
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6. Cultural Aspects
The cultural aspects of the work will be examined; particularly aspects such as
decision making, taking responsibility, initiative, and a lax attitude to procedures,
concern about appearance rather than substance, corruption and attention to details.
Are these reasons why personnel from developed countries are required to try and
improve this situation?
6.1. Culture
There is much made of the differences in culture between the western expats and
those in the eastern countries concerned in this study. We shall briefly look at the
cultures of Thailand, Indonesia and China, and those aspects of the culture that have
a bearing on the efficiency of the EPC process.
6.1.1. Thai Cultural Aspects
The Thais are profoundly influenced by the Theravada Buddhism philosophy
practiced in Thailand. This governs all interpersonal interactions, and is particularly
pronounced in hierarchical working environments, such as found in engineering
companies. The concepts of “right action”, “right speech” and “right understanding”
are very important and mean that often the language used is very subtle and gentle,
even when quite stressful topics are being discussed. There is also the Buddhist
requirement to seek the truth of a situation. This is in theory, however, and it is
possible that the Buddhist framework breaks down, and the expat can find himself in
a violent argument, it as if the dam, which has been holding back the emotional
58
torrent suddenly, bursts. It is better not to be downstream when that happens.
Naturally, when dealing with large quantities of money, there are occasionally people
who it is necessary to pay, but not in the formal context understood by western
accountants. Then, seeking the truth can become quite a quest.
Buddhism does not encourage personal competition, and consequently Thais do not
like to initiate change, engage in dueling discussions, or be overly ambitious to prove
themselves on a project. This is further reinforced by a dislike of those that push
themselves forward in a given position (probably Taksin Shinawatra’s gravest
“crime”, after the drug war murders). In the EPC environment, this means it is difficult
to find decision makers, and people that you can give “ownership” of a function to.
There will always be the “team” emphasis.
Because Thai society is very hierarchical, this translates into a strict “pecking order”
in the work environment, and while the westerner can recognize who the boss is,
informal meetings on a peer to peer level between a westerner and a Thai are
unlikely to achieve anything except possible resentment on the part of the Thai’s
superior, when, not if, he learns of the interaction. The workers can also slack off if
there is not constant supervision, and although Thais work hard when the work is
stimulating, once routine sets in (even in a construction environment) work can take a
distant second place to fun or “sanuk” as the Thaïs say.
On one occasion the author has found a mini casino, with alcohol and food, operating
atop a vessel during construction of an oil refinery. Most Thai engineers however are
far more professional and are keen to learn. Particularly since the economic crash
there has been a greater urgency to get qualified and to gain experience.
59
Another major drawback for Thais is the language. Consequently, unlike
Indonesians, they are rarely seen working as engineers in the International EPC
industry. Thailand does export labour, since the foreman can usually speak enough
English to relay instructions.
The fact that Thailand has “never” been colonized also plays a deep role in the ethos
of the country, and there is a distinct national pride because of this, which can in
some cases lead to chauvinism and overt nationalism. This can make taking advice
form other difficult at times.
6.1.2. Indonesian Cultural Aspects
Indonesia has an extremely polite culture, and generally a very pleasant attitude is
the norm when Indonesians are dealing among themselves and between
Indonesians and foreigners. This is not to say there are not arguments, there are,
like in Thailand when the situation has got too stressful to maintain the social veneer,
then the flood gates can burst. This seems to be a common trait in South East Asian
societies, although when the façade is down, an uglier side can emerge.
Another unavoidable factor in Indonesia is the corruption that is endemic in business,
where nothing will happen without the appropriate “commission”. This pushes up the
costs of jobs, and can lead to short cuts in the quality of materials or stringency of
checks. This is well known and open on Indonesia, although it occurs in other
countries, it is the perception by Indonesians themselves that considers the country
to be suffering more than its neighbours from corruption. The level of corruption is
probably no worse than in China, but China is trying to persuade the world it is trying
to clean up the act. Indonesia does not seem to have yet reached that stage.
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Indonesians are very modest in the main and are good communicators who are
eager to listen and learn. There is little evidence of resentment from the colonial
period, and Indonesia has a great advantage over the other countries in the reason in
that there is a more internationalist outlook and thinking, when compared to China or
Thailand as a result. This is a big advantage, and if other conditions were right, could
lead to an indigenous EPC industry, that was capable of fully operating
internationally.
6.1.3. Chinese Cultural Aspects
In China “face” is all important. There is also the politeness which is expected when
dealing with superiors. With people of a lower rank, a whole set of different rules
seem to apply, and there is a certain amount of callous behaviour towards the “lower”
classes in china. That the labourers and peasants are treated unfairly is no surprise.
The labour force on an EPC contract is quite likely not to be paid for months, and
even then, not fully. The peasants are driven off land they have occupied for
generations with government promises of compensation, but it often never happens
the way it’s promised. This is currently causing a lot of social unrest in China. Why
is it like this? Could it be the culture, corruption, or lack of the rule of law? A
combination of all three is likely. This all has an impact on the quality of the EPC
project.
China’s biggest problem internationally is the language. It is no secret that it is
difficult to learn the 4000 plus symbols required to read a quality newspaper, even for
ordinary Chinese. The foreigner has little chance unless he or she is an extremely
able linguist. Most people working in the EPC industry are not renowned for their
linguistic qualities, so translators are usually required. The translators are often
61
young people who are great at language skills, but arte not engineering graduates.
This can lead to difficulties in understanding the subject matter of the conversation,
notwithstanding the linguistic abilities of the translator.
6.1.4. Western Cultural Aspects
There is no single “western” culture as such, since in the author’s experience, the
work practices and ethics in western countries are varied, but compared to the
cultures of the Far East, the western cultures can be viewed as much closer to each
other than to the cultures of the Far East discussed in this dissertation, which in the
work environment are also far from each other, but share a number of common traits.
The Anglo-American culture is considered the default “western” culture. This is
common in the EPC business. It is true that among others there is a separate
German perspective, and a French view, but in the author’s experience, the Anglo-
American culture has been dominant in the Far Eastern countries considered in this
study, and tends to override the other western cultures.
This “western” culture then can be characterised by a directness and an openness in
dealings that is often diametrically opposed to the way in which the “eastern” cultures
behave, and in contrast to the politeness of the Indonesian, the face saving of the
Chinese and the deference of the Thai cultures, it can be seen as abrasive, crude
and even rude. The westerner is also obsessed with “time”. Time is money, and
squandering time is an expensive waste. In reality, the wasting of the time of the
very expensive western expat is far more expensive in monetary terms to the project
than the locals, due to the great discrepancy in salary rates. This too has an impact
on the relative attitudes to time on the project. The attitude is driven by the client,
although this can be as a result of political pressure rather than self generated
discipline.
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6.1.5. Cultural Synergy
Philip R. Harris, in his paper “European Leadership in Cultural synergy” advocates
the collaboration between professional of different cultures is the “key to survival,
problem solving and growth”. He outlines five strategies people commonly choose
from when in a cross cultural situation: dominance, accommodation, compromise,
avoidance and synergy. (Harris, P. R., 2004)
In the Asian / western cultural situation, Harris suggests that the Asian managers will
use the avoidance technique and act as if there are no issues, because the end
result is more important. For this strategy to work, the westerner has to
“accommodate” the avoidance mode of the Asian manager, so nobody loses face.
This is not the best mode of operating according to Harris, who rightly points out that
if the relative strengths of both cultures can be pulled together, the result can be a
win-win situation. Harris is writing in a mainly European context, from an American
perspective, and his examples mostly center on the European experience. In an EPC
environment in a developing country like Indonesia or Thailand, it is difficult to see
how that can work at first, but there are encouraging signs that the younger
generation are starting to question and not always accept the westerner’s point of
view, and by so doing, can often raise important technical issues. This is particularly
true in Indonesia, in the author’s experience.
6.2. The Dark Side
The author’s background and experiences in Asia have lead him to the conclusion
that there is an interesting study to be made into the reasons why, even though in
areas such as China and Indonesia where the educational level of (some at least)
engineers is high, why it is that there is always an uphill battle to achieve quality, and
63
usually there are schedule and money issues. He has worked in many Far Eastern
countries, such as Thailand (his wife is Thai), Singapore, Malaysia as well as China
and Indonesia, spending over half his working life engaged on Far Eastern projects.
This has given the author a wide range of experiences to draw on, and he seeks to
know the reasons why “western” EPC systems do not seem to work that smoothly
when translated to an Asian environment. This is not to say disaster doesn’t strike in
the developed world by any means, but things do work differently. This applies
whether the contractor is western or not.
6.2.1. Indonesia
The darker side of doing business in Indonesia is the endemic corruption which
particularly in the engineering environment accompanies all contracts, projects and
purchases of equipment. The Commission for Eradication of Corruption was set up
in December 2003 with the aim of reducing the amount of collusion, corruption and
nepotism which had become endemic in Indonesian society. At the time of the
CEC’s creation, Indonesia was stated by Prof. Adi Andojo Soetjipto, Chairman of the
Anti Corruption Joint Investigation Team that Indonesia was ranked 5th most corrupt
country in the world. (Soetjipto, A., 1999).
The ratings are however based on subjective surveys and reflect perception rather
than objective reality according to an article “Corruption unbowed in Southeast Asia”
by Wayne Arnold published in the International Herald and Tribune 28 October 2005.
Arnold further states that the US is not going to let a bit of corruption get in the way of
profits for its companies when here reports that:
64
“But when Indonesia attempted to renegotiate Suharto-era contracts with U.S.
companies that it said involved kickbacks and other forms of corruption, the U.S.
government intervened to pressure Jakarta to honor them anyway.”
A common Indonesian practice is bidding for jobs. People often have to pay for their
job. In an area of rampant unemployment where the Indonesian Unemployment is
estimated at 12.5% for 2007 not including a vast number of people who suffer
underemployment, which is not quantified, people are understandably desperate for
a secure job. (Index Mundi, 2007)
There are many scams and false employment agencies that persuade people to pay
for job interviews, which may not exist.
In this distressing environment it is not surprising that there are two surefire ways a
person can gain employment; either through nepotism, or by purchasing a position.
Purchasing a position means that the employee now needs to recoup his or her
investment, and the cycle of kickbacks continues.
This is especially prevalent in official capacities, such as auditors who will show up at
a business for an examination of the books, and will swoop like a SWAT team with a
perhaps legitimate or not so legitimate reason for the inspection. This will result in a
cash fine usually paid direct to the auditors, with a tax assessment which will usually
be less than the “fine”. The tax will go to the Government. The officials can justify
their action with the fact that it is hard enough to get anyone to pay tax in a country
like Indonesia, where it is estimated that only 1.5% of the population pay any tax
other than that garnered through sales taxes. As explained on the Indonesian
director general of taxes website, there are moves afoot to move to a consumption
based tax, as this would be more equitable:
65
“The present situation where only around 1.5 percent of the population has taxpayer
registration numbers should be the key reason to shift to consumption based taxes,
which are less costly to administer and less complicated, resulting in higher economic
growth. An appropriate consumption based tax will shift more of the burden to the
goods consumed by the wealthy people, and less to the poor people, hence it has a
dimension of justice.” (Direktorat Jenderal Pajak, 2006)
Another common practice is the collusion between buyers and suppliers, where, once
a supplier has paid the correct “commission” to win the right to be the “preferred
supplier”, the buyer will mark the price up for the project to cover the cost of the
kickback to the supplier, who will normally receive a percentage of the inflated price.
The people in the buyer organization have two slices of the pie to share out, the first
“commission” paid by the supplier to win the right to be the supplier, and secondly a
share of the inflated price paid by the project. The shareholders of the project
company are the ones who pay, and even if there are expats in the company, often
they will remain blissfully ignorant of such arrangements.
All this makes projects more expensive than they should otherwise be in Indonesia,
and can have impacts on safety, if cheaper than specified materials are used and the
inspector is paid “commission” to overlook the fact. There may be services like
maintenance that need regular attention, but are not done because it is cheaper for
the company to sign off the records without the work actually being done. This is
what the P.R. representative of the National Atomic Energy Agency in Indonesia
clearly stated in the Jakarta Post of 6 August 2007 in an article that asked “Is nuclear
energy safe enough for Indonesia” when he said that “The first plant to be built in
Cape Muria, Central Java, is a turnkey project, which could be owned and operated
66
by foreign entities with minor local participation. In this way, the fear of corruption,
which could compromise safety, can be minimized.” (Author’s emphasis added).
(Ferhat Aziz, 2007). From this piece we can gather that not only is corruption
foremost in peoples’ minds, but that also there is strong opposition on the rational
grounds of fear of earthquakes.
But it is the fear of corruption that is instructive here, because Indonesians often
regard the foreigner as somehow less corrupt, less likely to turn a blind eye to sloppy
practices and less likely to allow the operation of the reactor to fall into a dangerous
situation. This is in part borne out by the survey results to question 8 of the survey,
see section 5.9, where the highest number of Indonesians stated that expat integrity
was high.
The Indonesians have been operating a research reactor that has stood up to
earthquakes for forty years, and another two for less, but there is still the perception
that it would be safer with foreign involvement. Maybe there is a different standard
of ethics at an academic institution and a public utility in Indonesia? Would that be
the case anywhere, where one would expect a higher standard of altruism in
academia than industry? Or maybe people are not aware of the nuclear reactors
already operating. There is in any case a great difference in the scale of a
commercial and a research reactor.
6.2.2. International Involvement to Allay Fears with Safety
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There is a fairly controversial nuclear plan in the news in Indonesia, and there was a
very interesting article in the Jakarta Post recently. The author engaged in
discussion with the writer of the piece in the Jakarta Post, Mr. Ferhat Aziz. The
discussion was interesting because of the concerns about the perception of people
with regards to the influence of corruption on safety in Indonesia. Mr. Aziz graciously
granted his permission to incorporate the dialog in its entirety in this section, where
DE indicates the author’s questions, and FA indicates Mr. Aziz’s responses:
“Sent: Monday, August 6, 2007 8:12:49 AM
Subject: Article Jakarta Post 6 August
DE: Dear Ferhat Aziz,
As an expatriate engineer working in Jakarta, and currently working on my
dissertation “Achieving EPC quality in Developing Countries”, I read with interest your
article in the Jakarta Post of 6 August “Is nuclear power safe enough for Indonesia?”
This prompted me to do a little more research on the subject, and it is true that
Vietnam, Malaysia and Thailand in the region are also proceeding with similar plans.
(I also note that the Philippines never used their Bataan nuclear plant built in the
1980s because of safety fears).
FA: As far as I know, the Philippines case is more because of political decision
(following the downfall of President Marcos) and strong oppositions from
residents rather than real safety reason. Westinghouse would have not started the
project if they were sure that the location was not safe.
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DE: In Indonesia I understand the energy is due to be on stream in 2025 and will
account for between 4 and 5 % of Indonesia’s energy needs.
FA: Yes, but our Law on Long Term Development Planning mandated that nuclear
energy should commence to be used between 2015 to 2019. And according to our
National Energy Policy, by 2024 the share of nuclear electricity should reach
4%.
DE: You address the issue of corruption by saying there would be “minor local
participation” Two thoughts: firstly, why is it that the construction industry is
inherently more corrupt, than say those running the research reactors, and is it
inevitable that if local people were more heavily involved that corruption would bring
the project to a point of danger?
FA: This assumption (that construction industry is inherently more corrupt) is not
completely true. I wrote it to answer fears (of certain people, such as the Editor of
the Jakarta Post, -:)) that corruption may compromise safety of the installations.
You'll find many skyscrapers and bridges in Jakarta, all of them, I believe, comply
with international standards. And you are not so much concerned about safety when
you are in those tall building. I fully believe that the local people, when faced with
great safety concern such as nuclear, they will perform up to, and even better than
the expectation. Yes, you've seen this in the case of our research reactors
installation, one of which is completely indigenous (the Yogyakarta reactor).
DE: Secondly, what about the long term problem of nuclear waste? This is an area
where corruption could play a more insidious role.
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FA: Waste is another point that hopefully I can write in the future. In short I can
assure you that nuclear waste is really manageable, very small in volume (relative to
other large scale plant or chemical industries). Unlike fly ash coming from coal plants
which emits 100 times more radioactive fall-out than a nuclear plant of the same size
a nuclear plant emits radioactive material from its stack at a rate less than 0.1% of
radioactivity exists in our environment. Our nuclear waste facility in Serpong manage
all the waste from all over Indonesia, all comply with IAEA safety standards. The
same answer on corruption also applies here.
DE: This is leaving aside the question of earthquakes, which has been a good reason
not to build such reactors in this area up till now. Indonesia is blessed with an
abundance of natural energy resources such as gas and coal, which, if burned in
properly constructed plants to remove the greenhouse gases, could meet the future
requirements as easily, and probably more cheaply, than the nuclear fission option. I
personally believe that Indonesia has the human resources to manage the nuclear
facilities safely; as long as there is regular and stringent oversight, as you say will be
the case in your article. The long term operation and maintenance is what would
worry me however, as I think the ethos in a research centre is different from that in
industry.
FA: Indonesia is blessed with abundance...is just a myth. We already import one third
of our oil needs. We will be importing gas by 2014 (that's not far off). But yes, we are
urging the use of renewables, and coal gasification. But I am doubtful that they are
any cheaper than nuclear. Work ethics in Indonesia is developing and getting better,
along with the improvement in education and standard of living. Given a good system
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and management, we are as good as any developed nation. Take the "Busway" as
an example. You see the people can queue up nicely and turn off their cigarette
when they use the Bus. Although they go back to the old habits when they're out of
the bus.
DE: Lastly, if Indonesia could look a little further into the future, there is the
development of fusion; an international reactor is currently being construction to
deliver energy via fusion. While this is a prototype, I believe it has a good chance of
success. Does Indonesia have any plans to follow this up?
FA: yes, indeed. Fusion is an ideal source of energy, and we are also doing some
research on it. But many experts believe that they will not come into existence before
the next century. Meanwhile, nuclear fission is the wise and safe choice.
Kind regards, FA.
I would be grateful for your comments.
With best regards,
Dave Evans
Jakarta”
(Aziz, F. and Evans, D., 2007)
Response 7 August
“Sent: Tuesday, August 7, 2007 6:36:16 PM
Subject: Re: Article Jakarta Post 6 August
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Dear Ferhat, thank you very much for your detailed and considered
response. I agree that Indonesia has the engineering capability to pull
off most of the construction, but this will probably be a multinational
effort in any case. I was wondering where the finance would be coming
from, as this will largely I believe determine the make up of the
project team.
I too am worried about waste, and in the UK, this has been the major
problem in the public's perception. The problem of maintaining security
for long term storage of perhaps tens of thousands of years is the main
concern.
I know you have a heavy workload, so I don't want to burden you any more
than I already have, but I wonder whether you would be happy if I
included this correspondence (unchanged) in my dissertation. I feel
it is of relevance to my discussion. Thanks again, and all the best,
Dave Evans”
“Dear Dave,
The first NPP will most likely be a multinational effort. I am not an
expert on financing. But I can tell you that many world class nuclear
vendors have shown us their interest in an NPP investment in Indonesia
(for e.g. Rep. of Korea and Japan). They would probably team up with
some local companies (private and/or State's Company) to share the cost
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and ownership.
As for the waste, besides from the volume that is really small
relatively to the other technology, its radioactivity is diminishing
with time. About 50% of radioactivity in spent fuel is gone in just
three months, 80% is lost in one year. Only 1% of its radioactivity
remain for thousand year. That's the reason why NPP operator tends to
keep their spent fuel as long as possible on-site, in addition to
waiting for a break-through technology that will finally burn and reduce
further the waste in a so-called burner reactor. This burner reactor
concept is on the drawing board already in the USA.
Finally, the much reduced waste can be safely stored in a geologically
stable formation. The OKLO Phenomena (you can google this if you want to
know further) showed that nature keeps nuclear waste unmoved for 2
billion years if it is properly placed). And this is not so hard to do
with today's technology.
I don't mind at all that you use this correspondence for your
dissertation. FYI, my doctoral dissertation (in nuclear engineering,
Tokyo Inst. of Technology, Japan) was on the design of nuclear reactor
that can burn nuclear waste...
Regards, and good luck on your study.
Ferhat”
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This discussion indicates a few of the salient points about quality, corruption, public
perceptions and actual abilities of local staff. It is clear that when the reactor is being
constructed there will be a lot of foreign involvement, and the Indonesian government
is in the process of conducting a review of the available technology, it is claimed, to
get the safest plant design for Indonesia. Mr. Aziz makes the point that:
“Given a good system and management, we are as good as any developed nation.”
This is the same conclusion the author has reached, people everywhere are
inherently, as people, as good in one country as in another, but it is the “system” and
“management” and this is where the county specific culture plays such a defining
role.
6.2.3. The Fight against Corruption in Indonesia
Of course the fight against corruption is legendary, and there are many people
genuinely trying to defeat this cancer in society.
The Indonesian Commission for Eradication of Corruption (CEC) abbreviated in
Indonesian to KPK, was set up with the aim of changing the culture of Indonesia:
“The focus of this mission is that the CEC shall become the agency that will cultivate
the culture of anti-corruption in Indonesian society, government, and business world.
The CEC is aware that without the holistic participation of society, the government,
and the business world the fight against corruption will never succeed.” (Wikipedia 2,
2007)
It has had many successes, including this incident from 2005 where it had uncovered
“abnormal” bank accounts owned by police officers, one of whom had an astonishing
900 million US dollars in his account:
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“15 Indonesian Police Officers personal Bank Account are Suspected. The
KPK suspected that their personal bank accounts are abnormal; one of
them has almost USD 900 million deposited in it. Half of the suspected are
still active, some are retired, and some are high rank police officers. KPK
suspicions are related to the report from the community of their illegal
businesses, such as protection money, illegal lodging, abuse of authority,
and gambling, which business are now under serious attack by the new
appointed Police Chairman. Recently, the Indonesian KPK also seized a
number of Indonesian personal bank account in the Switzerland suspected
from illegal sources.” (DahanaRekan, 2005)
It is not easy when the Commission for Eradication of Corruption itself is under
investigation for corrupt practices. Social justice for the people is still a distant aim,
and must come after clean governance in Jakarta.
6.2.4. China
Corruption is big in the Chinese news in 2007. The head of the food and drug
inspection agency was executed recently due to the appalling safety lapses which
caused countless deaths of people, mostly in China. For example the baby food
formula that was sold minus the protein, as a clever “cost cutting” exercise. This
resulted in many deaths of babies from malnutrition. There have been numerous
cases of goods being declared unsafe when imported into the US and other
countries. The Chinese respond that this is due in part to over-zealous application of
the rules, which may have a germ of truth in it.
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The have been a lot of similar quality issues in the EPC industry, some of which
need to be put right, and others which merely make the plant look old before it
operates. There may well be problems at the top end, with financing, and the projects
the author worked on in China had a few difficult periods where the financial side was
not secure. The majority of problems encountered by the author in China were of the
minor variety, cables mixed that shouldn’t be mixed, small valves being stolen, tubing
being stolen, only to be offered back at a price. There were also the occasions
where the workers were not paid, or not trained, or not provided with tools. These
are all minor irritants maybe, but costly in terms of the project’s overall success.
6.2.5. Thailand
In Thailand, it was often a problem of the “private deal”. Someone had made a deal
with a local supplier of bulk materials, labour or services such as cranes, and it was
not a simple matter to access these resources. Sometimes it was noticed that buyers
were paying suppliers, and there were often meetings in town on the weekend. Not
much went on without the Thai staff knowing about it, but the expats were often left
out in the cold, wondering why such and such was not on site. This could be very
frustrating and lead to delay and sometimes shoddy work. There was also a problem
with theft of materials from the site, although the security fought a long and
conscientious program against this. There were monetary incentives for security to
stop the incidents of theft, and the security guards were well motivated by an
experienced expat management.
Of course, the culture in Thailand was always one of private deals, so much so that
when credit confidence dipped in 1997, Thailand precipitated the Asian financial
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crisis with its soft loans between “friends”. That the banks had loaned in a profligate
manner banking on an ever increasing real estate market was another factor, but the
main problem was the extent of cronyism between the big players. Thailand today is
run as a club for these big men, and the recent referendum has merely concentrated
power in the hands of these elite; the monarchy, military, bureaucracy and (group)
big business.
6.2.6. The West
There is a discussion on whether the presence of expats is more of a requirement
from the foreign investment entities, and there is a school of thought that there is a
deliberate policy of keeping the levels of EPC competence lower in the developing
world for the benefit of companies in the developed world. This author comes to the
conclusion that there is something in that line of thinking, but quality problems in the
developing world are certainly not all down to the west.
The “Economic Hit Man” (EHM) story below had some tragic consequences as it bore
its bitter fruit in Indonesia in 1998. The following was the result where the IMF had to
bail out the country and lead ultimately to the end of the President Suharto’s rule.
As described on the Economic Justine News website, the effect of this loan policy
where a few rich people in the target country get richer while the poor suffer as Abid
Aslam described below:
“The IMF controls Indonesia's 43-billion-dollar international bail-out, agreed last
November after the Rupiah dropped 70 percent against the U.S. dollar in a little over
four months. Three billion dollars in emergency loans, to help service foreign debts
and shore up the country's sagging reserves, were disbursed before the Fund's
agreement with the government in Jakarta fell apart over steps to be taken in
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exchange for the money. Another one billion dollars was released early this month,
after the sides signed their third agreement in six months. In exchange for the loan,
Jakarta agreed cut fuel subsidies, ratchet up banking and financial sector reforms,
and dismantle monopolies held by Suharto's friends and family.” (Aslam, A.1998).
This shows the extent to which Jakarta had let the situation get out of hand, and all
the while, the situation for the poorest in society went from bad to worse as economic
ruin and violence stared people in the face. The Economic Justice news article
continues and explains that it was the macro-economic forecasts that were driving
the show, and as described by Perkins in his book the “Confessions of an Economic
Hit Man” the result was actually planned, and has worked up till now, keeping
Indonesian firmly in the economic reality of the west. For many years Indonesia had
been steering a neutral line, with good relations with the Soviet Union. Now the
USSR has disappeared, and Indonesia is still in debt to the west, it would seem the
EHM has done his job well. The IMF revised its targets and assumptions, and
cancelled programs for the alleviation of poverty. Another example of the IMF’s big,
warm heart, as Abid Aslam continues in his article for the Economic Justice News:
“U.S. officials said privately the IMF's macro-economic assumptions and targets
likely would have to be revised and that, in any case, the next one billion dollars in
IMF money, due in early June, probably would be put off. (They said so publicly the
following week, and the World Bank on May 18 scrubbed an executive board vote,
scheduled for the following day, on a one-billion-dollar structural adjustment loan as
well as 225 million dollars for poverty alleviation programmes)” (Aslam, A.1998)
Of course the IMF was also infamous in Thailand, the country that precipitated the
economic crash in East Asia in 1997 – 1998. There however the Thai government
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took a resolute stand, agreeing to the strictures placed on it by the IMF, which
caused great hardship in Thailand, and not only among the poor. The middle classes
In Thailand were hit hard too. But the perseverance paid off and Thailand paid off
the greatly mistrusted IMF.
During the Asian economic crisis of 1997-1998, the US and its allies through the
instrument of the IMF was very forceful in imposing its will on developing countries.
For example when President Suharto has promised subsides on basic foodstuffs and
on fuel, with an increase in government spending to alleviate poverty, the Focus Web
site includes a report from writers Nicola Bullard, Walden Bello and Kamal Malhotra
who explain in their 1998 report “Taming the Tigers: The IMF and the Asian Crisis “
that:
“The IMF responded by flying in top-level officials to strong-arm Suharto into reneging
on his budget promises and to reaffirm his commitment to the IMF deal. Suharto also
received phone calls from US President Clinton, Japan Prime Minister Hashimoto,
Australia John Howard and Helmut Kohl of Germany, all urging him to revise the
budget and stick to the IMF conditions. Clinton dispatched two senior members of the
administration, Secretary for Defence William Cohen and Deputy Secretary to the
Treasury Lawrence Summers to deliver messages to President Suharto.
Using tremendous pressure, the IMF was able to extract a new commitment from
Suharto on 15 January 1998, powerfully captured in the photograph of IMF Managing
Director Michel Camdessus, arms crossed with the demeanour of an invigilator,
imperiously standing over Suharto as he signed on the dotted line.” ( Bullard, N. et al,
1998)
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(Focus Web is collaboration between “Focus on the Global South”, Bangkok, and
Catholic aid agency CAFOD, London.)
Sometimes the developing countries get wind of the scheme, but often only after
serious damage has been done. In an example from 2007, where Indonesia saw
through the EHM policy of donor group CGI:
“The Government of Indonesia dismissed the CGI donor group
(Consultative Group on Indonesia). The group consist of a number of
developed countries to provide financial support was established in 1992.
In turn, through tough terms and conditions, CGI had the authority in
setting up economy and financial policy for Indonesia. The dismissal of
CGI are based on the set of failure by CGI's advices implementation in
economy and financial, particularly in settling Indonesian government debt
in 2000-2002.” (DehanaRekan, 2007)
6.2.7. The real reasons expats are in the developing world:
The west loans the money to the target country, and sells its own workers, goods and
services. The developing country should not be allowed to develop too greatly;
otherwise it won’t need the western help twice. The plan is always to sell the fish,
never teach to country how to fish. The mechanisms are subtle, but the
encouragement of instability, not too much, to upset the plan of course, but enough
to prevent complete development is required. As John Perkins explains, the vast
majority of the money meanwhile never leaves the donor country’s shores, and goes
straight from the government coffers in Washington to the corporate coffers of
Halliburton in Houston or of Raytheon in Waltham Mass. for example. Meanwhile the
strategy provides that the recipient country gets saddled with the debt, and must pay
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money to the donor country, often at rates not sustainable by the revenues generated
by the investment. (Perkins, J. 2004)
With westerners on the ground, controlling the development of the projects and
looking at the potential for further development on the western model is much easier.
If the westerners were not there, there is a good chance that the investment would
not go according to the western plan, and depending on the culture, a greater or
lesser amount would be lost to the corruption endemic in some countries.
It is not all a western plot of course. Anarchy, corruption, greed and sheer
incompetence are not difficult to foster, and in most places need no nurture at all to
flourish. Where the economically powerful countries can make a difference that can
be either to advance the state of a country’s independence, or to further entrap it in a
loan-development-debt cycle.
This world is carved up between the US, who “allows” Europeans influence in certain
areas and countries, for example the Far East is more of a European “development”
theatre, whereas Latin and South America is an US area.
China is now looking at Africa for both energy resources but also for development in
vestment. In not competing with the US or Europe directly in these areas, as most of
Africa has been written of by the US and Europe, China is able to expand without
causing a confrontation, at least, not so far.
6.2.8. “Aid Money”
The quantity of aid the west talks about in terms of economic aid is small; around
0.5% GDP for the UK; e.g. from UK for 2005 it was just under 6 billion pounds or
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around 12 billion US dollars for the whole world. (UK Department for International
Development, 2007)
This pales into insignificance when we see the 150 billion US Dollars plus that
Africans deposited in Swiss bank account in one year 2006, as described in an article
by Alasdair Palmer in the Daily Telegraph “Feed the World…not a Swiss bank” 6 May
2007.
“To the objection that a huge portion of aid disappears into the pockets of corrupt
officials, Sachs's reply was that corruption is not Africa's main problem. Yet capital
flight from Africa increases in direct proportion as aid to the continent goes up: $94
billion left sub-Saharan Africa for Swiss bank accounts in 2004. That amount leapt to
an incredible $150 billion in 2005” (Palmer, A., 2007)
That is just Africa. It is difficult to imagine that greater corruption exists in Asia, but
vast amounts in this region are to be expected. Indonesia has a claim on Singapore
which has huge amount of Indonesian revenue in its banks. In a recent article in the
Asia Times, Bill Guerin writes of the amounts of money salted away in property and
investments by Indonesians, and this estimate shows significant quantities of money
that have been transferred in recent years, most of it following the crash of 1997 –
1998.
“According to a statement issued last October by US investment bank Merrill Lynch,
Indonesians based in Singapore own assets worth $87 billion - or an aggregate
wealth equivalent to some Rp850 trillion - or, in comparative terms, Rp200 trillion
more than the Rp650 trillion annual national budget spent by the government for
Indonesia's 228 million population.” (Bill Guerin, 2007)
So whether that is all a “western” plot to have the cash back safely at home in
Switzerland or Singapore is not known. It is this author’s opinion that a great portion
of corruption in the world exists because countries like Switzerland have this policy of
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keeping bank accounts secret. Why should bank accounts be secret? If you have
done nothing wrong, there is no need to hide, is there?
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7. The Asian Context
7.1. Why are there differences in Quality within Asia?
That there are differences in the quality achievable within Asia is irrefutable. The
performance of South Korean and Japanese companies in the EPC field is world
class, yet their southern neighbours in South East Asia and China cannot claim as
yet, to be in the same class. There are many possible reasons, the different cultural
backgrounds probably the most compelling arguments. There is a feeling that it
might have something to do with the weather. In permanently warm countries there
are no cold seasons, so apart from torrential rain, the living is relatively easy with an
abundance of food all year round. Could this make people less able to adapt, or
rather, less inclined to adapt. The modern world places great demands on the
adaptability of people, and centuries, or millennia old culture can have a dramatic
effect on how adaptable the people from a given culture are, or can be. But is that
really the answer?
7.2. Effectiveness of the Workforce
This study is concerned primarily with the factors that make the achievement of
quality different in developing countries as opposed to more developed ones. We
also attempt to determine what has already been determined in this regard, although
it has been difficult to uncover the type of comparative study necessary to draw out
the relevant facts. It is clear however that the attitude and nature of authority
exercised in various countries can have significant effects on the workforce, its
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attitude, discipline and ultimately its productivity. The workforce effectiveness of a
highly developed country like Japan compared to the newly industrializing countries,
such as Thailand is much higher @@@(HOW MUCH HIGHER REFERENCE
NEEDED)@@@ but is this because of the quality traditions intrinsic to Japan for
centuries, exemplified by her sword making? Or is it because of much later
influences like the American expat W. Edwards Deming?
The literature is not explicit on the problem I wish to address: “EPC quality in a
developing country environment” and this is itself somewhat surprising to me, since
there is great interest in moving the engineering function nearer to the project
locations.
The dearth of research literature on this material has meant that my initial literature
search has found papers that are not directly involved in this topic, but that highlight
various problems and concerns with doing engineering in a different cultural and
developmental level environment.
7.3. What effect does the attitude of Authority have?
7.3.1. Government
As an example, the growing globalization of project work has meant that there are
now many foreign Architects, Engineers and contractors working in China, and in
their paper, “Dispute resolution management for international construction projects in
China”, Chan and Suen describe the reason why there are many difficulties in dispute
settlement in China. These are primarily as result of the misunderstanding of
Chinese culture. According to Chen and Suen, the Confucian and Taoist nature of
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Chinese culture leads to a situation where “harmony” is the goal; success and failure
are not necessarily important; submitting to authority (not contradicting, even if the
authority figure is wrong), and the concept of the “big family” where one does not rock
the boat, all meaning that the timely and quality completion of a project may be
difficult. This does not sit easily with a success driven, irreverent and individualistic
western mentality, and in the opinion of the authors, is a major reason for disputes in
multicultural projects in China. (Chan and Suen, 2004)
This is relevant to my study for two reasons, firstly it provides a background in to the
cultural issues that affect relationships on projects between (in this case Chinese,
one of my experience areas) and foreign professionals, some of whom may have
little cross cultural awareness, and my therefore be less effective than otherwise they
could be. Further, China is very good as an example for East Asian cultures, as a lot
of the general traits are common to Thailand, Indonesia, Malaysia and even
Singapore, in my direct experience.
Thailand for example has a long tradition of the maintenance of harmony being the
main aim of society, and it is also extremely authoritarian, although with a benevolent
(usually) nature. This goes back a long way and as Handley describes in his recent
controversial book (banned in Thailand) the Thai King traditionally exerts power with
“lenient autocratic rule and good governance”. Added to that in Thailand, “those with
higher positions necessarily had greater merit”, meaning that those in authority were
in those positions because of their karmic behaviour in a previous life, means you
have a solid reason for obeying authority. (Handley, 2006). Incidentally, the most
influential expat in Thailand is of course His Majesty the King.
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However, as part of my premise that appearance or more properly, perception, is
more often more important than actual events, there have been many bloody
occurrences such as occurred in 1976 and 1992 where the King has not prevented
the bloodletting, at least initially. This tends to put people in their place in these
countries, something that in the West would cause serious disruption to the
governing classes, does not happen (yet?) in countries like Thailand, China and
Indonesia. All three countries have within the last twenty years put down dissent with
brutal force, in each case to protect the ruling class.
Therefore one of the fundamental ideas of the thesis is, does an unquestioning
attitude to authority really cause the quality problems experienced in the EPC
industry in for example, Indonesia or China? This is of interest, because in the case
of Japan, which also has an authoritarian culture, these quality issues are not
apparent. Japan however did benefit soon after the war from its most famous expat
import, Mr. Deming, who proved to be very influential in her development.
Korea has a similar productivity and achievement in quality to Japan, and although it
did not have a Mr. Deming, had learned a lot form its North East Asian neighbor, and
is now a formidable EPC force. Why did the quality culture not trickle down in the
same way to Indonesia, Thailand and china?
7.3.2. Education
The reasons are likely to be a further combination of factors, possibly motivational,
possibly educational, although there was an article by Rachel Davies in the Jakarta
Post 14 April 2007 which stated that “Indonesian Students do “very well” in Australian
Universities”, and the author expressed some surprise at this. (Davies, R, 2007)
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The main thrust of her article was that Indonesian schools teaching a “traditional
curriculum”, without continually changing methods subject to the whim of educational
fashion, produced students better able to cope with the rigors of an Australian higher
education, compared to those from Australia whose education was more liberal, and
who “lack discipline and commitment and simply fall short academically”. A particular
subject was mathematics, where Davies found that Indonesian students outshone
their Australian counterparts.
7.3.3. Company
There is also a need to look at the situation from the perspective of the developing
countries. There is an interesting paper from Indonesia on the topic “Human
resource management as competitive advantage in the new millennium. An
Indonesian perspective”. The authors state in their summary that:
“Indonesian management is traditional, patrimonial and hierarchically oriented, and
international practices like empowerment, participation and incentive orientation are
irrelevant or, at best, need to be adjusted to and are secondary to Indonesian
indigenous characteristics.” (Habir and Larasati, 1999)
This emphasizes here too the differences in cultural elements between “accepted
international modes” and eastern ones, in this case, Indonesian. There are strong
similarities between the three cultures cited: paternalistic, authoritarian and
“traditional”. The authors cite Hofstede who identified a list of Indonesian work
characteristics which I feel are typical of those in the region, most of them could as
well apply to Thailand or China. Hofstede identified “reluctance to plan ahead”, which
is not so true of China in my experience, but all the rest cited, were common.
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The traditional, face-saving authoritarian aspects of the work environment are very
strong in Asia. But that this is also the case in Japan and Korea begs the question: is
it simply a question of “development”? The topic is “Quality in a developing country”,
but what is it that makes the difference between Japan say, and Thailand? The big
difference is money. When you have a full stomach, a secure and comfortable place
to live, it may be easier to think about the finer things in life, like top quality. Does
Maslow’s “hierarchy of needs” play a role?
ADD INPUT HERE
One technical reason for the difference could be the acceptance of Western quality
control ideas in Japan and Korea, whereas this has only recently begun to happen in
Thailand and China in the manufacturing sector, notably Toyota in Thailand, because
of the requirement to produce export quality goods.
AND HERE
Quality has its share of euphemisms, like TQM, QA, QC, but does anyone outside
the game know they mean?
There is a time delay between TQM (Total Quality Management) being adopted in
manufacturing and in the EPC industry, as described by an American article on the
subject:
“While TQM has been adopted widely by manufacturing firms, it has only recently
been embraced by non-manufacturing and service organizations.”
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(Willis and Willis, 1996)
Even now, 11 years after that article was written the Western companies in the EPC
sector are still having quality issues, even with systems in place. It is not an easy
“tradition” to inculcate overnight. The problem in building that tradition is the time
necessary firstly to educate the engineers and designers working in the industry
about quality control and assurance, and secondly to inculcate the thought processes
that make “built-in” quality second nature. Today, outside of the specialist QA/QC
discipline, many engineers do not appreciate what is meant by “QA” and “QC” and
fail to see the distinction between these acronyms. (“QC” is Quality Control and is
the process of checking and detecting errors in the work. “QA” is Quality Assurance,
which is the process of correcting the errors, thus “assuring” quality.)
Korea too has issues with construction projects and an article attempts to identify,
and allocate blame (perhaps a major differentiating factor, Thailand rarely would
identify a guilty party) for delays and budget overruns in projects. The consultant and
client are the most guilty it would appear, from a Korean perspective. This is
indicative maybe of the strength of the EPC quality function in Korea. “Conflicting
factors in construction projects: Korean perspective”. (Acharya et al, 2006)
There are many reasons for delay and quality problems during a project. An article
on building fast track EPC Pipeline projects from an Indian perspective compares
projects in the developed and developing world. This was a most relevant article and
will be used as a basis for the literature search, as it is about pipeline project and
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discusses difficulties in organizational terms. There is also a good reference list.
(Dey, 2000).
8. The Transfer of Knowledge in Industry
8.1. Are Expatriates needed in the Developing World?
8.1.1. East and West
The key reason expats are brought into the developing world to work on projects is
their supposed possession of knowledge that the local population of professional
staff does not have. “Supposed” here means the expectations of the employer in the
local situation; the expat may actually or may actually not be in possession of this
knowledge, but the selection process favours those with a long successful track
record, as a safeguard. The host country fully expects that here will be a transfer of
knowledge both to the local company and its clients, but also to the local engineers,
who may stay with the company, but often move on to other companies in the
country. When the opportunity presents itself, many local engineers who have
garnered knowledge while working with expat companies or colleagues will often go
abroad on higher paying assignments, but this too benefits the host country in the
remittances sent back. This is particularly true of The Philippines, where by far the
greatest source of foreign currency is the money sent back by the engineers, nurses,
doctors and others working abroad. Nearly 10% of the Philippine population works
abroad, sending home 12 billion US Dollars in 2006. (Herald and Tribune, 2007)
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Generally this knowledge transfer is not about manual skills; though sometimes a
specialist craftsman is required, usually the main construction and design workforce
will be local. So the expat is usually an experienced engineer, manager or contract
expert. The nature of the knowledge required is also worth looking into, because
what is typically asked for is a developed country, usually “western” academic
background. In a paper on the retention of knowledge in organizations, Charles
Egbu raises a fundamental difference in approach to knowledge between east and
west,
“Historically, a continuous dialectic between philosophers of East and West has been
characterised by the merits and demerits of tacit and explicit knowledge. On one
hand Western philosophy emphasised the authority of explicit knowledge in the
search for truth, while Japanese philosophers stress the pre-eminence of tacit
knowledge in epistemology.” (Egbu, C., 2004).
This is interesting because the east emphasises “tacit” knowledge, which is
knowledge that is understood without being openly expressed, compared to the
western “explicit” variety. If we are to build a project however, the knowledge must
be transmitted in a clear and explicit form, so that the correct information is conveyed
to construction, vendors commissioning teams and so on. It cannot be left to intuition
or a slyly arched eyebrow. This is only one of a myriad of factors that make up the
different approach between occident and orient. The epistemology that Egbu refers
to in Japanese philosophy is the branch of philosophy that seeks to understand the
nature of knowledge itself, its basis and it validity. This is useful in a purely academic
context, but when practical decisions, designs and actions affecting the economic
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performance of an organization are required, this type of approach may not be so
useful in delivering products or services to the customers’ satisfaction. This is
something that Japanese companies have learned clearly over the last 50 years, in a
clear break form their cultural background.
8.1.2. Toyota: A Case of Knowledge Transfer
With Toyota now poised to become the number one vehicle manufacturer this year,
this point is succinctly made. Toyota has done this by a number of innovations in the
cars, such as Prius hybrids, Camry luxury cars and the RAV4, a compact crossover
SUV. In manufacturing there have been many innovations also, including “Kaizen”
(“change for the better”) quality programs, and just in time manufacturing and by
constant attention improvement. Toyota may be a little nervous about this position,
as they will be perceived as a threat to some Americans, worried that GM is not the
top dog any more in the US. This could have a negative effect on the fortunes of
Toyota, as a foreign (or expat) organization in the US.
The point about Toyota is that the company has not only learned to assimilate the
best of the western manufacturing and built upon that to further improve quality (it
was originally W. Edwards Deming, an American Statistician, who developed among
other techniques, hypothesis testing and ANOVA variance analysis, in the
furtherance of Japan’s production of quality products). The example of Deming is a
clear case where western knowledge was brought into an eastern, and at the time,
definitely a “developing country”, since Japan was reeling after the destruction
wrought by WWII. The Japanese Union of Scientists and Engineers (JUSE) had
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noticed his expertise and had invited him to teach statistical control. This was a great
success for Japan, and a number of companies followed Deming’s methods and
improved productivity and profits, while producing higher quality goods. Japanese
industry has constantly built on this initial impetus from an expat.
The role of W. Edwards Deming during the period of Japanese reconstruction is
instructive and although very few other expats in developing countries have had the
impact he has had on the host country’s industry, he is perhaps the role model for
expat involvement in a developing country. He freely gave of his knowledge and
according to the Wikipedia article “refused to accept royalties for transcripts of his
1950 lectures, so JUSE’s board of directors established the Deming Prize”.
(Wikipedia 1, 2007) This was given to companies and was greatly influential in
Japan. In this way, knowledge was transferred for a westerner to eastern companies
and laid the foundations for the rapid development of Japan. It is likely that South
Korea also benefited from this impetus, as there is a considerable transfer of
knowledge between these two neighbouring nations.
Egbu cites Leonard and Straus in his paper on improving the retention of knowledge
in construction based industries, where there is natural reluctance in employees to
share what they know. “In all organizations, the politics of knowledge sharing is an
issue. Employees and employers from diverse backgrounds often come into conflict
over important decisions. It has been suggested that manipulating these tensions to
achieve “creative abrasion” is a strategy to maximise innovation (Leonard and Straus,
1997). However, it is a challenging task that involves disciplined management”.
(Egbu, C., 2004).
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The point is made that there is a tension between employers and employees of
diverse backgrounds. That this can in some way benefit the organization is in some
doubt, and although it is possible to conceive of a situation where cultural differences
can create a “synergy” out of this tension, this is probably more likely to occur in an
artistic setting, such as “fusion food” or a new type of music than it is in the design of
an oil refinery for example. In the context of an EPC company, this type of tension is
not likely to lead to a 2+2=5 result, more likely is delay and cost overrun as
arguments continue over matters that could be resolved if a common background
was in place.
That said when the employees from the diverse backgrounds are split into two
distinct groups, one group of highly paid foreigners and the other group local staff,
how much more of an issue is it when it comes to the transfer of knowledge from an
expat to a local engineer, or even to a local company? The contracts that expats
regularly sign have an element of “mentoring” local staff, and imparting their
knowledge to the local organization. They are being paid not only to do the work, but
also in partly to give their knowledge to the locals. This could be seen by some
expats as giving their tools away, or being akin to a transfer of intellectual property,
for which they are not being properly compensated. The companies may view the
knowledge as a resource, to be exploited commercially, rather than something that
belongs to the expat employee. Egbu explains that the term “IC” or “Intellectual
Capital” refers to this knowledge that has potential commercial value. The aim of the
company would be to turn this, using “KM” (Knowledge Management) techniques into
“Intellectual Property” which can be patented, and owned, but now by the company.
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The same situation also arises when a local has specific knowledge, and he will often
be in the position to pursue his career abroad if he has been able to acquire such
marketable knowledge on a previous project, and this is pone of the pitfalls for the
local company. There is a great incentive for local employees in companies working
with expats to learn as much as possible from the opportunity since in many cases,
such jobs are extremely rare. The opportunities that arise for both expat and local in
this context are not limited to financial and career, since there are many other ways in
which the social interaction can be useful for the participants in their development as
people, and with better understanding of others situations and mental environments.
8.1.3. Is it all a “Western” Plot?
There is another aspect to the ubiquitous western expat, and that is western policy.
In a great many instances over the last fifty years there has been a deliberate policy
in the US and to a lesser extent other “western” countries. This was the concept of
“Aid Projects” where the money to build a project would be loaned by western
financial institutions, like the World Bank for example or USAID, for a hydroelectric
project, oil refinery or petrochemical complex, but insist that western contractors and
suppliers fulfill the contracts. Often, the money never leaves the western country. In
the US, the aim of this was to keep countries in permanent debt, in order to maintain
hegemony over them, or so claims a self confessed “Economic Hit Man”, John
Perkins in his book. This is a pretty serious charge, but in the book there are many
cases, including Indonesia, Iran and Ecuador where this policy has been seen to
work, at least for some time. The main engine of the policy is economic growth,
indicated by an ever increasing GDP. According to Perkins, the economic forecasts
would be written in such a way as to maximize the project requirement, more
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electricity, greater refinery capacity and more petrochemical products for example. A
result of this would be to have the recipient country of the loan (always a loan) get
into greater debt. (Perkins, J. 2004)
This author is not convinced it was an orchestrated policy at the highest levels, but
certainly there seems to have been some collusion among the financial and
engineering contracting industries. Japan too has been following the same policy on
a number of projects throughout Asia.
It does however offer one explanation as to why the western expat is so ubiquitous.
8.1.4. Is Knowledge Cultural?
Egbu mentions that there are arguments that promote the view that knowledge is in
fact societal specific, and that some knowledge cannot exist outside of the context of
its native society. However he does not give this view much credence, implying this
is has “Marxist undertones”. In terms of the “hard” knowledge required in EPC
environments that would appear to be an error, after all, a stress calculation is the
same whether carried out in Beijing or in San Francisco, or one would hope. The
idea is not totally without merit however when it comes to organizing working
practices, because different cultures organize work very differently and have differing
priorities.
The cultural aspects of knowledge transfer and implementation should not be
ignored, and according to Egbu, support for Knowledge Management and Knowledge
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Retention should come from the top, with a proper and appropriate system of
rewards which is inclusive. Egbu concludes that:
“If the construction industry is to build core competencies, maintain capability and
benefit from innovation, it has to change from an adversarial and blame cultures to a
sharing culture.” (Egbu, C., 2004)
8.1.5. Can the expats be replaced?
It must surely cross the mind of every owner and financial officer that the expense of
employing expats must be minimized. On every project staffed partially by expats in
the developing world there comes a point where the local staff must take over. When
does that happen though, and could it happen sooner rather than later?
One report in the Jakarta Post on 10 May 2007 related how due to a change in
governmental regulations, the Indonesian Broadcast Advertising Workers Association
(APFII) stated that foreigners that are working in the advertising industry would be
replaced by the end of 2007. However, then the ministry stated that the foreign
workers would be able to work as long as the ration of foreigners to locals did not
exceed 1:3. The APFII while stating its support for the regulation stated it lacked
clarity, and anyway, foreigners were already prohibited from working in the local film
industry, which includes advertising. (Jakarta Post, 2007)
As this story indicates there is a certain amount of confusion surrounding the legal
status of foreigners working in Indonesia. The Indonesian industry in this case has a
large pool of talent available, but the advertising industry is a highly subjective one,
and if an advert is “wrongly” put together, will it cause any problems? It may in fact
offend sensibilities and cause a riot, and so there is validity in that cultural
appropriateness. However in an article on the 6 August 2007, the chief of PR for the
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Indonesian Nuclear Industry was explaining the development against the locals’
wishes, of the Cape Mulia nuclear facilities. In that article, he stated the construction
was going to be carried out by foreign firms in the main, thus much reducing
corruption and consequently increasing the level of safety. (Jakarta Post, 2007)
However in the email to the author he implied he was not so much worried about the
possibility of corruption leading to a lowering of the safety of the reactors, but that
point in to allay the fears of various groups, including the editor of the Jakarta Post.
Maybe the Jakarta Post editor has an idea of what his audience is going to find
disquieting, a lax safety culture in a corrupt environment in charge of a large nuclear
fission plant.
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9. Conclusions and Recommendations
Quality
• Ineffective controls
• Corruption preventing effective controls
• Probes in to failure after the fact
• Blame scapegoats not the systemic failures
• Let the end customer find the faults
• Oversensitive customers?
• New form of trade protectionism?
Implement and Maintain QC/QA
Meetings
• Too many
• Ineffective (not getting to the main point)
• Too formal
• No follow up
• Already a foregone conclusion
• Too many participants
• Assigning actions to people not in the meeting
Hold Real meetings
Documentation
• Not ready on time

• Faked up after the fact to look nice
• Changes not tracked or identified
• Lack of discipline on document control
Document Control to become institutionalized and part of the culture
Skills
• “Degreed” staff instead of experienced
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• Low experience leading to fundamental errors
• Educational attitude passive versus active
Rules
• Sticking to the rules

• Not making everything an exception
• Making the rules transparent
• Reducing bureaucracy
• Everybody is equal under the rules
10. Glossary
@@@@@@@@@@@@@@@@@@
APFII Indonesian Broadcast Advertising Workers Association
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11. Appendix 1 Expat Survey Questions
11.1. Communication
As an expat, there are countless ways in which you can be misunderstood, and
misunderstand others. These can be simple language problems, but even in an
environment where the people speak your language quite well, there are ample
cultural and behavioural factors which come into play and can bedevil your best
efforts at good communications.
Do you feel your effectiveness has been hindered by miscommunication?

Please select one answer.
11.2. Responsibility
When we are "responsible" for something we assume that we will be held to account
for the outcome of the activity, function or role. This means there will be
consequences as a result of our actions, either positive, or negative. Most cultures
agree in principle, but in some, the practical side can be a little different.
Do you feel that as an expatriate, the local personnel you interact with have the
same perceptions as you do about responsibility? Please select one answer.
11.3. Quality
People have different perceptions of quality. For some, it means producing the right
goods, with the right functionality, in the right place and at the right time. Others have
a different emphasis, for example in subjective criteria in a wine. However as a
definition of quality in the EPC context, it is often felt that the product must meet client
expectations, even if the client has not specified exactly what he wants or needs.
Quality also means the product or service must be free of deficiencies and error.
Assuming for the purposes of this question we are talking about fundamental
issues that affect safety or performance, what do you feel was the quality
achieved in your experience? You can give more than one answer.
11.4. Knowledge
We are used to the phrases "technology transfer" and "localization", and many think
that the expat is in the developing country to transfer his skills and to enable the local
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staff to continue the job after he has left. However, many of the local staff has equal
and higher levels of education than some of the expats.
Do you feel a knowledge gap exists between the knowledge required on the job
and that available in the staff, both local and expat? Choose as many answers
as you feel relevant.
11.5. Experience
Often the expat finds himself the oldest member of the team. The local staff around
him is usually much younger. The expat will be expected to impart some of his
experience to the local staff, and be something of a mentor. This is not always the
case though, and there is often experienced local staff in the team.
Expats are not hired unless they have experience. But given this obvious
requirement for the expat to be experienced, do you feel that the experienced
local staff in general has good relevant experience of the work being
undertaken? What is your experience of the outcomes, were the projects in
your experience successful? Were there some disasters? Please select all that
are applicable, and add observations if you like.
11.6. Commitment
As an expat you are expected to have the commitment to see the project through to
the end or at least until you can reasonably move on. But as an expat, you are not a
permanent resident so you may have, or be perceived by the locals as having, a
lower sense of commitment. What do you feel your commitment is, and further, what
is the level of commitment from the local staff?
Do locals have a lower sense of commitment? What do you feel your own
commitment is? Does the success of the project really matter to you? Select all
that apply.
11.7. Willingness and Motivation
The success of a project is in large part due to the enthusiasm and energy of the
staff. This is in turn dependant on the motivations and willingness of the people on
the project.
We are all motivated by our need to make a living. There are other motivators,
such as a feeling of worth, a sense of achievement and the fellowship of the
firm. How do you feel about motivation? Please select all that apply, and add
your own comment if you like.
11.8. Integrity
Many a project can succeed only because of the integrity of the people working on it.
Projects are successful when the people have the integrity to do their jobs right and
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care about what happens on the project. This is a delicate question, as it asks what is
your perception of the integrity of both local and expat staff in your experience.
Who do you think has the higher level of integrity? Please select all that apply,
and indicate if you think there is more to it than simple black and white
morality.
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12. Appendix 2 Local Survey Questions
12.1. Communication
When working with expat staff, there are countless ways in which you can be
misunderstood, and misunderstand them. These can be simple language problems,
but there are ample cultural and behavioural factors which can prevent good
communications.
Do you feel your effectiveness has been hindered by miscommunication?

Please select one answer.
12.2. Responsibility
When we are "responsible" for something we assume that we will be held to account
for the outcome of the activity, function or role. This means there will be
consequences as a result of our actions, either positive, or negative. Most cultures
agree in principle, but in some, the practical side can be a little different.
Do you feel that as local staff, the expat personnel you interact with have the
same perceptions as you do about responsibility? Please select one answer.
12.3. Quality
People have different perceptions of quality. For some, it means producing the right
goods, with the right functionality, in the right place and at the right time. Others have
a different emphasis, for example in subjective criteria in a wine. However as a
definition of quality in the EPC context, it is often felt that the product must meet client
expectations, even if the client has not specified exactly what he wants or needs.
Quality also means the product or service must be free of deficiencies and error.
Assuming for the purposes of this question we are talking about fundamental
issues that affect safety or performance, what do you feel was the quality
achieved in your experience? You can give more than one answer.
12.4. Knowledge
We are used to the phrases "technology transfer" and "localization", and many think
that the expat is in the developing country to transfer his skills and to enable the local
staff to continue the job after he has left. However, many of the local staff has equal
and higher levels of education than some of the expats.
Do you feel a knowledge gap exists between the knowledge required on the job
and that available in the staff, both local and expat? Choose as many answers
as you feel relevant.
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12.5. Experience
Working with expats, you will find most are older than local staff; however there is
often experienced local staff in the team. What do you feel about the relative
experience levels of local and expat staff?
Please select all responses that you think are appropriate.
12.6. Commitment
Is there a difference in the level of commitment between locals and expats in your
opinion?
Do people, both expat and local have commitment to meet client expectations?
Tick as many as applicable.
12.7. Willingness and Motivation
The success of a project is in large part due to the enthusiasm and energy of the
staff. This is in turn dependant on the motivations and willingness of the people on
the project.
We are all motivated by our need to make a living. There are other motivators,
such as a feeling of worth, a sense of achievement and the fellowship of the
firm. How do you feel about motivation? Please select all that apply, and add
your own comment if you like.
12.8. Integrity
Many a project can succeed only because of the integrity of the people working on it.
Projects are successful when the people have the integrity to do their jobs right and
care about what happens on the project. This is a delicate question, as it asks what is
your perception of the integrity of both local and expat staff in your experience.
Who do you think has the higher level of integrity? Please select all that apply,
and indicate if you think there is more to it than simple black and white
morality.
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13. Appendix 3
107
13.1. Survey results Expats
108
109
110
111
14. Appendix 4
14.1. Survey results Locals
112
113
114
115
116
117
15. Appendix 5
Supplemental responses from expats
15.1.1. Communication
Do you have any examples?
• The accent is one thing. The other thing is how one puts the question /
describes some thing to someone depending on the cultural attitudes of both
originator and receiver can put people off. (Personal experience applied to
India, Pakistan, Bangladesh, Thailand, Indonesia and Vietnam) Not realizing
that describing the task in a minimum of 3 different ways or no matter how
many times you ask "do you understand?", the person either starts the task in
the wrong way obviously not understanding the requirement or does a half
assed job of the task or in the best case completes the wrong task.
• In most projects the base language is English, however host governments
insist on local content, however the standard of English is not normally
sufficient for Technical discussions.
• When you agree that some essential activities will be completed before you
arrive on site, and you get no message indicating otherwise, you are surprised
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and annoyed to find out absolutely nothing is ready. More often than not you
start the job waiting for preparation activities to complete.
• Recipient of your request is likely to confirm knowledge/agreement as this is
what they believe you want to hear. This partly due to not speaking their native
language. in Pakistan- for example- there are many very competent English
language speakers and one experiences the above stated problem as it is too
easy to forget that "speaking' is not necessarily " understanding". The
above can result in difficulty when one visits Home Office and you are accused
of repeating yourself and communicating in an offensive manner. Written
word works better than oral word.
• In English we say no to a negative question. Asians say yes because they
agree with the negative question.
• Related to a court issue when I asked the our lawyers a specific question
about our corporate input, received no answer yet at court was faced with a
situation that should have been foreseen as it was well know to the lawyer.
• Quite often Indonesian people will appear to be in agreement with what you
have explained in depth, but the reality is that you need them to re-confirm
back to you to ensure that they have understood. There is a high likely hood
that they have not!
• Only yesterday I had asked one of my staff to go to a remote site and carefully
measure one part of a building so that we could fit our equipment around it. He
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came back with detailed measurements of everything in the building except
the one requested. Over the years, I've found that saying what you want 3
times in different ways, and getting the local staff member to repeat back what
you wanted will work to make sure that communication has been successful -
it didn't work in this case.
• The peoples answer always with yes, even if the question was not understood.
15.1.2. Responsibility
Have you any other points about responsibility?
• In most 3 world countries the local population shy away from responsibility as
this means accountability and they do not want the slightest chance of any
blame/stigma for any problems that may occur on a project - they do however
want the kudos that comes with managerial positions.
• (Indonesia) - I am always the one to ask to work late, or on Saturday, to
complete the work. It may be a matter of politeness, but I think not.
• Depends on seniority in company. often the higher you go the less the local
culture has an impact- or perhaps the understanding is better due to exposure
on an international basis and reflects the adoption of "western" approach to
business.
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• Most "Western" engineers are prepared to make decisions and take the
responsibility. Often not the case elsewhere
• Within both the Thai and Kenyan cultures there is little willingness to accept
responsibility as if the individual does and it goes wrong his continued
employment is at risk.
• Responsibility and ownership of problems is lacking quite often. Sometimes
responsibility means being able to 'think outside the box' and not having such
a blinkered approach. Expats, in general, seem more adept at this.
• It depends on the person - not only the local personnel, but the expat
concerned. I do think though that expats will tend to take responsibility more
seriously - part of the reason they have been sent around the world at great
cost is that they should have a history of achievements, and not letting anyone
down regularly. Some locals I have dealt with have had as high commitment
as me. Others just show up for work for the money.
• In many Asian cultures it is more important to say yes to a request, even if the
staff do not understand it or have no intention of doing it.
• At the beginning they confirm full responsibility but later on it turns into
misunderstanding.
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15.1.3. Quality
What does quality mean to you?
• no mistakes
• The problem is imposing a 1st world perception of quality on personnel who
have no concept of the link between quality, safety and reliability
• Meeting client and your expectations. Alignment is essential.
• in this context it is interpreted to mean:- a) technical compliance with project
specifications and procedures b) compliance with ISO 9001/14001/18000
etc.- specifically when 'assurance' is added to quality c) combination of
technical spec. and commercial attraction d) for certain countries- quality
means- lowest price with stated technical compliance irrespective of whether
"stated" means "actual"
• It seems to me QHSE has been expanded beyond its original role in order to
create an extended role for itself. I still cannot see the merit in business targets
as part of the QA audit process as these are what they are and not a quality
issue.
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• Quality means meeting the project specifications in design and construction
with minimum to no re-work. A quality company would recognise where there
are some deficiencies in the clients requirements and advise and implement
appropriately
• I was previously part of an organization providing similar services around the
world (23 countries). A number of aspects of service were measured
objectively in all countries. The services themselves being fundamentally the
same so should be comparable across countries/regions. With effective
leadership (Expat) the Asia region consistently topped all the other regions in
these objective measures (over 2 years). After leadership was transferred to a
local, the Asia region slipped behind Australia and Nth America. Generally
Asians are much better at following processes than Westerners. Where they
need help is in problem-solving and arguably drive/leadership. There are
exceptions to all of these of course.
• Quality means first understanding the requirements and deliver accordingly.
15.1.4. Knowledge
Other comments on the relative knowledge of locals and expats?
• Projects try to replace a 20 year experienced expat with a 5 year poorly
experienced local on two grounds cost and political pressure from the host
country - thus leading to poor quality and safety. Locals need experience.
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• I feel that usually the role of an expat is twofold; One is indeed the transfer (or
at least application) of specific knowledge. The other is to express clear
judgments, force decisions and clearly specify what actions to take, in an
environment where it is usually not done to talk straight.
• Expats are perceived to have "international" experience and thus the
opportunity to provide “added value" to projects. Technical knowledge is
assumed to be part of this "added value" in as much as it relates to potential
new methods/eqpt./services to be used or considered. Once expats cannot
provide "added value" then it is reasonable in this world of global education,
that they will not be required.
• Education does not equal knowledge and experience
• Depends upon the country and the Subject within the Project itself. In
Indonesia, the knowledge gap exists, first of all, at the Contractors and Sub-
Contractors Levels. This is the most dangerous gap.
• The technology gap is often made worse by cultural and language difficulties
so whilst a local engineer may know the answer he is inhibited by the thought
of losing face if he should get it wrong. This is self defeating and a massive
blow to an individuals self confidence.
• Many answers to this question. Quality of expats and locals can be
questionable. However Expats in general are recruited for their experience
124
and should in general fulfill the experience requirements. Locals are in general
several levels below Expat experience. This can cause conflict
• Everyone can learn and improve. In a fast growing region such as Asia,
changes are much faster, so those knowledge gaps may be greater and more
apparent. Everyone should share knowledge and experience if the
organization is to thrive.
• Similar education means what? They both went to University; The University in
Indonesia is nothing like that in the UK so comparative education is not really
comparative. And the work ethic is the West is much different to that in Asia
and Africa also. But that's a different can of worms altogether
• Knowledge is available, but only what was trained before. The gap comes if
the problem was not handled before as the locals diagnostic skills are weak.
15.1.5. Experience
Any other observations?
• Takes lots of time and hard work. Locals are less likely to consider outcome as
important.
• In general they certainly know what you are talking about. The experience they
are usually lacking is in taking decisions and bear the responsibility.
125
• the local culture tends to show respect for elder( and therefore deemed to be
more experienced) persons- especially if the employed position demonstrates
seniority.[this understanding may well change in the forthcoming generations]
however in certain disciplines e.g. civil engineering- the local is likely to be
more experienced in recognizing local design and use of authorities. This
should contribute positively to the possible success of the project.
• Big Problem in Indonesia: Contractors Local Staff. If the Contractor's Staff
were good, the Project could be successful. The Owner’s Staff level of
expertise is of less importance and is not determinant in the success of the
Project. Maintenance Contracts can follow and the Owner’s staff can get, little
by little, a good expertise with time. NOTA: In India, staff was mostly very
knowledgeable.
• Most of the negative examples come from sub contractor quality issues. In
general these are eventually overcome but not with out cost and schedule
impacts. In general the Expat does have more experience in the Far East
even in relating to the more established clients. In fact I have experienced
younger Engineers being in transient to new methods and vice-versa Expats
being out of touch with new ideas.
• As long as the team is positive and not promoting a blame culture, they will
improve. Also not sure I agree that the expat is the oldest team member.
Asians do tend to respect the opinions of the older/senior group members, but
being a younger expat, different race & experience has not handicapped me in
leading teams.
126
• I am a young expat and some of the locals I work with are fantastic. If all were
like the some, there would be no need for me to be here.
• Sometime difficult for locals to apply their experience to new requirements
15.1.6. Commitment
Other points on commitment?
• Locals tend to be 'fireproof' and this have a lesser commitment to the project -
for the contract hire expat there are several things that will command
commitment, a) Salary b) Living conditions
• Locals are not as committed as most expats.
• There is no essential difference between an expat leaving the project after
completion, and a supplier supplying some installation. Both should have the
intention of providing the agreed quality of work.
• It is too easy to generalise. where the country has limited expats- e.g. middle
east/gulf then the situation appears to be different (due to the different cultures
of the "expats"- say- USA; Europe; Indian subcontinent; Philippines) when
compared with countries that have a large resident local work force. In the
127
latter the locals tend to follow similar attitudes to locals in most expat
countries- i.e. commitment but will (easily) move on to better personal
opportunities. Generally expats tend to have commitment and this is a) initially
based on salary considerations- a major reason for many working overseas.
And then b) professional/personal desire to have project and hence personal
success. As per normal you cannot generalize about everyone. Not everyone
is the same
• Personally the success of the project matters to me. Commitment also
depends on personnel situations particularly with contract staff looking for
security of work. This affects locals and Expats alike, particularly as contracts
are drawing to the end. A lot of clients are unaware that the make up of Expat
project teams may not be primarily staff personnel. Cant speak for how the
locals perceive Expat commitment
• It really depends on the person (both local and expat). I feel the bigger factor
about commitment is organization size. Smaller organizations have more
strongly individually committed people. Larger organizations have good
people, but as they don't see the whole project and long-term consequences
are less likely to be as committed.
• In international consulting work often there is an external Due Diligence
process, so the commitment is usually there
• I believe this is too General a question. Some are good and some are bad like
everywhere, I believe Expats have a higher level of commitment due the fact if
128
they didn't perform to a high standard they would no longer have a job. Locals
rely on Unions and the like so they don’t have to try so hard.
15.1.7. Motivation
My biggest motivator is...
• An Expat contract engineer is not working to further his way up the corporate
ladder - if so he would be working for a Major company.
• This question is responded to on the basis of being close to retirement. One’s
age will have an impact on one's response. A sense of achievement and the
opportunity to provide the benefit of experience to both the success of a
project and to team members for their future consideration.
• Money a motivator but also a desire to "do something different".
• Having an in depth knowledge of the project and being able to direct critical
stages is a motivator. Having recognition of your abilities and obviously the
money.
• Money is important, but making a difference and achieving goals (along with
peer recognition that comes with this) is what satisfies me the most.
• completing projects on time and budget, with strong efforts to maintain the
quality of the output
129
15.1.8. Integrity
More complex than that...
• Third world countries do not have the same bench marks for integrity as first
world countries
• I find that usually expats have a slightly higher level of integrity. But they
usually also get paid 20 to 50 times the salary of the people they work with. So
I find it hard to judge.
• To generalize would not be correct. Integrity tends to be dictated by attitude of
individuals, whether expat or local, and impact due to influence of peers,
superiors and whether the work/project is successful. Expats in theory are
"visitors” and thus one would expect their approach to be short term- my
experience indicates that when dealing with engineers this is not the case.
Locals (engineers) in my experience, tend to think long term career mindset
and not be as concerned about the consequences of not carrying out "current"
work correctly.
• Many expats and locals exhibit high levels of commitment until they get a
better of offer then commitment goes by the board and they move on usually
with the project unfinished.
130
• Really does depend on the people concerned. Also the culture of the country
and company will influence. Expats would tend to be higher integrity than
locals, but not all cases.
• To achieve a successful outcome ultimately relies on high levels of both Expat
and Local integrity
131
16. Appendix 6
Supplemental responses from locals
16.1.1. Communication
Do you have any examples?
• Some expats staff feel that all Indonesia employees have been fluent in
English so that when he/she speaks, he/she speaks so fast and so freely with
some "slang". Some expats accents are very hard to understand.
• Sometimes it's hard to counter any argument given by my expat staff, just
because of a very simple problem: language
• Asian culture tends to be low key and expat (USA) expect you to speak out.
• They don't like do tell that don't have a knowledge.
16.1.2. Responsibility
Yes- here's my take on responsibility
• My Responsibility is as per job Description and can be a part as team work.
132
• The responsibility is our way to achieve our target
• All the personnel should be on procedure
• Because not clear introducing by the high management. As expat personnel,
you should give responsibility to local staff and give a chance to local staff to
prevent their responsibility and their capability
• state of a mind that we have to do activity by rule we agreed
16.1.3. Quality
What does quality mean to you?
• Quality is a product which is yielding as according to standard production.
• In services, quality means that we can accomplish or translate what client
wants and put it in very effective way. it means producing the right goods, with
the right functionality, in the right place and at the right time, without error and
deficiencies
• Quality is very important and should be reference not only functionality
• good performance, high capability and satisfy
133
• Quality mean the high product result for the quality not excuse for everything
• Deliver the goods as they are specified, even slightly better. But sometimes it
depends strongly on the owner how much they concern about the quality.
Then different projects also have different standard or preferences of quality. It
will be different when you build or design refineries compare to Crude Palm Oil
Plants.
• That the plant is built to specifications and meets the performance guarantee
with the client perception that he got what he wanted and was listened to.
• The realized quality has to guarantee that the investment (plant) will not get
any damage and that the plant running without any danger for the people and
that the company reputation gets not any problems.
• the condition that it is achieved anything in requirement or nearest
16.1.4. Knowledge
Other comments on the relative knowledge of locals and expats?
• For me, both locals and expats should be working together without comparing
the knowledge they have. In projects, we are working to achieve the project
goal(s) with best performance and achievement.
134
• Mostly in product knowledge, the expats are more knowledgeable because of
the experiences using the products. So the differences in knowledge mostly
because the experiences. But if the locals and expats have the same
experience, both are the same. Level of education has never been an issue.
• Both local and expat have their own experiences. Right man on the right
place. Each person has their own capability base on their experiences.
• Basic knowledge of the local staff is same with expats, but local staff has less
experience around the world and slightly communication and understanding
with international language (English)
• The expats were more independently, and the way of think is very practice.
• I think the knowledge between local and expat is not really different, but the
maintain make different.
• Sometimes the local staff better than expat
• Not much gaps actually, it is only the matter of confidence of users
• It can be an issue, but is an individual case by case basis.
• The management gives the wrong job to the staff sometimes and not think to
staff possibility.
135
16.1.5. Experience
Any other observations?
• Some of technology comes from western, so the expert more experiences in
some area of job(s), local staff also has an experiences to be a superior of
expat staff. It means that the local staff should share his experience with the
expat staff.
• Both expat and local staff have their own culture and experience. expat staff
older because they are more mature and detail in analyze the system
• It is not comparable. Younger maybe means more energy, faster. Older may
not necessary means more experience in a particular field. Example the older
expatriate may have strong experience in the onshore projects but not the
offshore
• In some areas, local staff is more experienced than an expat staff, vice versa.
Age is not the matter.
16.1.6. Commitment
Other points on commitment
136
• Some locals lack of commitment because of their salary much lower than
expat. With the same experience and knowledge, the expats salaries can 5 to
10 times the locals. So the local mostly only commit only to the client not the
company that hires them. The one that I see, most of the expats commit only
to the company that hires them not to the client of the company.
• Because of differences of culture and behavior, most expats they have a good
commitment.
16.1.7. Motivation
My biggest motivator is...
• Much experience gaining the since is the way to get much money
• Although money is not a biggest motivator for me but this will be a starting
point to motivate someone to do the job. If someone get less payment from the
other but same tasks and responsibilities, I think, this will make a barrier to the
role of each other.
• All of the above.
• To get much experiences and the new knowledge.
• I will show to everybody that I can do my job responsibility as well.
137
• any other challenge in the future
• The opportunity to learn and share. Recognition is given where is due
• That the Project manager can give the whole team the feeling that is really
team and every one is an important team member.
• Money and big challenge will be big motivator
16.1.8. Integrity
More complex than that
• To be honest, generally speaking said that the expats who working in
Indonesia have a higher level of integrity due to the difference of payment and
allowance between locals and expats.
• My comment same as the previous question about the commitment.
• finally if there are some disputes regarding the requirements, expat back to
contract and let the client or local staff decide, but sometimes expat fight with
contractor (not local staff) because expat more understand and know the
problem. But expat always keep and maintain integrity to get good track record
138
• All the people (local & expat)must have in one idea for the successfully project
until the end of project
• It does depend on people. We can't generalize integrity of someone based on
local or expat status
• Integrity is depends on the person, not from their nationality (whether he is an
expat or a local worker). In some ways, working with people (local or expats)
with the same level of integrity can result good quality project.
139
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144

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A DISSERTATION

Achieving EPC Quality in a Developing Country

Submitted to the University of Liverpool

In partial fulfillment of the requirements for the degree of

MASTER OF BUSINESS ADMINISTRATION

Student Name: David Tudor Evans

Student Number: 10319032

Programme Manager: Heather Tucker

Dissertation Advisor: Dariusz Jemielniak

Achieving EPC Quality in a Developing Country

David Tudor Evans

acceptable standards, and as such is fully adequate in scope and quality. It is

of Master of Business Administration.

David Tudor Evans

Achieving EPC Quality in a Developing Country

David Tudor Evans

Engineering, Procurement and Construction (EPC) industry operating in developing

Eastern countries, and currently resides in Indonesia.

There is a perception that a problem exists in achieving quality in developing

expensive expatriate personnel to achieve the desired results.

This dissertation examines the hypothesis:

“Western Expats are required in an EPC project in a developing country to achieve a

Western level of quality”.

The conclusions reached by the dissertation include:

are far fewer problems in these areas than expats do.

complex of plants, if western investment is involved there will almost

inevitably be an expatriate presence in the management of the project.

equipment makes it inevitable that there will be some western involvement in

even the most local personnel intense projects.

• If there can be said to be a deficit in some aspects of developing countries

engineering effectiveness, this is due to a cultural bias away from individual

decision making, a less rigorous approach to time and less transparency in

projects in the developing world.

If the project has unusual requirements compared to a standard plant, then

more expats would be required.

• Quality needs to be continually, diligently and stringently monitored if the

benefits a properly implemented quality management program can deliver,

including profitability for the company, are to be realized.

• There should be greater involvement in decision making processes for local

become more intense and effective.

in the developing world is to aspire to the same standards as the developed

The following people gave invaluable input as respondents to the surveys:

John Stafford, Joko Subekti, Kamal Senasinghe, Karl-Hermann Mosner, Kundhi

Harjanto, Kusnu Hariyanto, Lung Mulia, Marcel Payens, Mark Barnbrook,

Lim, Steve Krupa, Yudith, Zia ul Haq.

Thank you all very much for taking part.

1.1. What is the Western Expat? .......................................................................... 1

1.1.1. A long tradition ........................................................................................ 1

1.1.2. Characteristics of the expat .................................................................... 2

1.1.3. Where are the expats?............................................................................ 3

1.2.2. Pertamina Indonesia ............................................................................... 5

1.2.3. Venezuela and Bolivia ............................................................................ 6

1.3. How is a “developing country” defined?......................................................... 8

1.4. What is the EPC Industry? ............................................................................ 9

2.1. Defining Quality in an EPC Environment ..................................................... 11

2.2. Issues that illustrate the problem ................................................................. 12

2.3. Total Quality Management Implementation ................................................. 15

3.1. Difficulties with the Search .......................................................................... 19

3.2. EPC Literature in Developing Countries ...................................................... 20

4. METHODOLOGY AND DATA COLLECTION .................................................. 23

4.1. Dual Surveys ............................................................................................... 23

4.2. Interviews .................................................................................................... 24

4.3. Correspondence .......................................................................................... 24