There are major opportunities in China for Irish companies hoping to expand, as PM Group has discovered

IN AN elegant and ancient Chinese city west of Shanghai, there are few signs of the recession that is plaguing the world. Here, engineers from Ireland’s PM Group have just installed huge dryers on a plant that will become one of the biggest factories for making baby milk formula in the world, and they are hard-pressed to find evidence of an economic slowdown.

The firm, which has 1,800 employees working on construction projects and consultancy around the world, has significant operations across Asia. Set up in 1973, the Dublin and Cork-based company’s portfolio of services ranges from small consultancy studies to large-scale, complex capital projects for industrial clients, and also infrastructure projects such as Dublin airport and Aviva Stadium (formerly Lansdowne Road).

It is busy in Asia too, with projects in Singapore, India and Philippines for clients such as Wyeth, Abbott and Intas Pharmaceuticals. In China, PM is working on two projects for Novartis, one project being an API facility in Changshu and a separate project in Shanghai.

China’s economy is still growing strongly, despite the downturn, and is set to notch up 8 per cent GDP growth this year, the kind of growth rates that most major economies would die for now.

With this kind of growth on offer, China still offers a major opportunity for Irish companies trying to expand abroad.

The property market remains buoyant, especially in second-tier cities such as Suzhou. According to China customs statistics, bilateral trade volume reached €4.96 billion in 2008, a year-on-year increase of 11.1 per cent.

Since last year, PM Group has collaborated with Germany’s M+W Zander to build a $280 million nutritional facility in Suzhou for Wyeth.

The plant is located in Suzhou Industrial Park, not far from Glanbia’s food ingredient facility, which opened a couple of years ago but is dwarfed by the Wyeth plant.

The Wyeth plant represents an investment of 2 billion yuan (€207 million) and will have an initial capacity of 40 million kilogrammes a year. It will employ 500 people when fully operational late next year, and will primarily supply the rapidly expanding China market for baby milk powder.

The plant involves cutting-edge nutritional manufacturing technology, with fully automated production lines, amenities, support buildings, laboratories and administration covering a gross floor area of 60,000 square metres.

Baby milk powder is a sensitive subject in China. In September last year, milk products contaminated with the industrial chemical melamine were blamed for sickening tens of thousands of children and killing four infants. It also means, however, there is a great market for safe milk powder.

“Wyeth’s product is pretty copper-bottomed given what’s happened in the last year,” said Charlie Hadden from Enniskerry.

The paramount objective of the plant is to minimise the potential for microbial or other forms of contamination. This means the plant involves a lot of automated processes, from manufacturing to warehousing to materials control, and it includes testing facilities.

PM’s international spread has softened the impact of the recession, although they are still a minor player in the market in China. “We have a relatively small market share in the whole region but that helps in that we can grow even in a static market,” said Hadden.

“This is a greenfield facility making nutritional formula. It’s good to be on a greenfield project of a good size and one that is state of the art. The plant is commissioning this year and then gradually handing over to production,” said Hadden.

“It’s difficult to gauge the slowdown here. In the train stations you can see the labourers are on the move, and the shops that serve westerners are doing discounts. But it’s not that visible to me,” said Hadden.

PM Group has built up a lot of world-class expertise in specialised areas such as pharmaceutical technology and medical devices over the past 20 years based on consistent significant investment into Ireland and the UK. Its challenge is to sell and make use of this knowledge in new markets.

Declan Sullivan from Adrigole on the Beara peninsula in west Cork is working in engineering coordination, a sizeable task given the fact there are 1,500 people working on the site.

“Every project has its challenges, but here the language has been a difference, dealing with engineers. There is a feeling that this is the way things are done and that’s how we do it. But I have some excellent engineers here and I would work with them anywhere in the world,” said Sullivan.

Sullivan also found dealing with the heat difficult, and adjusting to the very different lifestyle, although he said that his involvement with the Shanghai GAA has been a great boon.

Derek Swan has been in China for nearly six years, and has lived all over the country – Harbin, Dalian, Beijing, Shanghai and now Suzhou.

“My background is in building services, and I’m involved in so many aspects, including electrical and mechanical, getting involved on the process side.

‘‘A challenge has been getting my head around the size of the project. It’s huge and it’s a great opportunity to get involved in something so big,” said Swan, from Greystones.

Suzhou itself is a remarkable place. Marco Polo came through Soochow in the 13th century and was very much taken by what was then one of the richest cities in Kublai Kahn’s empire.

He described this 2,500-year-old city in Jiangsu province as “very great and noble”, full of silks and other treasures.

“The people are subjects of the Great Khan, and have paper money. They possess silk in great quantities, from which they make gold brocade and other stuffs, and they live by their manufactures and trade,” he wrote.

It’s still a strong trading city. On the 90km drive from Shanghai to what these days is known as Suzhou you can see evidence of the huge changes being wrought in the country.

The roads are lined with factories, and the city has been canny at luring foreign investors from the higher end of the value chain – biotech firms, IT companies and many big Western brands, such as Wyeth and indeed Glanbia.

Last month, PM Group announced it has signed three contracts worth €250 million in the pharmaceutical sector in Asia. The projects are in Singapore and India, plus another collaboration with M+W Zander on an RD facility in China.