The world held its breath in 2002. Few had recovered from the year-earlier shock of the terrorist destruction of New York City’s World Trade Center complex. In addition, many were worrying about whether coalition military action in Afghanistan would escalate attacks on global political and economic targets. The uneasiness only grew by the end of the year, when the U.S. began ramping up for war in Iraq. Growing turmoil, heightened by the mysterious outbreak of the disease SARS that threatened to cut off key Pacific Rim commercial centers, caused a major halt in construction programs as the world watched and waited.

Still, design firms managed to find work around the world. ENR’s Top 200 International Design Firms generated $18.9 billion in revenue from projects outside their home countries in 2002, up 7.4% from 2001’s figure of $17.8 billion. But doing so proved costly. Of 172 firms providing profit-loss figures for 2002, 32 reported a loss in the international market. That compares to only 12 of 173 reporting in 2001.

Global angst from events in the Middle East and the developing SARS crisis rattled the design industry last year. Nearly eight months into 2003, "things are returning very much to normal," says Kevin Stovell, international managing director of Mott MacDonald Group. "The real question is how much lasting economic damage has been done."

The SARS outbreak, which began in late 2002, caused varying impacts for firms with major Far East operations. Arup Group Ltd. had to quarantine staff traveling between Beijing and Hong Kong. W.S. Atkins plc temporarily closed its Beijing office, sending around 100 staff home. "It did push people to use video conferencing," says group Managing Director Norman Schunter. "That could be a long-term benefit."

The threat of war in Iraq in 2002, culminating in the March 2003 incursion there, scarcely impaired design firms’ operations, even in the region. Now, with U.S.-funded reconstruction plans, many engineering companies are being attracted there for the first time. European firms–many with long track records in Iraq–are keen to rekindle pre-1990 business.

Having worked on large water plants in and around Baghdad, Atkins hopes to return. "Eventually, there will be a reconstruction phase, probably using money as it starts to come from oil. That will be of great interest to us," says Schunter. Mott MacDonald is "definitely interested...as a long-term prospect," adds Stovell.

COWI A/S also hopes for reconstruction work. "But I have the expectation it will take some time," says CEO Klaus Ostenfeld. Arup Group is keeping away "until the security situation stabilizes," says Chairman Bob Emmerson.

While "there’s more uncertainty" in the global market, Stovell says Mott MacDonald is "doing pretty well." With half its business abroad, the firm’s total payroll has risen above 8,000 through acquisition.

For Germany’s Lahmeyer International, "business is more difficult...because of uncertainty in most markets and pressure on the funding agencies," says Rainer Bothe, chief financial officer. But he points to positive signs. Political pressure is weakening against new large dams, an important business line, and World Bank support shows signs of revival after dropping in recent years. "The question is, how soon?" Bothe wonders.

To compensate, Lahmeyer has turned to the water sector, doubling its market share in recent years, says Bothe. The firm is targeting privatized markets, as well as renewable energy and distribution. COWI also is focusing on specific market sectors, such as bridge design. One new project is a $900-million, bridge-tunnel link to Geoje Island, South Korea.

Other firms are making even bigger changes in their business plan. After two troubled years, Atkins is on the mend, says Schunter. One of Europe’s largest design firms with 15,000 employees, it diversified far from engineering but is now returning to its roots. Keith Clarke, a senior director of contractor Skanska AB, Stockholm, this fall will join Atkins as CEO. "We wanted somebody who understood our industry," says Schunter.

China continues to stand out as an enticing opportunity. The market "continues to be of great interest," says Stovell, whose firm has a wholly owned subsidiary in Beijing with about 60 staffers. Having done substantial work for foreign in vestors, "We are taking more of an interest in domestically financed work," he says.

Arup has major building design work in China and, with 150 employees there, is well placed for Olympics work. Atkins, not far behind with a 100-person work force there, expects substantial growth this year, says Schunter. The firm is targeting industrial work around Shanghai and the Pearl River. But Lahmeyer is keeping out. Says Bothe: "Either you go in with a big force or you leave it."

In Hong Kong, the government "is keeping the economy going through investment in infrastructure," says Arup’s Emmerson. "We will have something like 500 people on sites this year." The region is also still "very important" to Mott MacDonald. But "it’s a very competitive market [and] there has been less new work around in the last few years," Stovell says.

"The rest of the Asian market is following development aid," says Ostenfeld. He admits that apart from specialized areas of engineering, "we aren’t making any impact on the Asian market." Lahmeyer’s Bothe is surprised by the persistence of the region’s recession. "We thought many countries had a lot of natural resources, which should [have led] to more speedy recovery," he says.

In India, firms are finding enough work to keep local offices going, but the nature of the market keeps most selective about prospects. Ostenfeld notes that, with corruption a fact of life in India, "if we can’t do business in a clean way, then we are not going for that market."

Mott MacDonald acquired a Mumbai-based design firm a few years ago and now has about 1,000 employees in offices across India. While the unit primarily serves the local market, "we are looking to use the expertise to supplement our work in other places," including the U.K., he adds. That also could include the Middle East. With strong oil prices, the region’s oil and gas sector is keeping the company’s 600 local staffers there busy, mainly in Oman, Abu Dhabi and Dubai. "We see the Middle East continuing to be a very important market for us," says Stovell.

The Emirates remain strong for Atkins. "The Dubai office is doing a lot of high-rise building. Getting staff is a problem," says Schunter. Lahmeyer sees opportunities in non-oil countries, such as Syria, Jordan and Lebanon, which are attracting more foreign aid, says Bothe.

North Africa provides Paris-based Scetauroute S.A. with stable transportation work from the firm’s long-set operations in Morocco and Algeria, says Managing Director Rémi Cunin. In West Africa, powerplant renewal is Lahmeyer’s main draw. The firm is chasing hydro power jobs in Central Africa, but finds the continent’s southern tier still too competitive, says Bothe. COWI’s Africa operations may figure more prominently in the firm’s future because Denmark’s decisions on awarding aid "are being made locally and not in Copenhagen," says Ostenfeld.

In the European Union, U.K. infrastructure work is keeping Arup busy and a recently announced $11.5-billion highway program will provide a boost. Atkins has about 25 people in Greece working on building design. But after next year’s Olympic games, "there’s going to be a big question mark about what Greece holds," says Schunter. Ireland, another former hot spot, "has turned down a lot in the last six months," he adds.

Rail and road work in France is proving stable and the market in former Communist Europe "is taking off," says Cunin. Atkins also is looking at Eastern European countries about to join the EU, which are getting increasing aid from Brussels. "We focus on the new countries which will be in the European Union in 2004–mainly Poland," Schunter says. In Poland, the firm is doing early design for rehabilitation of the 70-km Sadova-Suceava highway. But resource-constrained Scetauroute and Atkins will, as Schunter says, "follow the money."

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