Korea’s overseas construction orders exceed USD 500 billion
Jul 10, 2012
In 1965, Hyundai Engineering & Construction won an order for the Pattani-Narathiwat Highway project in Thailand; it was the moment that Korea took its very first step into overseas construction markets. Almost half a century later, the cumulative amount of signed overseas construction contracts in Korea has exceeded USD 500 billion. On June 14, Hanwha Engineering & Construction signed a contract worth USD 7.8 billion on a new town project with Iraq, bringing Korea’s total cumulative overseas construction contracts up to a value of USD 501.3 billion, announced the Ministry of Land, Transport and Maritime Affairs on June 13.
Korea’s overseas construction industry has rapidly grown in the last five years; since 2007, Korea has won an especially great deal of overseas construction orders worth approximately USD 300 billion.
"Although the total value of orders for domestic construction has dropped due to the downturn of the construction business, orders for overseas construction projects have continually increased," an official from the ministry said "The ratio of the amount of orders for overseas construction against the amount of orders for domestic construction in 2006 was 17% yet the ratio increased up to 63% in 2011." In addition, during the same period, the percentage of the amount of orders for overseas construction among Korea’s gross national income (GNI) also increased from 2% to 5.2% while orders for domestic construction dropped.
Looking back on the accumulative records of overseas constructions Korea has conducted in the last 47 years, orders from the Middle East take the largest percentage followed by Asia (30%), Central and South America (3%), and Africa (3%). The total cumulative orders for projects in the Middle East is USD 301.9 billion, which takes 60% of Korea’s cumulative overseas construction orders. Korea’s construction projects in the Middle East especially played a huge role from 1960s to 1970s when Korea suffered from the aftermath of the Korean War.
By construction types, plant construction orders of USD 268.3 billion have been the largest part which is 54% of Korea’s whole overseas construction. Architecture projects of USD 120.6 billion and civil engineering work of USD 92.9 billion followed. Saudi Arabia has ordered the largest number of construction projects from Korea, with 8,638 projects valued at USD 50.1 trillion.
"If we keep rapidly growing, Korea will become one of the five powerhouses in the global construction industry with annual order of USD 100 billion in two years," President Lee Myung-bak said during a ceremony of the 2012 Korea Construction Day on July 2. "The government will try harder to foster professional human resources in the field of construction, expand financial support for companies’ advancement into overseas market, and spur the development of diplomatic ties with other countries."
Korea’s overseas construction is divided into three periods. From 1975 to 1983, it is called the first Middle East boom. Due to high oil prices and inflow of large amounts of foreign money, the demand for infrastructure in oil-producing countries rapidly increased; Korea won construction project orders worth USD 10 billon for three consecutive years from 1981. Korea’s first construction in the Middle East, Samwhan Corporation’s Al Ula- Khaybar Highway Project in Saudi Arabia, and Hyundai Engineering & Construction’s construction of Jubail Industrial Harbor in Saudi Arabia are representative projects that were conducted during the first Middle East boom.
From 1993 to 1997, Korea made a new leap forward to the Asian market. It was the period when Korea’s overseas construction including plants greatly increased thanks to the recovered Asian economy. It was also the period that investment & development projects had become popular.
The period from 2007 to the present is called the second Middle East boom. The number of orders for plant constructions in the Middle East countries has increased thanks to high oil prices, and development and investment for infrastructures in new markets such as Asian and African countries has rapidly expanded. In addition, Korea’s small and medium-sized enterprises have rapidly advanced into overseas construction market because of the domestic economic contraction.
“When I visited the Middle East countries in February, leaders of the countries highly praised the construction capacities and sincere workers of Korea,” President Lee said. “They asked Korean enterprises to participate in not only infrastructure projects such as housing and bridges but also welfare facilities such as medical institutes which actually felt like the second Middle East boom.”
In the last 47 years, Korean overseas construction projects have achieved several world records. The Libya waterway construction project conducted by Donga Construction from 1984 to 2003 is recorded as the world’s largest construction project, employing approximately 10 million workers using 5.5 million pieces of construction equipment.
The 828-meter Burj Khalifa in the UAE, constructed by Samsung C&T Corporation, is recorded as the world’s tallest building. Taking almost 47 months to complete, the building was finished in October 2009. The Marina Bay Sands Hotel in Singapore, constructed by SsangYong E&C, is known for its construction challenges, as it has an inclination of 55 degrees, which is ten times greater than that of the Leaning Tower of Pisa.
Meanwhile, Korea’s small and medium-sized enterprises have accumulated orders for overseas construction worth a total of USD 55.9 billion. A total of 996 companies have advanced into 123 countries regarding overseas construction in the last 48 years. Compared to other industries such as shipbuilding, semiconductors, or automobiles, Korea's construction exports of small and medium construction companies have been greater and recognized as a driving force of Korea’s growth.
Aiming to become one of the five powerhouses in the overseas construction industry by 2014, the Ministry of Land, Transport and Maritime Affairs will reinforce support and policies. It is planning to expand the number of professional workers it fosters from 2,500 in 2011 to 3,500 in 2012 and allocate 150 billion won of funds for the water industry to support companies advancing into developing countries, continued from the formation of a global infrastructure fund of 400 billion won in 2010. In addition, 36.7 billion won is slated to be invested in the R&D to secure original technology of plant and localize core technology.
As of June 2012, Korea’s orders obtained for overseas constructions for 2012 exceeded USD 32.1 billion. For the month of June alone, Korea won overseas construction projects of USD 19.7 billion.
By Jessica Seoyoung Choi
Korea.net Staff Writer
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