USD 37.5bn won as contracts in the first half of 2014, the highest amount ever for a first half

- Increased year-on-year by 21.5%, government determined to put all efforts to reach its USD 70bn goal -

□ The Ministry of Land, Infrastructure and Transport of the Republic of Korea (Minister: H.E. Mr. Suh Seoung-hwan) announced that it will redouble its efforts to win overseas construction contracts worth USD 70 billion by this year, saying that in the first half, the contracts rewarded to Korean builders already stood at USD 37.5 billion.

ㅇ The USD 37.5 billion is a 21.5% increase year-on-year, and it is the highest amount ever, even exceeding the record set in the first half of 2010 (USD 36.4 billion) that had been possible thanks to winning of the UAE nuclear plant contract (USD 18.6 billion). Aided by that plant contract, the year 2010 still remains the only year during which the goal of reaching USD 70 billion within a year was met.

* (January) 3.7 bn → (February) 16bn → (March) 17.6 bn → (April) 27.9bn → (May) 31.6bn → (June) 37.5bn

** The accumulated contracting amount for the past five years (USD 13.1 billion in 2009, USD 36.4 billion in 2010, USD 25.3 billion in 2011, USD 32.1 billion in 2012, USD 30.9 billion in 2013)

ㅇ One of the notable achievements in the 2014 first half is the fact that in such countries as Kuwait, Algeria, and Iraq, large-scale projects were won by Korean builders in consortia with foreign enterprises.

- In particular, it can be said that a precious accomplishment was made by diversifying the target markets for Korean builders, since contracts for large-scale projects were won in Latin American countries as well, including in Venezuela.

※ Major consortium projects in the 2014 first half

- Kuwait, clean fuel three packages, USD 7.15 billion (GS E&C+ SK E&C+ Samsung ENG, Daewoo E&C + Hyundai Heavy Industries)

- Iraq, Karbala oil refinery, USD 6 billion (Hyundai E&C + GS E&C + SK E&C + Hyundai ENG)

- Venezuela, Puerto La Cruz oil refinery, USD 4.3 billion (Hyundai E&C + Hyundai ENG)

- Algeria, thermoelectric power plant, USD 3.4 billion (Hyundai E&C + Hyundai ENG (2 projects), GS E&C + Daelim Industrial (1 project), Samsung C&T (2 projects))

□ (By region) The Middle East accounts for 66% with USD 24.7 billion and Asia took up 17% (USD 6.2 billion), which is a slightly weaker figure compared to its track record, but there was a surge of contracts0 won in Latin America in such countries as Chile and Venezuela, suggesting hope that the market is being diversified.

* The Middle East: 66% (USD 24.7 billion), Asia: 17% (USD 6.2 billion), Latin America: 15% (5.5 billion)

ㅇ In the Middle East, Korea's perennial number one overseas contracting market, the year-on-year increase was by 131% compared to last year's USD 10.7 billion), aided by large-scale plant contracts, such as the Kuwaiti clean fuel oil refinery project (USD 7.2 billion) and the Iraqi Karbala oil refinery project (USD 6 billion).

ㅇ From the Asian region, Korean builders won USD 1.5 billion worth of coal thermoelectric power plant contract in Vietnam, but compared to the year before, contracts for large-scale plants and building projects were decreased, leading to only 49% of the last year's contracting amount.

ㅇ As a result of Korean firms' tireless efforts to make inroads into the Latin American market in such areas as plant and civil engineering,

- A strong foundation for market penetration in Latin America in the future was laid with projects like the Puerto La Cruz oil refinery facilities upgrading project (USD 4.3 billion, Hyundai E&C+ Hyundai ENG).

(Unit: USD 100 million, %)

□ (By construction type) The majority of the contracts went to plant constructions, taking up 85.2% with USD 31.9 billion, as a series of large-scale oil refinery and plant constructions were planned to take place.

* Plant: USD 31.9 billion (85.2%), civil engineering: USD 3 billion (7.9%), construction: USD 1.6 billion (4.2%)

ㅇ As the plant contracts keep get issued in Middle Eastern countries, Korean builders that possess world-class EPC competitiveness are performing well at securing contracts in this field.

ㅇ In the second half of this year, better prospects are being expected from high value-added building construction, LNG terminals, and reclamation construction projects in the civil engineering and construction fields that had shown sluggish growth in the first half.

(Unit: USD 100 million, %)

□ (Prospects for the second half of 2014) MOLIT announced that it expects to reach its USD 70 billion goal within this year, given that already more than half of its objective has been attained in the first half.

ㅇ Based on an analysis of the overseas projects' current status pursued by Korean companies for winning of their contracts, there are about USD 12 billion worth of projects set to be secured. Also if added with other tenders that are being pursued by Korean firms for tender entering or preparation, the total amount goes up to about USD 110 billion, signaling hope that in the second half of this year, reaching the USD 32.5 billion mark would not be a major hurdle.

ㅇ However, there are concerns that if the Iraqi civil war is prolonged and its ripple effects get spread to the rest of the Arab world, all the projects in the Middle East might be in jeopardy of being delayed. If this happens, there is potential that Korean firms' prospective contracting amount might have to be adjusted to the downward.

□ (Overseas contract winning support plans) MOLIT has dispatched governmental envoys at a high level to help Korean firms win contracts overseas in the first half this year, first to Kuwait and Algeria (in January, headed by Vice Minister), and Malaysia and Myanmar (in March, headed by Minister), and then to Mexico and Ecuador (in March, headed by Deputy Minister).

ㅇ The Kuwait Clean Fuel Project (upgrading of oil refinery facilities, USD 12 billion) contract has been secured and other various Korean firms have passed the New Refinery Project pre-qualification assessments.

- In Algeria, the government delegation has identified an integrated dam operation system project (project scope undecided), and in Myanmar and Ecuador, MOUs on land development and infrastructure development cooperation were signed so as to strongly lay the foundation for Korean enterprises to enter those markets for contracting.

ㅇ Also, MOLIT announced that it will continue to dispatch governmental delegations to a wide array of countries for contract winning efforts; not just to Azerbaijan and Georgia (in the third quarter) and the Philippines (in July) where large-scale tenders are being expected to take place, but also to Hong Kong and Singapore (in July) and Spain (in September), which are construction markets of advanced countries.

ㅇ In addition, the fifth Korea-Kuwait Construction Cooperation Committee (September, headed by Vice Minister) will take place through which bilateral construction cooperation relations could be further strengthened. Kuwait is a country where large-scale plant and building construction projects are currently ongoing.

- Especially, the Global Infrastructure Cooperation Conference 2014 will take place in Seoul between September 17 and 19, during which human networks between major tender issuing entities and governmental high ranking officials will be established and state-of-the-art Korean technologies will be showcased, acting as an avenue for communications and dialogue.

* The GICC held in 2013 was attended by about 1,000 participants from 41 countries that have major tender issuing entities and governments, in addition to those from Korean construction companies.

** Project overview session, one-on-one meeting engagements between tender issuing entities and Korean construction firms, and site visits to major infrastructure places constitute some of the main programs of the GICC, and in order to participate, one can register at the International Contractors Association of Korea's website from early July.