Ministry to spur builders to take overseas projects

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Ministry to spur builders to take overseas projects

The government will ramp up its support for local builders to expand into overseas construction markets.

According to a plan announced by the Ministry of Land, Infrastructure and Transport yesterday, the government has set five goals for the next five years to make the country the fifth-largest construction powerhouse in the world.

The ministry previously said at the cabinet meeting earlier this month that it established a task force to develop the plan.

The government has set its target order value at $100 billion by 2017. Last year, Korea earned around $70 billion worth of construction orders from abroad.

The goals include participating in development projects in developing countries, allowing small builders to expand abroad, upgrading the construction industry to a high-value-added industry, venturing into new markets and establishing an effective support system for private companies.

The ministry will select a handful of developing countries in June for whom Korean builders will be constructing infrastructure starting next year at the earliest.

The Korean government will not only send private companies to do the work, but also provide the countries with financial and technological support.

For co-growth of small and large builders, the government will increase the amount of government-guaranteed loans for small builders from the current 110 billion won to 200 billion won this year. Korea Trade Insurance Corporation and Export-Import Bank of Korea will also expand their loan guarantees.

According to data from the International Contractor Association of Korea (ICAK), the value of overseas orders won by small-size builders has been decreasing steadily.

These small builders brought in 724.1 billion won in 2008, but last year, they only managed to win 339.7 billion won worth of orders outside Korea.

This will be an additional boost to SMEs following ICAK’s effort to create a division that evaluates the profitability of its overseas projects. It was originally designed to support a local guarantee from financial institutions.

Others speculated that this financial measure will be the beginning of reviving an overseas construction support fund similar to what the government ran more than 10 years ago. The fund disappeared after the 1997-98 Asian financial crisis.

Meanwhile, the government is eyeing new markets in North Africa and Latin America. Currently, more than 50 percent of overseas orders come from the Middle East.

Companies that plan to receive orders from these areas will be eligible for government support ahead of others. The government subsidy for initial costs of working in the new regions will rise from the current 3 billion won ($2.68 million) to 3.5 billion won.

The government will open a trade high school specializing in overseas infrastructure and plant construction in 2015.

In addition, the ministry signed an MOU with Seoul Urban Science Technical High School yesterday to establish the school to foster future talent in the field.

The local construction industry welcomed the idea that the government is showing its intention to boost overseas construction projects.

However, the industry also urged the government to develop a more organized plan to prevent overheated competition in winning foreign construction projects.

The ministry, meanwhile, previously said that it is also considering supporting an establishment of a private organization that can monitor overseas construction competition between local firms.

“What’s important is that the builders first need to practice ‘fair play’ while entering the competition and upgrade their ability on their own,” a spokesman from the local major construction firm said.

The ministry’s plan is followed by the recent “earning shock” from GS Engineering & Construction and Samsung Engineering that reported a huge loss in the first quarter after its overseas construction project.

By Song Su-hyun, Joo Kyung-don []

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