Korean builders expand beyond Middle East

The efforts of Korean construction companies to expand overseas are helping them offset the current slump in the industry.

According to data provided by the International Contractors Association of Korea (ICAK) earlier this week, local companies won $9.1 billion worth projects overseas in the past three months. That’s a 32 percent drop year on year, but experts say it could have been substantially worse considering low international oil prices.

The low prices have directly impacted local construction companies because of their reliance on the Middle Eastern market. In response, companies have been looking for new markets and, according to the data, are seeing success.

In the past, more than half of the 10 countries in which Korean companies won the most projects were in the Middle East. But according to the data, Kuwait was the only Middle Eastern country on the list, which now includes Vietnam, Panama, the Philippines and Canada, among others.

According to the data, Asia was the biggest market for Korean contractors, accounting for 36.1 percent, or $3.3 billion of the total $9.1 billion in contracts secured.

The Middle East was the second largest at $3.1 billion, followed by Latin America ($1.3 billion) and Pacific-North America ($1.1 billion).

In the past six years, more than 50 percent of overseas projects were won in the Middle East. The amount of orders from the Middle East and Asia decreased by 23 and 33 percent in the first quarter from a year ago, but the amount in Pacific-North America and Africa rose by 2,628 percent and 169 percent, respectively.

“Looking into the first-quarter data, we were able to see that Korean construction companies are diversifying their markets, which obviously is a good sign,” ICAK spokesman Kim Woon-joong said. He added that only 12 companies stepped into new markets in the first quarter last year, but 18 businesses did so this year.

One example is Daewoo Engineering & Construction, which is expanding its business in Africa. By winning a highway development project worth $82 million, the company entered Ethiopia for the first time. The company said it aims to extend its coverage to Kenya and Tanzania as well.

Posco E&C also won a project in Panama for the first time. The company said it will build a combined cycle power plant and liquefied natural gas terminal worth 780 billion won after beating out other global rivals in the bidding.

“While diversifying markets, Korean companies also need to focus on high-value projects like a new city development project - the Bismayah in Iraq, for instance,” said Prof. Han Man-hee from the University of Seoul’s urban science department.

“Foreign rivals have been traditionally strong in plants and railways, but developing a new city in only seven to eight years is something not so many businesses are capable of.”

One possible project is in Saudi Arabia, which announced in January that it will be looking for companies to build 1.5 million houses at a cost of $400 billion over the next seven years.

BY KWON SANG-SOO [kwon.sangsoo@joongang.co.kr]