A Magnificent Achievement

Korean builders celebrate $200 bln in project orders overseas in 41 years

The International Contractors Association of Korea held a special ceremony to celebrate $200 billion in overseas construction projects May 17 attended by government officials, and industry executives. Dignitaries included the Minister of Construction and Transportation Choo Byung-jik, Rep. Lee Ho-woong, chairman of the National Assembly Construction and Transportation Committee and hundreds of industry executives. The event took place at the KCCI building in downtown Seoul.
Minister Choo, in his speech at the ceremony, said the construction industry has contributed greatly to securing foreign exchange for the country to fund the nation's economic growth in the 1970s and 1980s. The industry, in addition, showed off its construction technology prowess to the world by building roads, bridges, buildings and plants in many countries around the world. Achieving $200 billion in project orders in the last four decades has not come easy. It came via tough competition with foreign rivals, showing in the process, the lofty position of the industry. Overseas construction orders are expected to total over $13 billion this year so long as you, the people in the industry, continue to make efforts and orders will keep piling up, bringing the industry to new heights. We cannot afford to relax and be complacent with competition among companies and nations rising ever tougher, the minister warned. China is trying to catch up with us as soon as possible. In order not to fall behind, we have to strengthen our structure and be competitive in the areas of building high-rise buildings and industrial plants, along with projects with high profits and investment development projects. Small and medium-sized builders should also participate in overseas construction markets.
He said the government will extend all the help it can muster to the industry, especially in the area of R&D to refine the construction technology and train technicians. High oil prices have given us another big opportunity for orders for big plants in oil-producing countries in particular.
ICAK Chairman Yoo Jun-kyu, in his speech, said the construction industry has made a great contribution to modernization of the country by securing foreign exchange needed to import machinery and equipment. Last year, the industry'overseas project orders marked the $10 billion level for the first time in 8 years since the financial crisis, making Korea one of the five or six countries in the world with $10 billion in foreign project orders. Opportunities are here again with high oil prices making oil-producing countries to spur their industrial projects. We hope that the government will not miss the opportunity by providing us with support. The industry itself has to make an effort to raise its technology level to that of advanced countries and enhance its competitive edge internationally. The ICAK will do its best to help its member companies solve problems so that they would be able to strengthen its abilities to win large plant construction projects, secure technical manpower and explore new markets.
It took 41 years to record that much of construction projects overseas with the new urban development project in Vietnam reported on February 6 to the ICAK have brought the figures to $200 billion.
Vice Chairman of Daelim Industrial Co. Lee Yong-koo said in his welcoming speech that this gathering is meant to remember the astonishing achievement of the Korean overseas construction and to solidify our determination to forge ahead again for development and resurgence of our overseas construction industry, learning from past glory and mistakes. Our industry had done its best to boost the national image of Korea abroad and the valuable sweat shed by our hard working laborers at the jobsites abroad and oil dollars earned had been locomotives to pull the country out of the two oil crises that hit the world in the 1980s and feeding the national economic progress by increasing national income and spurring the economic growth, the vice chairman said. Our industry faced difficulties including the financial crisis in 1998, but overcame it, turning it around as an opportunity for further take-off. We were able to restructure corporate structures and enhanced the competitiveness. We became wiser and be very selective in the selection of profitable projects, avoiding excessive competition among ourselves. In fact, we joined together in fighting for the projects and clinched orders in consortium. Our technological prowess has been recognized throughout the world with the orders for technology-intensive projects rising rapidly. The overseas construction industry is faced with the second construction boom in the Middle East with oil dollars pouring in and is in the process of making itself a loyal-son industry for the country by earning valuable foreign exchange,without inducing imports, Daelim Industry Vice Chairman Lee said.
But he cautioned that we cannot be satisfied and stop here. We have to pull forces together and be prepared to make the industry a growth engine for leading the futuristic market in the 21st century. It took over 40 years to achieve $200 billion in project orders in overseas construction markets, but if we push hard with all our might, we will be able to see our orders grow to $300 billion in a decade. He said themes for the debate that followed the ceremony well reflected the directions and issues facing the industry and therefore very significant. Themes read, "Ideas to Strengthen Competitive Power of Overseas Construction Industry,"and "Strategies for the Development of Overseas Plant Construction."
Korean builders made their first advance overseas in Thailand in 1965. The project was to build a highway in the Southeast Asian country. At the time, Korean builders took on the project with only guts, with not much equipment and technology.
In the past four decades, the construction industry provided jobs to over 3 million people and purchased $30 billion worth of material. They also surprised the world with their abilities to take on some of the biggest and complicated projects in the world. They ranged from the Great Man-made Canal in Libya, compared to building a modern-day Great Wall, the Grand Penang Bridge and Petronas Tower in Malaysia, the Jubail Port in Saudi Arabia, the world's tallest building Burj Dubai Tower in the United Arab Emirates, the South Par Gas Field development project in Iran, an oil refinery expansion project in Mexico, and desalination plant projects in the Middle East.
The period from 1965 to 1974, overseas building activity had been slow with projects mostly in Southeast Asian countries starting from Vietnam, benefiting South Korea's participation in the Vietnamese war. Korean builders focused on exploring overseas construction markets during the same period. The next decade was the maturation period helped by the construction boom in the Middle East. In the early part of the 1980s, South Korea's construction industry ranked the second in the world next to the United States in terms of its overseas projects. In the next three years, Korean builders raked in overseas projects worth $10 billion annually. But from 1984 to 1992, the industry slowed down only to recover from 1993 until 1997 before getting sluggish again hit by the financial crisis in 1998. The industry again survived the crisis in 1999 after going through tough restructuring. From 2004, the industry was back in business again with construction orders from Middle Eastern countries rising due to the strength of oil dollars. Last year, the industry's overseas projects totaled around $10 billion for the first time in more than a decade.
Project orders came from a broad region expanding to Africa and Asia, especially, from Vietnam, China and Kazakhstan, thanks to the economic resurgence in those countries. The industry has begun to advance into those countries to build residential houses, the development that has been seen before 1990. Korean builders provide their own funds to develop residential areas and sell those houses. It is likely to bring estimates for total overseas project orders to $13 billion this year and $14 billion at the high end. The figures break down to about $3.2 billion in the Asian region, about 24 percent of total orders and $1.3 billion from Africa, the Central and South America and Europe, accounting for 10 percent of total orders.
Industry experts said overseas project orders could total around $300 billion during the next 10 years if the industry takes care of securing enough technical experts and technologies.
In the debate session following the ceremony, professor Han Seung-hon proposed that construction firms need to upgrade their competitiveness in the international construction market. They have to raise their systems to global standards and be competitive to win plant construction orders. They also would have to build risk management systems to boost productivity and profitability.
Participants in the debate session called for increased government support for the industry. They said the government should provide more support to small and medium firms to make advances into overseas construction market because they account for only 10 percent of total overseas construction orders won by Korean builders. The government should increase its funding support to them and make a system so that big and small builders can jointly win building orders overseas.
State-owned banks such as the Export-Import Bank of Korea should develop financial products to assist those small builders including the extension of guarantees and loans. They have to be able to extend funds to them with profits from project orders as collateral. The government should also help the industry to explore new markets and diversify markets. The government should also find ways to support risk expenses related to the exploration of new markets. The government also takes measures for the industry to collect information overseas directly not through foreign agents to improve the industry's ability to win profitable project orders and reduce risk burdens from stages of winning contracts and collecting payments.
State-owned firms should lead the efforts to secure project orders overseas in terms of attracting private investment in the development of projects overseas. nw

MOCT Minister Choo Byung-jik delivers a speech at the celebration ceremony for $200 billion in overseas construction orders provided by the International Contractors Association of Korea.