Tuesday, March 31, 2020
Korean Construction Companies Changing Overseas Business Strategies
Focus on Latin America
Korean Construction Companies Changing Overseas Business Strategies
  • By Jung Suk-yee
  • April 10, 2015, 06:00
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Korean builders have won the New Refinery Project, which is estimated at US$14 billion, from the Kuwait National Petroleum Company. They succeeded in beating European and Japanese bidders by means of cooperating in the bidding for the plant construction project, which is expected to be largest one in the Middle East for this year. About 10 Korean builders, including Daewoo E&C, SK E&C, and Hyundai Heavy Industries participated in the tender in groups without exception. 

Orders received while a member of a consortium have risen sharply in 2014.This shows how Korean construction firms’ overseas business strategies are changing. These days, consortium-based joint bidding is becoming increasingly prevalent. Last year, this method accounted for 56 percent of the total value of the orders they obtained abroad, US$37 billion in amount. The amount increased from US$7.1 billion to US$9.2 billion and then to US$18.4 billion in the Middle East between 2012 and 2014. 

“Korean builders experienced earning shocks in the large-scale projects in the Middle East in 2012,” the International Contractors Association of Korea explained, adding, “Since then, they have focused on collaboration in order to minimize the profitability risk attributable to excessive competition and facilitate financing.”

Another trend in the overseas construction industry is regional diversification to Asia and Latin America. In the first quarter of this year, Korean construction firms won orders worth US$4.9 billion combined in Asia, slightly more than double the amount of a year ago, while the amount quadrupled to US$4 billion in Latin America. As of the end of March this year, Venezuela is their largest customer with US$2.6 billion worth of projects scheduled. The others on top of the list include Saudi Arabia (US$2.1 billion), Vietnam (US$1.9 billion), and Chile (US$1.2 billion).