Replacing Middle East
The Korean construction industry is having difficulties to win overseas construction orders. The total value of overseas orders of local construction companies last year stood at US$46.1 billion (51.12 trillion won), recording the worst record since 2008. Domestic construction firms have bagged orders worth as low as US$15.4 billion (17.79 trillion won) so far this year.
According to the International Contractors Association of Korea on August 1, Korean companies won US$6.9 billion (7.65 trillion won) of construction orders in Asia as of now in 2016, accounting for 44.8 percent of the total value this year. The figure is US$2 billion (2.22 trillion won) higher than US$4.79 billion (5.3 trillion won or 31 percent) of Middle East during the same period.
Until 1980, Middle Eastern countries accounted for 90 percent of the overseas construction orders. The figure dropped to 60 percent after 2000 and then 40 percent last year, losing the title of the largest market.
By country, domestic firms saw a noticeable decline in order backlog in the Middle East. Among top 30 countries in terms of order values in 2016, there are only four Middle Eastern countries – Kuwait, Saudi Arabia, the United Arab Emirates and Qatar. The figure is a third of 12 countries in Asia and similar with that of Latin America, including Mexico, Panama and Chile.
In 2006, the Middle Eastern countries – Saudi Arabia, Kuwait, Qatar and Oman – were among the top four countries. A total of US$8.1 billion (8.97 trillion won) of construction contracts were ordered by these four countries alone, a half of the total order value of US$16.47 billion (18.25 trillion won) in 2006.
Asia is the alternative market from the fall in overseas orders in the Middle East. The order value in the region surged from US$1 billion to 2 billion (1.11 trillion to 2.22 trillion won) in early 2000 to more than US$10 billion (11.08 trillion won) after 2007.
More than a half of 10 large orders won this year is from Asia. GS Engineering & Construction received a US$1.46 billion (1.62 trillion won) contract for Thomson East Coast Line T301 Zone in Singapore as well as in Kazakhstan, Vietnam and the Philippines. On the other hand, the Al Jur Liquefied Natural Gas (LNG) Import Terminal Project, which is won by Hyundai Engineering and Construction and Hyundai Engineering in Kuwait, is the only project received in Middle East.
There are negative views on this. They say that it does not mean that the amount of orders in Asia hasn’t increased to the extent to substitute that of Middle East. Rather, the total value of orders has decreased mainly in Middle East.
In fact, the total value of overseas orders of domestic construction firms decreased from US$66 billion (73.19 trillion won) in 2014 to US$46.1 billion (51.12 trillion won) last year. It is the lowest record since 2008. This year, it got much worse.