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Korean Builders’ Overseas Construction Orders Should Be Subject to Risk Analysis
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Korean Builders’ Overseas Construction Orders Should Be Subject to Risk Analysis
  • By matthew
  • October 22, 2013, 06:53
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The total amount of overseas orders obtained by Korean builders over the past 6 years surpassed 400 trillion won (US$377 billion) as of September 2013. But it was pointed out that it is necessary to prepare for growing risk. 

According to data submitted to ruling Saenuri Party lawmaker Lee Hun-seung on October 20 by the Ministry of Land, Infrastructure and Transport (MOLIT), local builders won 4,133 contracts in total for construction projects abroad, valued at US$377.1 billion (401.3 trillion won) from 2007 to late September of this year.

During that period, Hyundai Engineering & Construction (HDEC) was a top ranked builder in overseas construction, receiving 116 orders worth US$43.7 billion. Samsung Engineering, which was embroiled in controversy over lower-priced deals for overseas construction projects in the first quarter of this year, ranked 2nd with 76 orders valued at US$37.8 billion. GS Engineering & Construction ranked 3rd with 71 contracts worth US$33.7 billion.

The next spot was taken by Samsung C&T Engineering & Construction Group with 75 orders worth US$24.9 billion, followed by Hyundai Heavy Industries (22 deals, US$22.9 billion), Daelim Industrial Co. (50 deals, US$22.3 billion), Daewoo Engineering and Construction (57 deals, US$21.4 billion), SK Engineering & Construction (54 deals, US$21 billion), Doosan Heavy Industries & Construction Co. (32 deals, US$20.1 billion), and KEPCO Engineering & Construction Company (5 deals, US$19 billion).

As of late September of this year, overseas projects won by local construction companies amounted to US$44.8 billion. Samsung C&T ranked first with US$10 billion contracts. 

In the meantime, it was reported that MOLIT and the International Contractors Association of Korea (ICAK) have statistics about overseas construction contracts. However, they do not seem to analyze data related to business losses or construction delay penalties. Their tendency to collect only favorable data for promotion and to neglect losses and risk management is a point against them. As a result, they are blamed for their data preference and negligence.  

Last September, the Construction and Economy Research Institute of Korea (CERIK) held an emergency meeting on the potential risk of overseas construction. It was estimated that Korean builders’ losses in overseas business caused by low-priced projects and insufficient technology would reach between US$340 million and US$1.8 billion. 

Aggregated compensation costs from local builders for construction delays were projected to be between US$754 million and US$17.86 billion in total. In spite of these results, MOLIT and ICAK only dismissed the data as figures that exaggerated losses without disclosing any specific numbers. Builders themselves have not revealed their business losses or compensation costs for delays, either.

Lawmaker Lee said, “Possible risks in construction projects abroad ought to be prevented with the examination of relevant data.”