The sun is slowly setting for Korean builders in the overseas construction market, which has been a growth engine for them. In particular, the size of the Middle East market, which has been a treasure trove for Korean contractors, plunged to one-third of the market in the past. The Middle East market accounts for 60% of Korean builders’ overseas construction orders.
According to the International Contractors Association of Korea on April 25, domestic builders' overseas construction orders from the Middle East amounted to US$ 3.624 billion as of April 25, only 43.3% of the same period of last year (US$ 8.336 billion). Given that many contracts are usually signed at the beginning or end of a year, it is forecast that orders from the Middle East market will fall short of US$10 billion this year.
Orders from the Middle East amounted to US$22.8 billion in 2007, US$35.7 billion in 2009, and US$47.2 billion in 2010. However, they have barely exceeded US$10 billion since 2015. This year, the figure is less than half of last year’s and some experts are concerned over it, saying,"The era of a boom in overseas orders is probably over."
Lower oil prices and political uncertainties in the region are blamed for the drop in orders. Traditionally, orders from Saudi Arabia, which has been a big client for Korean builders, have fallen sharply. Saudi Arabia's orders to Korean builders added up to US$10.5 billion in 2010, US$16.5 billion in 2011, US$16.1 billion in 2012 and US$9.9 billion in 2013. But the figure fell to US$2.9 billion in 2014 and US$1.1 billion in 2017. This year they are only US$700 million.
The post-war reconstruction project in Iraq has not led to new orders to Korean construction companies. Korean contractors enjoyed US$9.6 billion and US$8.5 billion in new orders from Iraq in 2012 and 2014, respectively. But in 2016, new orders from Iraq plummeted to US$ 600 million. Last year, they hit US$13.39 million, much lower than US$100 million.
The same goes for Iran which has recently been freed from economic sanctions. Last year, Korean contractors recorded US$5.2 billion in orders from Iran, but this year they have not received one single order.
This year, overseas construction orders reached US$11.9 billion, similar to the volume of the same period of last year. "Even though large orders will be placed by the Middle East, we are not sure of landing them," a company official said. “Since the exchange rate has continued to fall, price competitiveness has been weakened. Since overseas dispatch workers are also affected by shortened working hours, I cannot help but raise bid prices."
By company, SK E&C ranked first with US$2.5 billion, followed by Samsung Engineering (US$2.2 billion), Samsung C&T (US$2.0 billion) and Hyundai Engineering (US$800 million). In 2014 when overseas construction enjoyed a boom, Hyundai E&C's annual orders alone reached US$11 billion.