Posted : 2013-08-28 18:21
Updated : 2013-08-28 18:21

Gov't to boost overseas plant orders

Strategy and Finance Minister Hyun Oh-seok, flanked by Financial Services Commission Chairman Shin Je-yoon, left, and Trade, Industry and Energy Minister Yoon Sang-jik, speaks about the government's support programs for overseas construction and plant businesses at a news conference at the Seoul
Government Complex, Wednesday. / Yonhap

By Na Jeong-ju

The government will set up an $8.6 billion fund by 2017 to support Korean firms involved in construction projects overseas.

About $7.5 billion of the money will be raised in the form of a private equity fund (PEF) to draw investment from private firms. It's a new concept of investment for overseas construction business, under which state financiers, such as the Export-Import Bank of Korea and the Korea Development Bank (KDB), will take bigger risks than private investors, officials said. The government will invest the rest of the money through KDB and the Korea Finance Corp.

These plans were included in a package of measures to help firms win more construction and plant orders in oil-rich Middle Eastern countries and Asia, which was unveiled Wednesday.

The government also plans to use its foreign currency reserves to finance large-scale overseas deals, if necessary. The measure will enable firms to compete better with foreign bidders and focus on more value-added businesses, according to the Ministry of Strategy and Finance.

"Korean firms have a technological edge in building plants and infrastructure, but their overseas businesses have remained sluggish due to insufficient financial support," a ministry official said. "The envisioned financing plans will help them increase their overseas shares and create a virtuous circle of investment and growth."

To that end, the government will form a joint committee, comprising officials from related ministries, the Financial Services Commission and state financing firms. The panel, which will be headed by the vice finance minister, will play a central role in coordinating policies for overseas construction and plant businesses, the official said.

The ministry forecasts the measures will increase overseas construction orders won by Korean firms by about 4.7 percent annually. During the first half of this year, the country's overseas construction and plant exports grew 3.1 percent from a year earlier, which was far slower than the average growth rate of 9.7 percent in the previous five years. In particular, plant exports fell 1.9 percent in the first half.

The government also expects the measures will create 15,000 more jobs.

"There will be a lot of positive effects for the industry. One of them is that firms can secure funds at lower interest rates. The interest rates are expected to fall 0.1 to 0.5 percent," Finance Minister Hyun Oh-seok told reporters.

Experts say firms usually cover some 10 percent of total business-related costs with state funds in conducting overseas construction projects. That means the environed $8.6 billion won fund could create deals worth $86 billion.

The government also plans to strengthen loan guarantees and trade-related insurance services for firms.

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