By Yoon Ja-young
The government will spend up to $2 billion to support Korean companies bidding for construction orders overseas, especially in Iran and with the Asia Infrastructure Investment Bank (AIIB) which will open up new opportunities.
The Ministry of Land, Infrastructure and Transport (MOLIT) held a meeting, Thursday, to seek ways to promote overseas construction, the first of its kind.
The meeting came amid concern over the country’s construction companies which have been suffering due to a lack of overseas orders.
“Korea became one of the world’s top five in the overseas construction market, with total orders received so far reaching $700 billion last June,” said Minister Kang Ho-in of Land, Infrastructure and Transport.
“With the market conditions deteriorating, however, the annual orders received last year plunged by 30 percent compared with the previous year. There are huge uncertainties this year as well considering external factors,” he said, citing the low oil price that the market expects will persist. Due to low oil prices, oil-producing countries have been cutting construction orders.
“As growth is slowing in economic leaders such as the eurozone, Japan and China, conditions aren’t positive for overseas construction,” the minister added.
He said that Korea’s construction players should switch to high value-added sectors like project planning and management rather than simply executing the orders they have received.
Korea is seeking new opportunities in Iran where sanctions were recently lifted and with the China-initiated AIIB.
In the case of Iran, Kang pointed out that Korea has maintained friendly ties with the country for over 50 years. Diverse infrastructure development markets such as railways and water resources are cited as new opportunities for Korean businesses.
The AIIB is also regarded as a huge opportunity for construction companies. The investment bank is likely to hire around 700 employees.
“As Korea has a 3.81 percent stake in the AIIB, the ratio of Korean employees should be as high than that,” an official at the ministry said, adding that development specialists working in the country’s public sector will be encouraged to apply for positions at the AIIB to work as a bridge between Korean firms and the AIIB.
The ministry is also stressing its preparations to participate in China’s One Belt, One Road project. It is scheduled to hold a seminar next month seeking ways to increase Korean firms’ participation in development projects backed by the AIIB.
The government fund will also be used for investments in AIIB projects to offer more opportunities to Korean construction firms.