KoreaToday Overseas Construction Orders Picking Up
Solid Reputation Helps Contractors Through Downturn
By Jane Han
Staff Reporter
For the past six months, business wasn't great for Korean construction giants that relied on overseas projects. Orders stopped coming in and existing jobs started getting cancelled as the global economy shriveled and cash-rich Middle East countries were slowing down their building boom.
But recent developments are encouraging eager builders to wonder: Is the overseas construction market turning around?
``I wouldn't say that we've completely turned the corner just yet, but what I can say is that we're almost there,'' Kim Tae-yup, the head of the planning team at the International Construction Association of Korea (ICAK), told The Korea Times.
He said that builders, which have generated strong profits from overseas projects for years, began suffering in September last year from the trickle effects of the global economic crisis.
Quarterly data compiled by the ICAK showed that South Korean contractors' new overseas orders plunged in the first quarter of 2009 from a year ago. They won orders worth a combined $8.2 billion from 46 countries in the January to March period, down 42 percent from $14 billion a year earlier.
Kim explained that the slowdown was largely due to declining demand for mega petrochemical and other industrial plants in the Middle Eastern nations as oil prices tumbled in recent months.
``We're seeing that the orders are starting to come back though,'' he said, adding that builders are expecting more business to return once the Ramadan period is over after August.
Reflecting the hopes for a rebound, the government hasn't revised down its overseas construction order goal for this year. The annual target is set at $40 billion. Last year, the country won a record $47.6 billion in overseas building overseas.
The ICAK official said that long-term business prospects are bright for Korean builders because of their strong reputation abroad.
He said local contractors' punctuality in delivering on schedule, perseverance and know-how have put them on top of their global competitors.
Plus, experts say that mega projects are awarded to Korean firms because domestic builders are among the few in the world with the capability to complete Engineering Procurement Construction (EPC), a turnkey method involving all aspects of building from design and construction to project financing.
``As long as the reputation is good and the market is still there, Korean builders could expect to see another boom wave,'' said Kim, adding that Africa and the Central Asian States (CIS) are the emerging markets that companies should focus on.
Domestic construction giants have been beefing up their work abroad, but analysts say that they still need to push for more expansion outside of local borders.
According to the Engineering News-Record (ENR), a trade magazine, major foreign construction firms reap 70 percent of their annual revenue from overseas projects, but South Korean builders still generate less than 30 percent from cross-border jobs.
SK E&C Moves Forward
SK Engineering & Construction is one of the most recognizable contractors that have managed to successfully draw new orders from the Middle East amid the deepening global economic turbulence.
Last month, it won an $820-million engineering, procurement and construction contract from Abu Dhabi National Oil Company's onshore unit to install three gas compressor units at the Bab oil and gas fields.
In India, the company won a $90 million construction order from India Strategic Petroleum Reserve Limited to build a crude oil underground reserve base in Mangalore, while it won a $76-million project in Ecuador to repair a refinery.
Also in Abu Dhabi, SK E&C was hired to build the C-13 Block of Al Reem Island for $373 million. The project will include erecting four buildings 31 to 51 stories high on a 17,643-square-meter site.
Company officials stress the significance of the order not only because of its sheer size, but because it helps to diversify the SK E&C construction portfolio, which so far has been centered on plant construction.
``Portfolio diversification is crucial during these challenging times because it expands our business possibilities and opportunities,'' said SK spokesman Park Sung-hoon.
The Construction & Economy Research Institute of Korea pointed out that local contractors should focus on diversifying their businesses beyond oil-related projects in the Middle Eastern countries since too much emphasis on one area could hurt sustainability.
``Even though there have been more difficulties in receiving new orders recently, we're managing to overcome the challenges thanks to the reputation that we've built,'' he said.
Ssangyong Builds High
The Marina Bay Sands Hotel in Singapore is currently singled out as one of Ssangyong's top undertaking overseas.
The company beat Japan's Shimizu Corp., France's Dragages, Hong Kong's Gammon and other international heavyweights in 2007 to win the $686-million deal to build a hotel in Singapore's Marina Bay.
The three concave-shaped hotel towers, with a total of 2,600 rooms and suites, is set to dominate the city's skyline. The complex will include convention facilities, a casino and theaters.
Company officials say Ssangyong was able to receive such a large-scale order thanks to its proven track record.
The contractor has consistently ranked high in the Engineering News Record's annual evaluation of hotel builders.
Having received 128 orders from 19 countries around the world since the company was founded in 1977, Ssangyong has left its mark from developing countries in Southeast Asia and the Middle East to advanced nations including the United States and Japan.
The Raffles City Complex in Singaopre, which consists of the 73-story Swissotel, is one of the most recognizable of Ssangyong's completed projects. The hotel was recorded in the Guinness Book of Records in 1986 for being the tallest in the world.
The builder was one of the first to enter the Gulf region by building a 55-story Emirates Tower Dubai Hotel with 400 bedrooms back at the end of 1990s.
Ssangyong's portfolio includes everything from hotels, hospitals, office buildings and leisure facilities to industrial plants.
POSCO Goes Int'l at Home
POSCO Engineering & Construction is working on an international city right at home.
The Songdo International Business District, part of the new Songdo City, is being developed on 1,500 acres of reclaimed land along Incheon's waterfront by the U.S.-based Gale International and POSCO E&C in a 70:30 joint partnership.
The 100-million square foot metropolis is a model of sustainable development and innovation that will be 40-percent green space, according to the developers.
The $30-billion city will include a world class hospital, two international preparatory schools, museums, a ubiquitous computing environment, a 100-acre Central Park and a Jack Nicklaus Golf Club.
Aside from the Songdo project, POSCO E&C has also won several new orders overseas.
It clinched a $150-million deal in March to develop a huge expressway project linking Hanoi's main airport with the northern border province of Lao Cai in Vietnam. The construction is set for completion in August 2012.
Also in Hanoi last year, POSCO E&C won the bid for a $6.4-million project to mould the city's master plan. The deal includes developing the administrative, cultural, scientific, education and economic center and an international trade center, the company said.
The construction arm of POSCO, the world's No. 4 steel maker, is expanding into new areas, but its expertise is in energy-related plant construction.
About one-third of last year's orders were generated from plant and energy projects, according to the company.