Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Korea Expressway expands overseas business
Korea Expressway Corp. (KEC) Executive Director Kim Na-joo, third from left, poses with other KEC executives and Cambodian officials during a ceremony to celebrate the completion of a road constructed in the Southeast Asian country in this file photo taken in December last year. / Courtesy of KEC
By Yi Whan-woo
By Yi Whan-woo
Korea Expressway Corporation (KEC) is expanding its overseas business by taking advantage of the growing demand for road network construction in developing countries.
The state-run expressway operator won its first overseas contract in 2005, when it built a detour in Indonesia. From 2005 to 2012, it has won contracts worth 12.6 billion won ($10.8 million) combined in 16 countries. The company seeks to increase its international revenue to 220 billion won by 2020.
“We have gained abundant knowhow and experience from our domestic projects,” KEC said in a press release. “We now focus on overseas projects as a key way to raise profits and ensure our global competitiveness.”
The strategy comes after the significant decrease in demand in recent years for construction of expressways and other kinds of road infrastructure in Korea and the downturn of the construction industry in general since the early 2000s.
The overseas market, especially in underdeveloped countries, has grown by 8 percent each year, and its size is estimated to reach $15 trillion by 2020, according to KEC.
“The construction industry in developed countries, such as the United States and Western Europe, will diminish, while that in Asia, Latin America, the Middle East and Africa will continue to grow,” the company said.
The state-run company said it will work with private builders here through consortia, explaining that their combined strengths will increase its chances of winning and completing overseas projects on time and within budget.
On one hand, according to the company, private builders have had difficulties in winning overseas projects because developed countries tend to offer projects to firms that can take care of the entire construction process. “A private builder mainly specializes in planning and designing, and it can’t carry out an entire investment project for a road network,” KEC said.
On the other hand, partnering with private builders will boost its financial resources. “We have difficulty in funding our investments because we are able to borrow only up to $200 million for each project from state-run banks per the government’s regulation,” the company said.
By working together with private companies through consortiums, the KEC anticipated it can win international projects at reasonable costs.
Starting next year, KEC will build a 17.82-kilometer-long expressway in Vietnam. The five-year project to build four-lane roads was first undertaken by Kumho Engineering & Construction in 2007. However, the builder faltered and decided to form a consortium with KEC, the state-run Korea Development Bank and other private builders.
KEC has also won a $525 million project to construct a 2.7-kilometer-long above-water bridge in Brunei in collaboration with the Seoul Metropolitan Government and two private builders.