Korea's revenue from overseas construction plunges

By Choi Sung-jin

Korea’s revenue from overseas construction projects sank more than 30 percent last year, mainly because of low oil prices, the central bank said.

According to the Bank of Korea’s balance of payment statistics, the nation’s construction income totaled 16.1 trillion won ($13.49 billion) last year, down 30.3 percent from 2014, the biggest drop since the 39.9-percent fall in 1992.

Construction income in balance of international payment refers to money Korean builders earn in accordance with the progress of projects abroad, including the Middle East.

Construction income peaked at $20.37 billion in 2013 but fell to $19.35 billion in 2014. The decline for two consecutive years was also the first since 1998-99 in the aftermath of the Asian financial crisis, the BOK report showed.

The plunge last year was due mainly to low international oil prices, it said.

As average crude prices dived from $105.25 a barrel in 2013 to $95.56 in 2014 and $50.69 last year, oil-producing countries experienced financial crunches. The Middle East countries in particular, on which Korean builders rely for nearly half their overseas projects, have put off or canceled massive construction projects or delayed payments for finished ones, construction industry executives said.

Nor can Korean construction companies expect this year will be much different.

Above all, their order receipts last year remained at $46.1 billion, 70 percent of 2014. New orders from the Middle East stood at $16.5 billion, compared with $19.7 billion from Asia. International oil prices have also fallen below $30, and will likely remain there for some time.

The construction officials described the situation as the “second slump” following the “first slump” in the 2009-10, stressing the need for the industry to focus on high value-added projects, including plant construction, to cope with dwindling orders.