Korea likely to miss $40 billion overseas construction order target

Land, Infrastructure and Transport Minister Park Sang-woo, third from left, speaks to representatives from construction firms during a meeting to discuss ways to increase overseas construction orders in Seoul in this July 11 photo. Courtesy of Ministry of Land, Infrastructure and Transport

The Korean construction industry’s goal of securing $40 billion worth of orders from other countries this year has been overshadowed by uncertainties.

According to data compiled by the International Contractors Association of Korea (ICAK), Monday, the total value of new overseas orders during the first seven months of this year fell to $16.8 billion from $19 billion a year earlier.

Notably, the value of orders from North America and the Pacific Islands fell from $5.3 billion to $2.5 billion. This decline is attributed to fewer Korean manufacturers placing orders to build U.S. factories for tax benefits under the Inflation Reduction Act.

The value of orders from Asia — except for the Middle East — also decreased to $2.4 billion from $4.2 billion. This decline is due to the recent belt-tightening policies implemented in developing countries following their stimulus measures during the COVID-19 pandemic.

Over the past couple of years, the government and construction firms have sought to participate in large-scale construction projects abroad to overcome a slump in the domestic housing market.

They have especially focused on achieving this goal through their expansion into Africa following the 2024 Korea-Africa Summit in June, as well as by preparing for reconstruction projects in Ukraine once the war is over and pursuing large-scale projects in the Middle East.

However, the value of orders from Africa dropped from $919 million to $161 million.

The intensifying war between Ukraine and Russia has also made it difficult to begin reconstruction projects.

Although the value of orders from the Middle East jumped to $10.3 billion from $7.2 billion, concerns are lingering over the potential impacts of military conflict between Israel and Iran on construction projects in the region.

“We have continued monitoring this conflict to brace for the possible spread of war to other countries, where Korean companies received construction orders,” an ICAK official said.

Additionally, Saudi Arabia is no longer seen as a lucrative market. Although the country previously placed large construction orders, it has started to scale down its urban development projects due to prolonged financial difficulties.

Samsung C&T, which told investors and analysts last year that it would make efforts to win additional orders from Saudi Arabia, refused to mention details about its overseas projects during a conference call for its second-quarter earnings last month.

However, there is optimism that Korean construction firms may increase their presence in Europe, following the Czech Republic's selection of Korea Hydro & Nuclear Power as the preferred bidder for the construction of two nuclear reactors valued at approximately 24 trillion won ($18 billion).

Although the main contract for the project is slated for next year, Korean companies have already sought to win additional nuclear power plant construction projects in other European countries, such as Poland, Slovenia, Romania and Bulgaria.

A Korean business delegation will also visit the Czech capital of Prague next month to look for new opportunities and build personal networks.