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Construction firms in South Korea have stressed balance sheets. The sluggishness in the domestic housing market, coupled with a higher interest rate environment and raw material prices, dampened the growth of the construction industry in South Korea in 2022. With the trend projected to further continue in 2023, many of the leading construction developers have turned their attention to the overseas market. The overseas construction order value is a testament to the strategy adopted by construction firms in South Korea.
The International Contractors Association of Korea, in March 2023, revealed that the total amount of overseas construction orders in January and February 2023 reached US$4.16 billion. While this represents a decrease of 2.9% compared to the same period in 2022, the order value has been increasing gradually, with US$661 million in January and US$3.5 billion in February.
Overall, in 2023, the government is targeting an order value of US$35 billion. This will represent a growth of 12.9% compared to the US$31 billion order value achieved last year. However, as of June 2023, South Korean construction firms have recorded an order value of just US$8.79 billion in overseas projects. The number falls far from the government’s goal, but the increasing activities and bidding in the global markets can help achieve the goal in H2 2023.
Among the construction firms that increased their focus on projects in overseas markets include big names like Daewoo Engineering & Construction, Hyundai Engineering & Construction, and Samsung C&T.
If the firm secures the project in Saudi Arabia, the contract will be the largest-ever order clinched by a South Korean construction firm. Up until now, the largest construction project received by a South Korean firm was pegged at US$3.39 billion, which was bagged by Doosan Enerbility Co. in September 2010.
Notably, the project will also aid Hyundai Engineering & Construction to reach its goal of US$4.3 billion or KRW 5.7 trillion in overseas construction orders in 2023. In addition to this project, the firm has also made a bid for the second phase of construction of the Jafurah gas processing facilities in Saudi Arabia.
Samsung C&T also won several large construction projects globally in 2022. This includes a solar power plant project in Qatar, a cycle power project in Vietnam, and a semiconductor factory project in Malaysia. Like Hyundai Engineering & Construction, Samsung C&T is also expected to focus its efforts on the Middle Eastern region, where the construction industry is poised for an accelerated growth trajectory in 2023 and beyond.
In the United Arab Emirates, the construction industry output is projected to reach AED 331.6 billion by 2027, according to ConsTrack360’s estimates. Between 2023 and 2027, the market is projected to grow at a compound annual growth rate (CAGR) of 5.7%. In Saudi Arabia, on the other hand, the construction industry output is projected to reach SAR 276.9 billion by 2027, according to ConsTrack360’s estimates.
To tap into the construction projects in the Middle East, the South Korean government is also providing support to developers. Diplomatic ties between the government and Middle Eastern nations have been strengthened, with increased channels for communication. Additionally, the South Korean government is actively seeking the backing of state-run banks to finance collaborative construction projects involving domestic companies.
Alongside the Middle East, South Korean construction firms are also targeting projects in Southeast Asia. Notably, developers are seeking to bid for projects in Indonesia, which also includes the relocation of the capital city to the island of Borneo. The participation of South Korean construction firms in all of these global construction markets will enable the developers to offset the slowdown in their domestic market from the short to medium-term perspective.
To know more and gain a deeper understanding of the South Korean construction market, click here.
