The Korean construction industry observed this year’s Construction Day anniversary ceremony with a fanfare after it surpassed a combined $700 billion in overseas construction projects in the 50 years since expanding into the global arena. The feat comes one-and-half years since Korean contractors logged a record $600 billion in accumulative overseas construction project value in December 2012, a great achievement despite various global uncertainties in the Middle East and elseware.
The following are excerpts of an interview between NewsWorld and Director General Kim Kyung-wook of the Construction Policy Bureau at the Ministry of Land, Infrastructure and Transport (MOLIT) in which he spoke of the industry’s contribution to the development of the nation, economy, regulatory reform and policies, including the ones to promote the overseas construction industry.
Question: Will you introduce to our readers the significance of the designation of Construction Day and anniversary events?
Answer: Construction Day falls on June 18 in celebration of the establishment of the Construction Ministry on June 18, 1962. The government observes a ceremony to commemorate Construction Day every year since 1981. During the period 1984 to 2000, a biennial rally to promote construction took place instead.
The Construction Day anniversary event is designed not only to reward the construction industry and industry people who have contributed greatly to the development of the Korean economy through the establishment of the Korean economic foundation, improving of the balance of payments, and expanding jobs — but also to encourage the construction industry community, which is charged with an immense task of building a welfare society.
The nation observes this year’s Construction Day anniversary event after the industry surpassed a combined $700 billion in overseas construction projects in the 50 years since expanding into the global arena. The latest Construction Day ceremony is a significant event that is designed to encourage the pride and morale of 2 million construction industry workers, who have contributed to the development of the nation and industry and to suggest a vision of hope to the Korean construction industry.
Q: Will you tell us about the current situation of the Korean construction industry, and what steps can be taken to boost the industry?
A: The domestic construction industry has shown signs of turning a corner since last year, but is still far from a full-fledged recovery. This year will likely see the construction economy improve a little bit thanks to the rising private housing construction market as well as a boost to the government’s social overhead budget, from 23.7 trillion won in 2014 to 24.8 trillion won in 2015.
In order to reinvigorate the construction industry, the government needs to concentrate on improving irrational systems and practices after an in-depth diagnosis of the market, the development of construction technology, and enhancing of competitiveness in the global market. In particular, a focus will be attached to improving price-based bidding systems, raising construction costs to actual levels, and eliminating unfair practices. We plans to come up with support steps, including the government’s expanding R&D outlays for the development of construction technology, the strengthening of incentives for technology development, and support for making construction technology intellectual properties. We also plan to create an environment in which construction firms do business in a business-friendly manner through such regulatory reform as the scrapping of a regulation requiring periodic reporting of registration of construction businesses.
Q: Will you touch on the government budget on infrastructure construction?
A: The government set its 2015 national SOC budget at 24.8 trillion won, up 1.1 trillion won from 2014. Out of the total, MOLIT’s SOC budget rose 1.2 trillion won to 21.8 trillion won in 2015.
Concerning the direction of our ministry’s SOC investments, we will focus on reinvigorating regional economies, investing in safety concerns to prevent accidents, strengthening housing welfare for low-income families and underprivileged people, expanding investments into SOC projects closely related to daily lives, and exploring new industries and markets. In particular, we plan to push ahead with such projects as the completion of the 88 Expressway expansion, the Seongnam-Yeoju double-track electrified railway, continuing Incheon Subway No. 2 Line, and the design of small ports for Ulleung and Huksan islands.
Q: Will you elaborate on the ministry’s policies to elevate Korea’s construction technology and engineering to the level of advanced countries, which is essential for a sustainable growth of the Korean construction industry?
A: We strive to secure core technology at the earliest possible date,which is considered important when it comes to the Korean construction industry gaining competitiveness. We will do this by prodding technology development and utilization by making the most of national R&D and new technology systems. Korea’s technology stood at 73 percent of the highest levels of the United States, the world’s best, in 2013.
The government plans to establish selective, strategic R&D plans on projects with high potential for foreign market exploration, and such core technology as tunnel boring method (TBM) and super-long bridge technology. The public sector will be asked to become the first clients of introducing new technologies or implementing pilot projects on an experimental basis, while ramping up incentives for the developing of new technologies. We aggressively provide support for making developed technologies proprietary assets.
As part of efforts to continue regulatory reform, we seek to revise the Construction Technology Promotion Act to nurture integrated engineering companies with a global competitive edge so that such regulations can be eased. Two examples are the improving of portioned business structure and the relaxing of registration requirements. Such detailed regulations related to service businesses as pre-qualification standards and subcontracting systems will be revamped in a continuous basis to ramp up business competitiveness and closely reflect reality.
The ministry plans to establish comprehensive steps this year to ensure the institutionary reform of construction management takes place, a kind advanced consulting service, in order to boost the industry.
Q: Will you speak about the current status of winning overseas construction projects and any specific plans to boost the overseas construction industry?
A: Samsung C&T’s winning the $680 million Westconnex, Australia Road Project on June 5, brings to more than $700 billion the accumulative value of construction projects Korean contractors have been awarded overseas in the 50 years since the construction industry made its maiden entry into the Thai market. The feat of surpassing $700 billion in accumulative project values comes one-and-half years after Korean contractors reached $600 billion in accumulative overseas construction project values for he first time, a great achievement considering the turmoil around the world.
It is noteworthy that half of the accumulative overseas construction project value in the past 50 years was recorded in the past five years alone. Korean contractors ranked sixth for the second straight year, and nine Korean companies were among the global top 100 companies, ENR magazine reported.
As of June 17, Korean contractors posted $24.2 billion by winning 275 overseas projects so far this year, accounting for 74.2 percent of the $32.6 billion they logged during the same period last year. By area, Asia and Central and South America represented a 2.1-fold and a 3.6-fold surge, respectively, thanks to the winning of mega-projects there, whereas Korean contractors suffered a setback in the Middle East, where they saw the value of winning project account for 28 percent of the figure during the same period of last year, due to the impacts of low crude oil prices.
We try to maintain Korea’s competitive edge in the Middle East, the nation’s major turf, and diversify areas, construction types, and project methods. The ministry plans to establish such collaboration foundation as the signing of MOUs among governments, and joint studies to help Korean contractors make inroads into such key infrastructure projects as national railways, and desalination plants. The government plans to beef up construction sales diplomacy activities to explore such new markets as Central and South America and Central Asia by dispatching high-level delegations to support Korea’s winning construction projects and inviting ranking officials from developing countries to educational programs.
In the long-term, the government plans to beef up cooperation with foreign governments and multilateral international banks to help Korean contractors make inroads into overseas project financing business markets, to offer financial support like the raising of overseas project development funds, and to nurture construction expertise manpower speaking English fluently.
Q: Will you summarize the outcomes of MOLIT Minister Yoo Il-ho’s recent visit to the Middle Eastern region?
A: Minister Yoo has wrapped up a trip to the Middle East as the leader of a government-private sector delegation to support overseas construction market exploration. The trip was designed to lay a foundation for Korean companies to make inroads into such new high-tech areas as water resources development, new city development and railways, departing from the conventional plant engineering sector, to flow up on the issues discussed during President Park Geun-hye’s summits in March.
At that time, Korea signed an MOU on a joint desalination study and cooperation in the transportation field with the Untied Arab Emirates. The nation reached an agreement on new city development manpower exchanges and project proposals with Kuwait, while agreeing to sign an MOU on cooperation in the transportation field with Saudi Arabia at the earliest possible date.
Minister Yoo asked the owners of Kuwait’s New Refinery Project and Oman’s first-phase national railway project to help Korean contractors participate in the projects, which are in the process of awarding contracts. He also requested the easing of difficulties that Korean contractors experience, including allowing for the extension of construction periods and expanding foreign labor permit fee refund beneficiaries.
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