Construction Industry Needs to Brace for a Shift to Ones Based on Project Financing
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Construction Industry Needs to Brace for a Shift to Ones Based on Project Financing
CAK Chmn, Yoo says the CAK will hold consultations with the government and related organizations on ways of expanding Korean contractors’ entry into the U.S. market

30(Sun), Jul, 2017

Leaders and staff members of construction organizations, including Chairman Yoo Joo-hyun of the Construction Association of Korea (CAK), pose for a group photo session in the celebration of the 70th anniversary at the Construction Hall in Nonhyeon-dong, Gangnam-gu, Seoul, on July 20. (Photo: CAK)

Korean contractors will aggressively explore strategies to enter foreign markets in cooperation with the government and related organizations since overseas construction projects are shifting from contracts ones to project-financing, said Chairman Yoo Joo-hyun of the Construction Association of Korea (CAK). 

“Internally, the construction industry is undergoing a hard time due to declining SOC investments and slumping house and real estate markets. Winning overseas construction orders stood at $63 million as of July 6, 2017, a 13 percent plunge over the same period of last year. 

This setback is primarily blamed for fallout from declining orders in the Middle East, Korea’s mainstay market, which has been buffeted by the prolonging of low crude oil prices,” Chairman Yoo said. “In this situation, the Korean construction industry needs to establish strategies to diversify its overseas construction markets,” he noted in an interview with NewsWorld in celebration of the 70th anniversary.

CAK Chairman Yoo said he, a member of a delegation accompanying President Moon Jae-in on his maiden state visit to the United States, participated in official business events such as the Korea-U.S. Business Summit. He also held discussions with officials from Korean Embassy stationed in the United States, people from the U.S. construction and related institutions and took time out to share information on the local developments and views. 

“The CAK will hold consultations with the government and related organizations on ways of expanding Korean contractors’ entry into the U.S. market to follow up President Moon’s official visit to the United States,” he said. U.S. President Trump’s administration plans to implement a $1 trillion infrastructure investment mega project. 

As to the urban renewal project, one of the new government’s key tasks, about 10 trillion won will be infused annually starting this year. The money is 66 times more than the government budget for a similar purpose, and almost half of this year’s government budget for SOC investments. 

The new urban renewal project, which will cost 50 trillion won for the next five years, is expected to not only improve people’s living conditions, but also bring a positive effect to the construction industry with a rise in small-sized refurbishment project orders, the CAT chairman said. In particular, he said the new project, taking the form of small-sized refurbishment projects rather than the conventional large-sized redevelopment ones, is also expected to become a boon for SME’s market entry.  

SMEs are favored to implement the urban renewal project since the project is characterized by cooperation with residents of the related region and exchanges of views. Large-sized contractors will likely be given more business opportunities by making the most of their capability to develop diverse types of urban renewal content corresponding to the characteristics of each region by combining the knowhow they have accumulated through diverse business experiences and their creativity. 

“Construction companies are required to differentiate themselves from others by getting a better understanding of the characteristics of each region to restore such software functions as social, economic and cultural aspects, and have urban competitiveness strengthened rather than resorting to physical-centered development,” he said. 

The securing of financial resources is a prerequisite in the course of achieving the goals of any policies, said Chairman Yoo, adding that the government’s fiscal spending of 10 trillion won annually, and capital from the private sector, should be utilized to implement the urban renewal project in a continued and stable fashion.

The government’s 2018 budget proposal calls for spending 141.1 trillion won in the health, welfare and labor sectors, an 11.6 percent jump over this year, but setting aside 18.7 trillion won in the SOC sector, a 15.5 percent plunge, he said. The chairman said the government’s negative attitude toward investments into the SOC sector stems from a misunderstanding that such ample infrastructure as roads and bridges has already built. In reality, Korea ranked 34th among OECD countries, indicating that the nation still lacks SOC facilities in terms of diverse infrastructure indexes. 

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