Minister Suh Seoung-hwan of the Ministry of Land, Infrastructure and Transport said, “The government will encourage construction firms to go overseas for operations since the domestic construction market is too saturated, and we will continue to monitor the construction market and provide additional measures to revive it if needed.”
He went on to say, “Diversification is needed in overseas construction market to expand the number of projects and profits as well and the projects should be investment construction-type projects, as they have high added value under government support measures. In order to lead the construction firms to enter the new construction market overseas, the government will set up a master plan for them to enter emerging market countries for construction projects including financial support for so called, “package-type infrastructure projects.”
The following are excerpts from a special interview with Minister Suh on the occasion of his first 100 days in office in which the minister stressed government policies to get the construction industry back on track by building customized houses for the homeless and house poor, along with special measures to diversify the overseas construction market for Korean construction firms with government support.
Question: It’s been 100 days since you took office as minister of the Ministry of Land, Infrastructure, and Transport. What do you have to say about your time in office thus far, Minister Suh?
Answer: My new job has been like that of a field general who moves from place to place along the frontline, taking responsibility for every action and result on every policy, a great change from my days as a scholar giving advice here and there.
I have to follow tight schedules, aware that my actions will determine the happiness of the people and will have a deep impact on the national economy. I have been doing my best always under a heavy feeling of mission.
I think we are getting good results from the Happiness Housing Project. We have been focusing on it since the implementation of the April 1 Real Estate Measures. We can also expect the creation of new jobs from the Daegu National Industrial Complex and the third stage of the Incheon Airport Expansion Project, which was kicked off on June 14, along with other important basic installations expansion projects that will establish a basis for our future growth.
For the past three months on the job, I have been trying to change the way the ministry does its work by insisting that government officials should always work on the side of consumers by visiting jobsites early in the mornings, thus closing the gap between the administration and jobsites.
I plan to promote the pledges that we made to the people as thoroughly as possible to earn the trust of the people. The creative economy requires fusion, cooperation, and communication by removing walls between the people, jobsites and consumers. It must provide a base for the people so they can work on what they want to achieve. We would like to get rid of the civil engineering image and get to work on the creative economy policies by focusing on the Happiness Housing projects, dam construction, and the reform of procedures and spatial information, and the creation of an open platform with convergence, cooperation, and communication policies.
Q: What are your plans for the house poor and a real estate market revival and where do they stand now?
A: Tailor-made support measures are being taken by the ministry for the house poor and those who want to own houses. For those who want to own houses, the ministry plans to help them clear their debt problems through restructuring and workout at the financial firms and the Credit Recovery Committee.
For those who are behind in their monthly installment payments for their cars, the ministry will secure 100 billion won in funds so that KAMCO can buy the car payment debts in default. For car owners who are likely to have a difficult time paying for their cars, they will be able to get housing loans from the Korea Housing Guarantee Corp. against their houses from the 1 trillion won fund secured for that purpose.
The ministry will also set up a system for the house poor to buy houses through the leasing house REITs, starting with 500 houses. The ministry will also set up a plan whereby those over 50 years of age can be a member of the housing retirement fund by readjusting downward the age limit from the current limit of 60 years.
We will try to assess the progress of the support for the house poor in order to get more families qualified for support.
Q: Will you please introduce to us the sustainable housing policies?
A: The government has decided to expand the number of beneficiaries of the government housing welfare service and improve the service quality.
The government, first of all, has been working to provide all homeless and low-income people to get residential support service from the government under its average residential welfare service.
By 2017, 64 percent of the 5.2 million homeless families below the No. 5 category would benefit from the government housing welfare service and by 2022, 130,000 families of the below No. 5 category would benefit from the government housing welfare service, providing government housing welfare service benefits to 5.5 million families —all of the homeless families or households in the nation.
The government plans to supply 130,000 new residential houses every year —110,000 houses for lease and 20,000 houses for allocation. Those houses will be built near the centers of cities, on land near railroads, and government-owned land rather than locations far from the centers of the cities for the benefit of the residents
Q: What are some of the measures the government will take if the domestic construction market becomes sluggish due to reductions in SOC budget ?
A: The construction industry accounts for 13 percent of GDP and 8 percent of employment with huge effects on the creation of jobs and, as a nucleus industry, has a great impact on the growth of other related industries. Among the measures are the normalization of the real estate market, which need to be taken fast. Also, we have to provide other measures in the areas of tax and finance to increase demand for houses, which are included in the April 1 Measures. We also have to execute the SOC budget earlier than usual to expand the public construction sector investments. The SOC budget in 2009 amounted to 25.4 trillion won, 25.1 trillion won in 2010, 24.4 trillion won in 2011, 23.1 trillion won in 2012 and 25 trillion won this year. We will also find new business models to spur private investment, along with appropriate reimbursement for land and support for supplementary businesses.
The government will also encourage construction firms to go overseas for operations since the domestic construction market is too saturated. We will continue to monitor the construction market and provide additional measures to revive it if needed.
Q: What is the situation regarding ‘dumping’ by Korean construction firms in their bids to win construction projects overseas and measures to prevent it in the days ahead?
A: Excess competition among Korean construction firms operating overseas has led them to cut their prices sometimes, raising concern over their profits. But the losses incurred so far by some construction firms overseas have not affected the entire Korean construction industry overseas because they vary depending on each construction firm. In the first quarter, construction firms like Daelim earned 123.9 billion won from its overseas projects; Daewoo E&C earned 109.3 billion won; and Samsung C&T earned 67.6 billion won. In order to prevent dumping in overseas projects, the market should be diversified and expand investment construction-type projects. Also, the overseas construction market, which is now centered on plant construction projects in the Middle East, needs to be diversified and include more investment construction-type projects, which will be pushed by the government.
Q: Can you please explain the governm-ent strategy for diversification of the overseas construction market for Korean builders?
A:Korean construction firms were able to secure a bigger number of construction projects overseas from the middle of the 2000s due to the synergy between government support and construction firms' positive moves to enter overseas markets. The project orders won by Korean firms increased from $47.5 billion in 2008 to $49.1 billion in 2009 , $71.6 billion in 2010, $59.1 billion in 2011, $64.9 billion in 2012, and $22.5 billion in the Q1, 2013.
But most of the overseas projects won by Korean firms were concentrated in the Middle East with high value-added projects accounting for only 1 percent of the total projects during these periods.
Diversification is needed in overseas construction market to expand the number of projects and profits as well and the projects should be investment construction-type projects, as they have high added value under government support measures.
In order to lead the construction firms to enter the new construction market overseas, the government will set up a master plan for them to enter emerging market countries for construction projects including financial support for so called, “package-type infrastructure projects.” The government will increase financial support for the exploration of new construction markets.
At the same time, the government will provide financial support for market surveys for new markets in emerging nations to encourage Korean construction firms to take up development investment projects. The government has been considering joint investment with the Middle East Wealth Fund and the Global Infrastructure Fund.
Q: What are some of the major plans the ministry has in place to implement its major policies this year?
A: Such short-term policies as the normalization of the housing market will be pushed hard so that more low-income families will be able to benefit from the housing welfare service provided by the government. The ministry plans to complete the April 1 Real Estate Measures, as well as the Happiness Housing Project, and at the same time strengthen the support for the payment of house leasing charges by introducing the voucher system and others measures, if needed. The ministry will also customize housing projects for college students, newlyweds, and senior citizens.