The government will support local builders to diversify overseas plant orders and to win more infrastructure projects in a bid to put the faltering construction industry back on track, officials said Tuesday.
“The cutthroat competition among the nation’s leading builders in pursuit of the same overseas orders has been prevalent, and the business practice is dealing a blow to the entire industry,” Land, Infrastructure and Transport Minister Suh Seoung-hwan said in an interview with a local cable channel.
“To tackle the issue, builders have to shift their overseas business strategy by adopting the concept of a ‘creative’ economy. On the government level, the ministry will support them to diversify their overseas plant orders and to win a package-type of infrastructure building projects in emerging markets.’’
His remark came as demands are growing that the government create policies to support local builders to become globally competitive.
Large-scale Korean builders which had focused on the local housing market turned to overseas markets during the previous government, following the downturn of the local real estate market. But they had to compete against one another in limited overseas markets like the Middle East as latecomers.
Continued overcompetition, in particular in overseas plant-building markets, among local builders in 2011 and 2012 caused a big loss in the first quarter of this year. GS Engineering & Construction, the nation’s fourth-largest builder announced it posted a 386 billion won ($342 million) net loss mainly due to the low margin from overseas projects.
According to FnGuide, a local stock information provider, the operating profits of eight major construction companies for the first three months of this year are estimated to be 197.7 billion won ($175 million). This is a 75.2 percent plunge compared to a year earlier.
To improve the overseas business conditions for local builders, industry watchers said the government needs to strengthen its coordination role when they are in a tight race for the same order, while developing a policy to support them to win diversified orders.
In a response to the industry demand, the ministry considers the establishment of a state-run corporation to promote the overseas construction business within the year.
“The ministry will soon propose the plan to the Blue House. The overseas construction promotion agency will focus on tapping new overseas markets for local builders and support them to attract package-type, large-scale infrastructure projects like a new city development project in emerging markets,” a ministry official said.
The organization also will support local builders to finance overseas projects by helping them secure funds from the financial industry.
Despite the expected opposition against the government’s intervention, industry watchers the land ministry will be able to establish the new affiliate as it set a target of boosting the nation’s overseas construction orders to $70 billion this year. In 2012, the overseas construction orders tallied $64.9 billion.
By Seo Jee-yeon (firstname.lastname@example.org