South Korean builders are expected to expand investment into the world’s emerging markets this year as they seek ways to sustain growth amid tough market conditions in the Middle East, which previously was the top client for the industry.

The global oil price plunge and fierce competition were the main factors that propelled Korean contractors to seek new business opportunities in key emerging markets such as Latin America.

“There is a possibility that competition in winning overseas orders will get stiffer among Korean contractors as oil producing countries are likely to place less orders due to the sharp decline in crude oil prices,” said Huh Kyung-shin, a spokesman for the International Contractors Association of Korea.

“Although the overseas market is expected to falter overall, the non-oil-producing countries are expected to expand their investment in the infrastructure of manufacturing plants.”

Despite the enhanced competiveness of local construction firms that have toiled to achieve high-value-added engineering technology and find new markets, the reliance on the Middle East is still high ― 52 percent of all overseas orders placed at local builders this year was from the region.

But it is too early to despair, as the government expects accumulated overseas construction orders to have reached $700 billion last year, which marked the 50th anniversary of the local construction industry’s first overseas ventures.

The Ministry of Land, Infrastructure and Transport ― which is in charge of establishing construction policies ― is busy drawing up measures to support construction firms to help them win more overseas projects.

“It may turn out to be a more difficult year because of the risks such as the slide in oil prices and economic uncertainties in Islamic countries but we will continue to provide support for our builders with policies to perform well with high-value-added projects,” said Song Suk-joon, director of the ministry’s Construction Policy Bureau.

As a part of the government’s efforts, the Export-Import Bank of Korea recently announced its plan to create private equity funds, focusing on investment in the three areas including helping contractors to win overseas construction and plant projects.

The Middle East and North Africa ― two of the largest markets for local construction firms ― are steadily showing signs of stagnation and other global players such as Indian construction companies are also hindering the prospect of Korean firms by submitting the lowest bids for projects.

As the country’s leading construction company, Hyundai Construction and Engineering is already placing priority on Latin America and the Commonwealth of Independent States, to secure stable income sources and winning profitable orders.

Other builders including Daewoo Construction and Engineering and POSCO Construction and Engineering are also preparing to reduce their Middle East orders by focusing on regions like Africa and Latin America.

By Park Han-na (hnpark@heraldcorp.com)