Kukto-yeon "Overseas Construction Hits Cumulative $1 Trillion Era, Requires Mid-to-Long-Term and Two-Track Strategy"

The government aims to achieve a cumulative overseas construction order amount of 1 trillion dollars this year, and there has been a suggestion that a two-track strategy considering a mid- to long-term approach and the differing views of large and small-to-medium enterprises is necessary.

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On the 31st, the Korea Research Institute for Human Settlements published a working paper titled "Evaluation of Overseas Construction Performance and Support Policies: Implications for the Era of 1 Trillion Dollar Overseas Construction," involving senior researcher Kim Ji-won, researcher Jang Kyung-eun, and research fellow Ahn Ye-hyun. The paper comprehensively evaluated the achievements and support policies of overseas construction over the past 60 years and compared the support systems of Korea and Japan.

First, the past 60 years of overseas construction were divided into four phases based on the rise and fall of order amounts: Phase 1 (1965?1992), Phase 2 (1993?2003), Phase 3 (2004?2016), and Phase 4 (2017?present).

Phase 1 was subdivided into the pioneering period when overseas expansion began, the expansion period when competitiveness was established in the Middle Eastern market, and the stagnation period when the initial limitations of overseas construction were learned. Phase 2 was seen as a period of expansion in regions and types of construction projects due to the Asian economic boom, followed by an adjustment period triggered by the financial crisis. Phase 3 was a period of rapid growth due to high oil prices, with annual orders exceeding 65 billion dollars, but it also experienced a transitional period marked by deteriorating profitability due to excessive competition.

The most recent Phase 4 was evaluated as a restructuring period that actively pursued a shift from quantitative growth to qualitative growth. In fact, the average overseas construction order amount in Phase 4 was 30.48551 billion dollars, which is over 13 billion dollars less than Phase 3 (44.04333 billion dollars). However, since the late 2000s, there has been a sharp increase in orders exceeding 1 billion dollars due to diversification of order regions and types of construction. The Korea Research Institute for Human Settlements stated, "Various policies and systems have been introduced, and more stable order performance has been recorded compared to previous periods."

The paper also analyzed Japan’s support systems and structures, which show considerable similarities in overseas construction support policies. It noted that Japan is characterized by clearly defined roles among institutions while effectively utilizing cooperative networks between them. In terms of financial support, Japan secures differentiation by discovering and improving systems that align with the purposes and characteristics of each institution.

Above all, based on these findings, the paper emphasized the need for Korea to establish mid- to long-term plans and support to secure national growth engines. The paper stated, "Until now, overseas construction support policies have been centered on responding to current issues of the time, resulting in low policy effectiveness. To strengthen the foundation of the overseas construction industry, it is necessary to prepare for the era of 1 trillion dollars and to establish mid- to long-term plans and support that anticipate and lead the era of 2 trillion dollars."

Additionally, it pointed out the need to strengthen support policies that enhance the capital, technological, and human capabilities of small and medium-sized enterprises (SMEs) and mid-sized companies that may be excluded from government policy benefits. It argued that a two-track strategy considering the differing views of large enterprises and SMEs/mid-sized companies regarding joint overseas expansion should be established and implemented. Furthermore, it suggested selecting technologies that are suitable for local conditions and where domestic companies can have an advantage, supporting the spread of demonstrations overseas, and advancing the implementation system.

Meanwhile, according to the Overseas Construction Association, 234 domestic construction companies achieved orders worth 15.58 billion dollars from 296 projects in 79 countries during the first half of this year. Compared to the previous first half (17.29 billion dollars), this represents a decrease of about 10%. By region, the Middle East accounted for the largest share (64.4%), followed by North America and the Pacific (14.6%), Asia (14.0%), and Central and South America (3.3%).