Construction in South Korea

A Hot Tip about Building Products and Construction in South Korea

Posted on: 4 Jan 2010

Overview

Total market size is expected to grow in 2008 by 1.5 percent in terms of the Korean Won. However, due to the increased value of the US dollar, market growth rate for the construction industry is expected to fall by 14.2 percent when exchanged into USD. The Construction and Economic Research Institute of Korea forecasted that total market size in 2008 would be able to reach approximately 108.3 trillion won. A consistent increase of exports to Asia and Latin America would contribute to the increased market size. By the second quarter of 2008, exports to the Middle East accounted for 49 percent of total exports, worth USD 1.3 billion.

 

Korean demand for construction services is driven by four diverse, yet closely linked construction sub-sectors: construction of residential apartment buildings, civil engineering services, construction work for commercial/ industrial facilities and government-initiated infrastructure. The Construction Association of Korea reported that total orders reached USD 50 billion by the second quarter 2008. Compared to the same quarter of the previous year, this is a decrease of 1.4 percent. Out of that figure, construction for public services reached USD 16 billion, an increase of 22.1 percent from 2007, whereas private construction reached USD 34 billion, showing a decrease of 9.4 percent.

 

The market for privatized construction is affected by several factors. The supply of residential apartment buildings decreased by 15 percent by the end of 2007 due to the introduction of a new government policy which came into effect in September 2007. The law mandated a price ceiling for residential buildings, which automatically drove down supply. Moreover, a decreased number of build transfer lease (BTL) projects brought fewer opportunities for private firms to construct public facilities in return for rent payments from the government.

 

Construction of government-initiated infrastructure has increased since 2008. A second phase of ‘new town developments’ as well as other large-scale regional development projects were launched in 2008. These projects were initiated by the prior Presidential administration to bring about government-backed “Ubiquitous City development,” “innovative city” planning, and the creation of “industrial cities.” Many of these projects have continued to move forward and continue to be active during the Lee administration. The Construction Association of Korea estimates that construction for public facilities has increased by 9.4 percent in 2008, while on the other hand, private construction services have decreased by 1.9 percent compared to the previous year.

 

As the Korean engineering services market evolves, the demand for technically advanced services for the construction of the so-called ubiquitous cities or U-cities continues to grow, creating additional demand for very creative and innovative services and technologies from U.S. American engineering firms working in Korea that are expected to expand their activities into the future as U.S. companies continue to hold a strong position in advanced engineering and soft technologies. U-cities described as the next step in the evolution of "Digital Cities", with redundant communications networks, both wired and wireless, making it possible to offer "ubiquitous services," based on the information contained in all information systems available to the public. The goal of these investment is not only to drive Korean investments in developing these technologies but to improve living standards by providing ready access to key residential, medical, commercial, and government information.

 

Best Prospects/Services

Real-Estate development & project management

Engineering consulting

Urban planning

Digital / ubiquitous city infrastructure

Construction materials

Structural/mechanical engineering services

Earthquake-proof engineering

Architectural design

Green building engineering

 

Opportunities

Aside from the investments in U-cities, there are numerous other major projects that are creating opportunities for U.S. solution providers. One recent project, already with significant U.S. involvement, is the New Songdo City development. This is actually several projects including the construction of an International Business Complex, a High- Tech Industry Park and a Biological Industry Complex. Located with direct access to Incheon Harbor and Korea’s largest international airport, Songdo’s goal is to be a financial hub of Northeast Asia, as residents will be able to interact freely with 60 economic cities nearby given its status as a designated International Free Trade Zone.

 

The construction of the Northeast Asia Trade Tower (NEATT) will feature convention centers, international schools and residential homes designed to attract approximately 253,000 residents. Development plans are divided into 11 sections with the first four phases currently under construction.

 

The U.S. Forces-Korea (USFK) relocation project is consolidated into the Land Partnership Plan (LPP) and the relocation of the Yongsan US Army Garrison. Once completed, the USFK will turn over a total of some 36 bases and training facilities to the Korean government. DOD will consolidate numerous small garrisons and camps and have USFK operations move from the center of Seoul and surrounding areas to a new facility further south in the Pyongtaek region. The prime management contract has been awarded to the U.S. engineering firm CH2M Hill and scope of work requirements and timelines are being developed.

 

Ubiquitous City Infrastructures---There are currently 7 key Ubiquitous City development projects underway: Incheon Free Economic Zone, Busan U-City, Pankyo U-Healthcare Town, Jeju Telematics, Suwon Techno Valley, Osong U-Bio City, Changwon U-City and U-Jeonju. The Korean government expects that approximately USD 143.2 million would be invested for R&D of U-Eco City Planning by 2012. Other than the projects mentioned above, 40 other city areas are pursuing plans to introduce high-technology, U-City models in the upcoming years.

 

 

 

Read the full market research report


Posted: 04 January 2010

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