Only 70 years ago, Korea was near completely destroyed. The rebirth and rise of South Korea stands testament to the enduring human spirit of its people. South Korea is the 13th largest economy in the world with few natural resources while caught between competing economic blocs. One strong example of this success is the Korean construction sector, going from strength to strength and now deploying advanced, world leading techniques for future cities in Korea and abroad. Hannes Humala, Asian Insiders partner for South Korea explores.
The Republic of Korea is a smaller-sized nation with a population of just over 51 million people, and around 30% of the mountainous country being habitable. The country has few major mineral deposits and few resources beyond the industriousness of its people. However the Korean government form of stimulating business growth has led to the rise of several large conglomerates, called ‘chaebols’ – some of whom have become global brands such as Hyundai and Samsung. These chaebols are active in many major sectors including large-scale construction and have become major drivers of Korean industry and the economy.
The market size of the Korean construction sector is around EUR 200 billion in 2023 with a projected average annual growth rate of 3% over the next five years. Domestic residential construction accounts for around 40% of that, however with Korea’s sharply declining birth rate, the domestic sector has slowed. While firms still face considerable demand for Korean major infrastructure projects such as the recently completed Incheon Bridge, Korean construction firms are increasingly looking abroad for new projects and in doing that competitively, are bringing a number of innovative, future-forward technologies and construction processes to bear.
Korean construction companies are EPCs (Engineering, Procurement and Commissioning), which allows them to manage the whole project efficiently. They are particularly active in Southeast Asia and in the Middle East, where there are already several signature Korean construction projects completed including the Riyadh Metro, the Jeddah Tower, the Burj Khalifa, Jebel Ali industrial harbour, UAE Nuclear Power Complex and Emal Power Plant, as well as Singapore’s Marina Bay Sands, Taipei’s 101 Building and Petronas Tower 2 in Malaysia as well as the new airport in Ulan Bator and others. Due to this EPC dimension to Korean construction firms, senior decisions are made in Korea. Where projects are based offshore, sales activities must include a strong and effective Korean business development element.
Korean construction firms are at the forefront of developing new technologies in improving quality, efficiency and safety in the physical construction of building and infrastructure projects. Korean firms are embracing the use of Business Information Modelling (BIM), customised drones, the Internet of Things (IoT), VR, AR and artificial intelligence as well as leading safety technologies towards earthquake resistance and resilience to natural disasters and heavy weather events.
The Korean government, in striving to meet its international environmental obligations has implemented a range of regulations, policies and incentives to encourage eco-friendly construction techniques including the use of green materials, decarbonised concrete, energy efficient designs allowing reduced heat loss along with allowing smart technology implementation in the operation of the buildings and facilities.
Leading Korean companies in this sector include Hyundai E&C , Samsing C&T, Dawoo E&C, Posco E&C, Hyundai Engineering, Samsung Engineering, SK Ecoplant and Lotte E&C. Korea, once a labour exporter, now faces labour shortages so turns to Southeast Asia to meet the requirements for a skilled workforce. As the Korean investment footprint in Southeast Asia extends, workers from the region receive training and opportunity within the Korean construction sector. The volume and quantity of these offshore projects along with the ongoing improvement of Korean infrastructure means that the Korean construction sector is in very good health, pressures on labour and supply costs notwithstanding.
Korean construction firms, with their aggressively acquired competitive advantages, will continue to extend into further international markets, participating in major reconstruction and infrastructure projects and likely becoming a global force. Their success in this will depend on a combination of continuous technological improvement, sustainability initiatives, regulatory frameworks, global and regional economic factors and societal demands – such as responding to national requirements for sustainable, durable and affordable housing.
There are a wide range of opportunities for western companies to work closely with the Korean construction sector. They continue to require input from international designers, suppliers, innovators and technical firms. However, Koreans have their ways of working and integration is critical to a successful partnership.
Asian Insiders offers connections, expertise and experience with the Korean construction sector. To explore your opportunities in this market, you are invited to a no-obligation call with Jari Hietala, Managing Partner: jari.hietala(at)asianinsiders.com or with Managing Partner for Korea, Hannes Humala: hannes.humala(at)asianinsiders.com