A Second Middle East Boom

The Middle East is becoming a hot spot again for the Korean corporations after a temporary lull caused by the war on Iraq. As Korean companies received orders for big projects in this month, it is forecast that a second Middle East boom is arriving soon.

Among the Korean companies, Doosan Heavy Industry has recently distinguished itself most. It won a 90 million-dollar construction project for a combined cycle power plant in Jordan on the 7th and a 260 million-dollar installation project in Iran on the 11th. Given that Iran is now considering additional constructions of 13 combined heat and power plants and 5 water-power plant, it is highly likely for Korean corporations to won some of them.

Samsung Heavy Industry also received an order for a LNG delivery ship worth 150 million dollars. Oman is one of the countries in which Korean companies have not received many orders. But the Oman government is planning to order 2 ships soon.

Samsung Engineering announced that it had received an order for a 50million-dollar chemical manufacturing plant from Sabic, a Saudi Arabia`s petrochemical manufacture.

Considering the worth of bids in which they plan to participate amount to 20 billion dollars, Korea Trade-Investment Promotion Agency (KOTRA) prospects that domestic companies can receive orders worth 6 billion dollars. According to this forecast, the total amount of orders Korean corporations will receive in the Middle East will increase 50% to 7.32 billion dollars, compared to the last year.

Korea companies showed very poor record in terms of construction works in Middle East: it received orders worth 190 million dollars in the first quarter of this year and 1.13 billion dollar in the second quarter. But the situations has changed thanks to oil-producing countries` vigorous investment in establishing the social infra structures after the end of the war.

“Not only change of international situations but also improved technology of domestic companies contributes to the increase in the number of plants for which Korean companies receive orders”, said Kim Dong-whan in charge of overseas marketing for Doosan.

Only in the early 1990s, Korean construction industry had hard time because both of weak price competitiveness, compared to China and Southeast Asian countries, and of the technological gap with advanced countries. But, judging from the Korea`s good record in constructions of technology-intensive plants, the situation has changed.

“The recent successful records in construction bids in the Middle East are attributable to the strategy for efficiently using local workers, materials, and equipment and finding competent suppliers”, analyses Um Seong-pil in charge of overseas research for KOTRA.

Domestic corporations vigorously advanced into the Middle East market in 1970s-80s when there was a surge in demand for construction including roads and ports. But the boom has disappeared since the late 1980s when Middle East economy shrank and political unrest continued.

smhong@donga.com