South Koreans rule - for now

19 January 2010

The South Koreans’ contracting crown is now theirs to lose. Chinese firms are increasingly appearing on bid lists in the region

It has been a long, hard slog to the top for South Korean firms working in the Middle East and North Africa but, right now, they are on a high.

Construction companies from the Asian republic won $71bn worth of contracts in 2009, more than the gross domestic product of Bahrain, Oman or Qatar, and the regional contractors’ crown is now theirs to lose.

When South Korean engineering companies first arrived in the Gulf in the late 1970s and early 1980s, they came offering cheap labour and for the most part worked on undemanding civil engineering projects.

Some 30 years later, in December 2009, a South Korean consortium won the largest-ever deal to be awarded in the region, a $40bn contract to build and operate four nuclear power plants in the UAE. It was the first time Korean firms had won a nuclear power deal outside their domestic market.

A combination of perseverance, low prices and a record of delivering projects on an ever-increasing scale has gradually dislodged the major European and US contractors, which had until then dominated the construction market for energy and utilities projects.

But the South Koreans cannot rest on their laurels in the next decade, for Chinese engineering firms are increasingly appearing on bid lists across the region.

They are adopting the same tactics of low prices that gave the Seoul-based firms their edge in the first place, and are an increasing threat to the Korean companies’ hard-won position in the market.

Winning contracts is only half the battle. If they are to maintain their market lead, the South Korean firms now need to complete tens of billions of dollars of work within the next decade on time and on budget – no mean feat in the case of the nuclear deal, in particular.

The march to the top has been tough, but the fight to remain there may prove even tougher still.

CAPTION - On site: Koreans dominate construction in the region

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