Major engineering, procurement and construction (EPC) contractors from outside South Korea have said they need to adopt some of the Korean working practices to remain competitive in the Middle East.
Speaking on condition of anonymity, one senior-level executive from a European EPC contractor says the continued successes of South Korean companies has forced many of their competitors to realign strategy.
“[South] Koreans are not successful because of their nationality, they are successful because of the model they are using,” says the executive. “This model is admittedly higher risk than what has been done before, but the results speak for themselves.”
|South Korean awards|
|Contractor||Value of work won|
|*=April 2010-March 2011. Source: MEED Projects|
South Korean companies have had enormous success in the Middle East over the past few years. According to the Middle East projects tracker MEED Projects, South Korean companies have almost $50bn-worth of projects under execution in the region. The nearest rival is Italy, with $15bn.
Within the last three years South Korean companies such as Daelim Industrial, GS Engineering & Construction (E&C), Hyundai E&C, Samsung Engineering and SK E&C have all become leading players in the Middle East EPC process plant sector.
The business model adopted by these companies revolves around aggressively bidding low prices for projects, carrying out a relatively large amount of basic engineering during the tender phase and forging close links to suppliers.
“Obviously there are some aspects of the model that labour laws in European countries wouldn’t allow,” says the executive. “But there are other facets of this [model] that can be adopted by everyone.”
Another senior executive from a leading US contractor agrees and believes that the competition the Koreans have brought to the Middle East EPC market will be beneficial for everyone in the long term.
“The continued success of the Koreans has made everything rethink their strategies,” says the executive. “Most of the Western contractors are very strong on the engineering side, but we all need to improve our procurement and construction if we are to threaten the Koreans’ dominance.”