The population of South Korea has grown rapidly since the republic’s establishment in 1948 and now stands at over 48 million. This growth has placed enormous burdens on Korea’s major cities. Seoul, the capital of the Republic has a population of 10.3 million (2006). The Seoul National Capital Area, which includes the major port city of Incheon and many satellite towns in Gyeonggi-do - has almost 23 million inhabitants, making it the second most populous metropolitan area in the world.

Korea’s rapid economic growth has influenced the nation’s construction industry. As the Korean market opens up, foreign enterprises trying to enter the Korean market, and Korean companies trying to exploit the international market, will have greater possibilities to expand their businesses. The Korean housing market also has experienced rapid growth and change. The shorter work week and growing interest in alternatives to urban living is resulting in demand for comfortable and healthy living environments.

Further, growing awareness of environmental issues and rising energy costs is resulting in demand for environmentally-friendly building materials and energy-efficient housing and other buildings. This has created opportunities in areas such as R&D collaboration, environmental engineering and architecture, ventilation equipment, wood flooring and related wood finishing and low VOC paints and adhesives sub-sectors.

Demand growth

Until recently "green" was scarcely seen in the Korean urban landscape, but today sustainable construction and urban design have become top priorities of the government, which is working hard to make the nation’s cities more sustainable. A number of major mega-projects are underway that will make Korea a showcase for green building.

A consortium led by Samsung Construction is developing the Yongsan Project, a $31 billion new business district in central Seoul. It will feature a 620-metre high skyscraper, expected to be the world’s second tallest building. Additional buildings, apartments, hotels and shopping malls will also be built. Samsung must integrate green building technologies and products into the Project, which will create opportunities for British Columbia firms.

The Songdo City International Business District being developed in Incheon is Korea’s first "new" city designed as an international business district. Built on 1,500 acres of reclaimed land, it will be connected to Incheon International Airport by a 7.4 mile highway bridge.   The plan includes fifty million square feet of office space - including a landmark 65-story tower and convention center, and 30 million square feet of residential space.

Opportunities

In addition to large urban renewal projects underway in Korea that may present business opportunities for BC companies, the rapidly expanding residential market has opportunities worth pursuing.  The demand for environmentally friendly building products is growing, particularly for wood frame housing, reflecting the growing popularity of townhouses in Korea.

The City of Seoul has launched the ’Seoul City Green Building Standard’ to regulate new construction and remodelling projects to reduce GHG emissions by using green technologies. The retrofit market, valued at $250 million in 2006, is expected to grow rapidly, and will present opportunities for BC companies specializing in green technologies and products.

New regulations that curb destruction of aging apartment complexes are also expected to increase repair and remodelling activities, as owners are no longer permitted to tear-down and rebuild older buildings. The Korea Remodelling Association estimates that repair and remodelling activity will grow at a rate of roughly 6-8% per year through 2010, rising to more than $17 billion by 2010.

Competitive Environment

According to the Korea Engineering and Consulting Association (KENCA), as of 2006, the Korea Korean market for construction and engineering was worth an estimated $65 billion in 2004 and grew by 17% in 2005 and 26% in 2006, and it is expected to be worth over an estimated $100 billion in 2007.

The rapid rise of the urban construction market has seen a shift to more technology intensive projects. Also changing is the pattern of ordering, from conventional Design-Bid-Build (DBB) to the type of Build-Operate-Transfer (BOT) or turn-key orders, which need the full responsibility of a contractor throughout the project life cycle. Due to this new development trend, many leading Korean companies are reorganizing to be more competitive. According to the data from National Statistical Office, the import market accounts for only 1% of the total construction and engineering market. The total value of imported construction services was $109 million in 2006.

However, the Korean market will require higher financing capabilities and new design and engineering technologies for major urban developments. Generally these are not available in Korea and foreign real-estate developers, project management companies and engineering companies will have opportunities to fill these important gaps.

The top 5 Korean construction companies are: Daewoo Engineering & Construction Co., Ltd., Samsung Corporation, Hyundai Engineering & Construction Co., Ltd., GS Engineering & Construction Co., Ltd., and Daelim Industrial Co., Ltd. Major foreign companies in Korea include: Bouygues Construction, Toyo Engineering Korea Ltd., Taisei Construction, Gale International, CH2MHill, Parsons Brinckerhoff Asia Ltd., Portman Holdings, and Bechtel International Corporation.

Market Entry

Canadian exporters interested in the Korean market are encouraged to contact the Trade Commissioner Service further advice regarding the marketability of their products, a list of key contacts in their sub-sector, or any of our other services. Exporters should also consider attending or exhibiting their products at major trade shows in Korea.

The Korean government procurement market has been opened to foreign companies based on the WTO agreement since 1997. The most effective way for companies to tap into the Korean construction market is to identify a well-qualified local agent. The Korean Public Procurement Service (PPS) and the Construction Association of Korea (CAK) have maintained a list of qualified service providers. PPS contracts major turn-key construction projects and projects that need prequalification for central and regional governments that it is important for the agent to be familiar with the market data, government and private development plans and related regulatory issues.

Regulatory Environment

Construction of buildings requires a huge amount of energy and resources and generates correspondingly huge amount of carbon monoxide, waste and other pollutants. As such, the entire construction process, from material production, design and construction to maintenance and disposal, is subject to impact assessment in relation to its energy and resource conservation, reduction of pollutants and environmental pleasantness. Buildings with superb environmental performance are certified by the Green Building Certificate System, which has been in force since January 2002.

In the initial stage, the Green Building Certificate System primarily targeted residential buildings but the system has been extended to semi-residential buildings, office buildings (public and private), commercial buildings including schools and hospitals and remodelled buildings. When this system is firmly in place, it is expected to foster the development and use of environment-friendly materials, reduce environmental pollution generated during the building lifecycle and provide accurate information to consumers on the pleasantness of "green" buildings.

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Prepared by the British Columbia Environment Industry Association in cooperation with the Ministry of Economic Development, Government of British Columbia. 2008