UAE-South Korea build close construction ties
The growing number of South Korean contractors and developers setting up shop in the UAE is a testament to the close relationship between the two countries. Angela Giuffrida and Monika Grzesik report on the Asian invasion.
Diplomatic relations bet-ween the UAE and South Korea were first established in 1980. Since then, the UAE has gone on to become one of South Korea's most important trading partners, having imported US $12.93 billion (AED47.4 billion) worth of goods from the region in 2006.
His Highness Sheikh Mohammed bin Rashid Al Maktoum's visit to South Korea in May was viewed as a landmark step in further strengthening ties, and is expected to bolster annual trade between the two countries to $15.82 billion.
According to figures released earlier this month from the Ministry of Construction in Seoul, the value of overseas contracts won by South Korean construction companies so far this year is at a record high.
South Korean contractors are set to secure $20 billion worth of overseas contracts this year, compared to $16.5 billion in 2006.
There is no doubt that this record high value is largely down to the work of South Korean contractors in the Middle East. The region is the biggest construction market for South Korean construction firms, who are collectively working on $11 billion worth of projects at the moment.
In the first three months of this year alone, South Korean contractors secured a raft of billion-dollar deals in the UAE.
Among them were Doosan Heavy Industries and Construction's $1.14 billion contract from Dubai Electricity and Water Authority to build the 'M Station' desalination and power plant in Jebel Ali, which was awarded in February. A few months later, the company won a $510.5 million contract to provide equipment for phase two of the project.
Saudi Arabia and Kuwait are also key markets for South Korean business interests.
Doosan is working on the world's largest desalination plant in Saudi Arabia, in a deal worth $850 million, while Hyundai Engineering and Construction has secured work on oil and gas projects in the UAE and Saudi Arabia.
Other South Korean contractors active in the region are Daewoo Engineering and Construction, SK Engineering and Construction, GS Engineering and Construction, Daelim Industrial and, of course, Samsung - the contractor currently building the Burj Dubai in a joint venture with Besix and Arabtec. Samsung was also recently awarded a $350 million infrastructure package on Nakheel's Palm Jebel Ali.
"Korean companies have good expertise for construction and can also provide engineering and procurement services to clients at a competitive price," said Mr Park, business development manager, Daelim Industrial.
"Our price is backed up by our technical aspect, particularly in the oil and gas field, and infrastructure projects."
So far, the only two property developers who have taken the plunge in Dubai are Sungwon Corporation (also a contractor) and Bando.
Sungwon, which developed the Seoul World Cup Stadium for the FIFA World Cup 2002, entered the market with a combined investment of over $450 million for its first two projects: Santevill at Business Bay, a 24-storey residential tower to be completed in 2009, and a twin-tower commercial development at Culture Village, which was launched in April.
The company further strengthened its presence in the market in May after striking a $5.5 billion deal with Deira Investment to redevelop an area of 'old' Dubai, and earlier this month announced plans to build a $700 million project at Sama Dubai's The Lagoons.
To execute the projects, Sungwon is seeking the help of contractors back home.
The company recently invited around 30 South Korean subcontractors to its sites at Business Bay and Culture Village, along with key construction areas in Dubai where it plans to participate as a main contractor.
"Our key aim is to ensure that the South Korean contractors, who will be working closely with us in the UAE, understand the country, its conditions and the different demands of each project so that they are able to help us deliver the best construction services in a cost-effective manner in line with our motto 'quality on time'," said Chang-Pyo Park, CEO, Sungwon's Middle East headquarters.
"Their visit is timely, especially as Sungwon will be playing an important role in various huge projects in Dubai."
The subcontractors will undergo a stringent selection procedure to find out if they're better placed to do the work over their Dubai counterparts.
"We will evaluate and select subcontractors from South Korea collectively in light of cost, quality and construction time, together with other factors, in comparison with local Dubai subcontractors," said David Kim, managing director of Sungwon's Dubai office.
Kim added that the South Korean subcontractors would mainly be used for structural, interior and MEP works.
Sungwon may also look to its home market as a source of labour, along with Vietnam and Mongolia.
"But because of the high salaries earned by Korean construction workers, the subcontractors may only bring over management level staff, foremen and a limited number of skilled labourers," said Kim.
With construction in the UAE showing no signs of slowing down, and billion-dollar projects expected to emerge from the likes of Saudi Arabia, it would seem that the South Koreans are poised to benefit from several more years of the Middle East's building boom.