South Korea Infrastructure Report Q1 2009

In time for the launch of BMI's infrastructure Q109 reports, we have revised our construction data. The data has been modified from 2008 onwards. This initiative stems from new methodology being introduced in our forecasting method and aims to increase the relevance and reliability of BMI's infrastructure data. BMI strives to be able to offer five year industry forecasts for the South Korea Q109 report however that data is not currently available, but it will be updated in time for Q209. BMI therefore will make its predictions based on data sets from 2009-2012.

For 2009 BMI forecasts that South Korea's construction industry will be worth KRW56,528.20bn (US$51.39bn) in 2009. The sector's value is forecast to continue increasing, and we expect it to be worth approximately KRW61,720.88bn (US$61.72bn). We note that South Korea's year-on-year (y-o-y) construction sector growth has been slowing, with the industry registering negative growth of -1.32% in 2008, and declining to -1.51% in 2009. The lowest point will be reached in 2010, when negative growth of -1.97is forecast, however, following this the growth rates will return to positive levels, reaching 0.79 yo- y for 2012.

South Korea's construction sector is forecast to make up 5.47% of the country's total GDP for 2009, the industry's percentage is slipping and will make up just 4.76% in 2012. Despite this, the number of workers employed in the country's construction sector has reached 1.9mn in 2008 and makes up roughly 8% of South Korea's total workforce.

BMI believes that the construction sector, not just domestically South Korea, but worldwide will be buffeted by the global economic downturn and will lead to investors tightening their belts, leaving less money to go towards funding infrastructure related projects, especially those in the real estate sphere.

This could see a serious decline in the number of companies available to participate in Private Public Partnership (PPP) projects, which will lead to delays and in some case cancellations of proposed infrastructure schemes.

In relation to South Korea, BMI has no news of specific projects that may be affected by the economic downturn, it could be a case of watch this space. BMI however is confident that the big infrastructure projects launched in 2008 especially projects associated with the country's port and inland waterway infrastructure will go ahead. BMI is afraid that although the South Korean economy is not heavily dependent on the country's domestic construction sector, some of the largest construction companies with global operations, namely Doosan Heavy Industries and Construction Company and Hyundai and Engineering and Construction Company are based in South Korea and will be affected by the global downturn.