CONSTRUCTION & BUILDING TECHNOLOGIES IN KOREA November 2016
Transcript
CONSTRUCTION & BUILDING TECHNOLOGIES IN KOREA
November 2016
Market Overview
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Country Profile
Peninsular country located in Northeast Asia
Situated in a temperate zone, four distinct seasons
Population of 51.4 million
Land area 100,284km2
High population density of 514 people/km2
Republic of Korea (South Korea) in General
Presenter
Presentation Notes
The Republic of Korea (South Korea) is located in the Northeast Asia as a peninsular country with a 100,284km2 landmass. The country has developed from poverty to prosperity since the rapid industrialisation initiated in 1960s. It adopted the presidential system and has three branches of power – the executive, the legislative, and the judiciary. The country has nine provinces with local government authorities. It is one of the major economic powers and trading country with the trade volume of over USD one trillion (2014). Between 2011 and 2015, the country’s real GDP growth rate was 3.0% on historical average with 1.9% inflation. With the vast FTA network established in the past decade, Korea is emerging as a trading hub with its FTA with the European Union, the United States, and most recently with China. Korea’s major industries include automobiles, ICT technology and consumer electronics, petrochemical, and shipbuilding. Although the overall trend in manufacturing is positive, its growth potential has declined in recent years. Some key industries – especially the shipbuilding sector – face increasing competition with Chinese manufacturers. The society is rapidly ageing with the national median age is 40.8 years old. According to the OECD, it has the sharpest drop in working age population. Due to an on-going outsourcing process to emerging markets, Korea is faced with the short-term challenge to substitute work places in production with jobs in the service area.
nation, seventh biggest import nation Multiple FTAs, incl. with the EU (2011), the USA (2012), PRC (2013) Key industries: Automobile, machinery, chemicals, electronics,
semiconductors, and shipbuilding
Challenges Market dominance of Korean chaebols (conglomerates) Search for future growth engines as production is moved more to
emerging markets Ageing population, peaking in 2035 thereafter decreasing
Economy
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Korean Construction Market
1950s: Korea’s reconstruction after Korean war Focus on infrastructure, efficiently build and affordable
buildings 1960s to 1970s: Korea’s industrialisation Same as in 1950s Additional focus on industrial construction such as
production, logistics, retail
Development Phases (1)
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Presenter
Presentation Notes
The modern development of the Korean construction and building technology market started with the end of the Korean war (1950 to 1953). The country was devastated and accordingly huge efforts and investments were carried out to restore infrastructure as well as industrial, administrative and residential real estates. During Korea’s industrialisation period (1960s and 1970s), the construction market experienced further growth due to public large scale projects in roads, tunnels, railways, land reclamation, and administrative facilities but as well as in industrial facilities and residential buildings. Those times were characterised by efficiently built buildings constructed in relatively short time periods. This changed in the 1980s with the Asian Games hosted in 1986 and the Summer Olympics being held in Seoul in 1988 as modern architecture played a more important role. Naturally the focus was on the construction of state-of-the art sport facilities. Beside that, representative buildings became more sophisticated and apartment complexes were designed and built at higher quality standards. The trend has continued into the new millennium visible in many modern buildings in Seoul or other major cities. A recent trend is owed to the increasing number of tourists as since about 2010, Korea experiences the opening of various hotels to accommodate the high number of foreign guests. The Winter Olympics to be held in 2018 at Pyeongchang is again one major event where state-of-the-art constructions can be expected. The construction industry accounts for about 5% of Korea’s GDP equivalent to KRW 72,751 billion in 2015. Civil engineering contributes 35% as residential building construction 27%, and non-residential building construction 31%; building maintenance share is 6%. The building market is dominated by construction of dwellings and residential construction has significantly increased since 2012 due to various stimulus packages by the Korean government. The residential building market offers only limited opportunities for European companies due to standardised design and construction of apartment complexes built by well-established and dominant local players. Market opportunities rather exists in niche segments where European companies can offer technological advantages or upmarket solutions. The market sector non-residential construction is still a dynamic one demonstrated by many construction of office-, hotel-, and retail-building as well as of warehouses and factories. A recent trend is the building maintenance, rehabilitation and retrofit. In line with the green growth policy – but also just from a pure economic evaluation – more and more buildings constructed a few decades ago are renovated and up-graded to higher building standards instead of demolition and a new construction. The Korean society is experiencing also the trend that more and more smaller dwellings are in high demand. This is due to the increase of individual households either desired by younger generation or needed by retired pensioners as the traditional customs of a multi-generation household is constantly losing attractiveness. The latter one also leads to a higher demand in specific infrastructure for elderly people not being able anymore to life on their own.
Korean Construction Market
1980s-1990s: Korea adoption of modern architecture 1988 Summer Olympics in Seoul: state of the art sport facilities Residential and office buildings became more sophisticated
2000s: Korea’s continuation to grow modern constructions Residential and office buildings became more sophisticated Construction of more hotels to accommodate foreign tourists 2018 Winter Olympics in Pyeongchang: state of the art sport facilities
Development Phases (2)
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Korean Construction Market
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95%
5%
GDP share of Construction Industry
Others Construction
Civil engineering: 35% Non-residential building
construction 31% Residential building
construction 27% Building maintenance 6%
5% = KRW 72,751 billion (2015)
Sector Information
Smart Grid & Green Buildings
Launched in 2009; definition of framework and key elements as a national strategy up to the year 2050.
5 areas defined:1. Smart Power Grid,2. Smart Renewable,3. Smart Transportation, 4. Smart Electricity Service, and5. Smart Place.
Green Growth Policy Outline
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Presenter
Presentation Notes
Smart Grids & Green Building: In 2009, the Korean government launched the Green Growth Policy in which the framework and key elements have been defined as a national strategy up to the year 2050. The Smart Grid roadmap is composed of five areas: 1) Smart Power Grid, 2) Smart Renewable, 3) Smart Transportation, 4) Smart Electricity Service and 5) Smart Place. In a first phase from 2009 to 2012, a smart grid test-bed on Jeju Island was developed in which 168 Korean and foreign companies were involved. The plan was to test relevant technologies and develop new business models. Thereafter – starting 2012 – the focus was on expansion into metropolitan areas to add intelligence on the part of consumers; this phase is expected to be completed by 2020. In a last step, namely from 2020 to 2030, a completion of a nationwide Smart Grid of all intelligent grid networks is planned. The Green Growth Policy contains a national plan for the promotion of zero energy buildings and energy efficiency policies for new and existing buildings. The target is to achieve a 31% reduction in GHG emissions in the building sector by 2020 (against the emission levels of 2005) by strengthening energy standards for new buildings, improving energy efficiency for existing buildings, inducing voluntary energy-reduction efforts from building residents and by supporting development of innovative technologies. Certification is done according to BEECS (Building Energy Efficiency Certification System), G-SEED (Green Standard for Energy and Environmental Design), LEED (Leadership in Energy and Environmental Design), or according to Green Architecture Standards (similar to the LEED certification). The smart grid market and the green building market do provide market opportunities for European companies. With the development of both the smart grid and green buildings being strategic for Korea, companies having a technological advance or additional innovative benefits do have market potential in Korea.
Smart Grid & Green Buildings
2009-2012: Smart grid test-bed on Jeju Island 2012-2020: Expansion into metropolitan areas to
add intelligence on consumers 2020-2030: Nationwide Smart Grid of all intelligent
grid networks
Green Growth Policy – Implementation Phases
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Smart Grid & Green Buildings
The smart grid market and the green building market provide market opportunities for European companies Growing need for certification (G-SEED, LEED, etc.) Constant demand for technological advanced products
and solutions
Market Opportunities
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Construction Machinery
Korea ranked 6th in global ranking Korean companies with high focus on export Domestic market dominated by Hyundai Heavy Industries, Doosan InfraCore, and Volvo Construction Equipment
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Overview
Presenter
Presentation Notes
Construction Machinery: The construction machinery industry is a highly capital- and technology-intensive sector. High manufacturing costs and a variety of parts necessary for production make it essential to achieve economies of scale. The figures have also placed Korea as the sixth largest construction equipment producer in the world and Korea’s construction machinery industry is heavily export-oriented as the domestic demand is insufficient and often fluctuant. In this light, the sector is also exposed to international competition and the global economic environment. In Korea, there are approximately 460 construction machinery companies, including 10 equipment manufacturing companies, 50 attachment builders and 400 parts producers. The manufacturing market is dominated by three companies – two Korean and one multinational: Hyundai Heavy Industries Doosan InfraCore Volvo Construction Equipment According to the Korea Institute for Industrial Economics and Trade (KIET), Korea’s competitiveness in the sector is behind Japan and the US by about 10% points whereas the country has been maintaining its competitive advantage against China. Although Korean construction machinery industry presents a solid standing in the global market, there are shortcomings. In essence, Korea’s weakness in core technology and its inexperience in original design put Korea at a competitive disadvantage being behind by 5 to10 years compared with market leaders. Although Korean construction machinery industry presents a solid standing in the global market, there are obvious shortcomings. Korea’s weakness in core technology and its inexperience in original design put Korea at a competitive disadvantage compared with world market leaders.
Construction Machinery
Korea’s competitiveness behind Japan, US by about 10% points but ahead of China
Korean companies relatively weak in development of state-of-the-art core technology, original design
Korea at a competitive disadvantage being behind by 5 to10 years compared with market leaders
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Evaluation
Construction Machinery
The construction machinery market provide market opportunities for European companies Construction machinery based on state-of-the-art core
technology and original design Construction machinery with specialised functions and
employment areas
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Market Opportunities
Construction Material
Korea lacks natural resources Relies heavily on import of construction raw
materials (metallic and non-metallic minerals)
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Overview (1)
Presenter
Presentation Notes
Construction Material: Korea lacks natural resources and accordingly relies heavily on the import of construction raw materials such as metallic and non-metallic minerals. Korean companies run some refineries such as LS Nikko Copper or Korea Zinc. This is different picture for limestone where the domestic demand is almost completely satisfied by domestic production. The cement and steel industry was primarily built up in the 1960s when Korea invested heavily in housing and infrastructural projects to improve the country’s living and economic conditions. The cement industry is facing overcapacity and accordingly is in the progress of being reshaped by various capital transactions. Ceramic material originally used as roof tiles has lost market share due to the dominance of high-rise buildings where roof tiles are not necessarily used any more. Due to the cost pressure in the construction of apartment complexes, there is trend to substitute floor tiles by either cheaper or easier to construct material such as wood but especially wood imitate. The glass market, especially flat glass, is dominated by two Korean companies named Saint Gobain Glass – a French-Korean joint venture – and KCC. Glass is foreseen to remain in high demand due to need for the construction of high-rise buildings. The steel industry is dominated by two companies POSCO and Hyundai Steel who alone reach a combined market share of about 90%. Wood is primarily imported despite the fact that Korea is a heavily forested country. The lack of self-sufficiency is caused by the lack of mature timber. The construction material market does provide market opportunities for European companies. Similar to other industries, commodity or low-technology products are either imported from emerging markets such as China or produced locally; companies having a technological advance or additional innovative benefits instead do have market potential in Korea even if there is a mark-up in selling price.
Construction Material
Cement industry facing overcapacity, in progress of being reshaped
Glass market dominated by Saint Gobain Glass (French-Korean JV) and KCC, outlook to remain positive
Steel market dominated by POSCO and Hyundai Steel, outlook to remain positive
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Overview (2)
Construction Machinery
The construction machinery market provide market opportunities for European companies Commodity or low-technology products either imported
from emerging markets such as China or produced locally Companies having technological advance or additional
innovative benefits do have market potential in Korea –even if there is a mark-up in selling price.
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Market Opportunities
Regulations
Regulations
Construction industry is governed by various Korean laws such as: Framework Act on Construction Industry, Construction Technology Management Act, Electric Construction Industry Act, or Fire-Fighting System Installation Business Act
Overview
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Presenter
Presentation Notes
The construction industry is governed by various Korean laws such as the “Framework Act on Construction Industry”, the “Construction Technology Management Act”, the “Electric Construction Industry Act”, and the “Fire-Fighting System Installation Business Act”. There are other laws to adhere to beside those specific laws related to the construction industry. The Korea Fair Trade Commission is reviewing constantly potential cartels. The construction industry used to be in the very past known as an intransparent industry in respect to project biddings and pricing. That this custom has not completely vanished can be seen among others in the fact that in 2014 three case of bid riggings were detected such as construction project for Incheon subway line No. 2 (February 2014), in the construction project for Honam express railway (July 2014); and in a turn-key construction project for the Restoration of Four Rivers (November 2014). The “Kim Young Ran Act” also known as the anti-graft law scheduled for implementation on 28 September 2016 sets new rules in respect to the entertainment of governmental and public officials and is therefore considered to be an important milestone to fight corruption and bribery. There is no specific law or act in respect to sustainable construction; the only act is the “Construction Waste Recycling Promotion Act”, defining certain construction works in which the use of recycled aggregate or recycled construction waste is mandatory.
Regulations
The construction industry used to be in the very past known as an intransparent industry in respect to project biddings and pricing. Korea Fair Trade Commission reviews potential cartels /
price fixing “Kim Young Ran Act” aka anti-graft law (implemented 28
September 2016) regulates entertainment of governmental and public officials
Compliance
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Presenter
Presentation Notes
Conclusion The market outlook for the construction industry remains positive. This is due to large scale projects such as the Winter Olympics in Pyeongchang in 2018 but also due to the on-going investment in new residential and representative office buildings. The need to fight climate change will provide benefits and additional demand in the area of smart grid and green building technology. Other trends such as single-households or aging society leads and will lead to changed design of dwellings and in the latter case also to new building lay-outs considering “aged-care-services. The market chances for European companies are not necessarily seen in commodities such as high-rise apartment complexes but rather in niche areas or where a technology advance exists. This is true not only in construction itself but also for Smart Grid & Green Buildings, Construction Machinery and even Construction Material. It is important to team up with experienced partners in Korea – either with companies acting as agents etc or directly with one of the retailers to ensure an adequate market penetration and accordingly market success.
