Connect to share and comment

S. Korea unveils measures to boost construction and plant exports


SEJONG, Aug. 28 (Yonhap) -- South Korea said Wednesday that it will launch a new type of private equity funds (PEFs) aimed at encouraging the participation of private-sector financial firms in helping local companies win overseas plant and construction orders.

The government will also expand its loan guarantee and other supports for small- and medium-sized firms in getting overseas contracts through state-run policy banks and trade promotion agencies.

Under those measures, the government plans to launch PEFs where state-run policy banks shoulder losses ahead of private sector financial institutes when a related project goes sour.

The move is aimed at stimulating private-sector participation in financing large-scale overseas construction projects by providing a "buffer" for future losses.

By 2017, about US$8.6 billion will be raised for the funds. Customarily, financial support provided through such funds accounts for 10 percent of total business-related costs, which means that $8.6 billion can be involved in about $86 billion worth of overseas projects, the government explained.

To further encourage the private sector, the government will offer diverse support for currency risk management, loan guarantees and trade-related insurance services. It is expected to lead to about $10 billion flowing into the market from the private sector.

Those measures are part of the government's push to boost overseas construction and plant exports by local builders, which recently have been struggling to win orders amid intensifying global competition.

During the first half, South Korea's overseas construction and plant exports grew 3.1 percent from a year earlier, which was far slower than the annual average growth rate of 9.7 percent in the previous five years. In particular, plant exports fell 1.9 percent over the cited period.

The government expects that those measures will lead to about 3.9-4.7 percent annual growth in the country's overseas construction and plant orders. They are also expected to generate 150,000 jobs and induce $1.4 billion worth of production every year.

The government, meanwhile, said that it will allow state-run policy financial agencies to tap into the country's foreign reserves through a currency swap to provide liquidity to cash-strapped large-scale construction projects. But the government noted that it will be restricted only to "emergency" cases.

<All rights reserved by Yonhap News Agency>