South Korea will seek a "second Middle East boom" by strengthening economic cooperation with countries that are preparing for the post-oil era, the government said Thursday.
In a national trade and investment promotion meeting, chaired by the President Park Geun-hye, policymakers stressed the considerable potential for local companies to tap large scale development projects in resource-rich countries that are scrambling to build up their economic and social infrastructure before their energy reserves run out in the coming decades.
Extensive orders won by South Korean companies in the 1970s and 1980s brought about the first Middle East boom that laid the foundation for the country's rapid rise to economic prosperity.
The meeting was held in part to capitalize on Park's recent trip to Saudi Arabia, Kuwait, the United Arab Emirates and Qatar, and formulate realistic follow-up measures.
During the visit early this month, South Korean businesses inked 44 memorandums of understanding worth $906 million.
The government said if all projects that local companies expressed interest are secured, the total could exceed $40 billion. Some estimates have said size of prospective projects to be pursued by Middle East countries could reach as high as $750 billion won over the long haul.
"By forging close ties and meeting specific development demands, South Korea could generate a new growth momentum for itself," said the finance ministry, which coordinates economic policies.
The foremost plan is for South Korean companies to move up the value added chain in the overseas industrial plant sector with the goal of securing at least $70 billion in fresh orders this year and $80 billion in 2016.
Last year, South Korean builders won $66 billion worth of orders abroad with the bulk of the mega projects coming from the Middle East.
"Emphasis will be on greatly increasing financial support for local builders so they can engage in so-called investment development projects," Deputy Finance Minister Jeong Eun-bo said.
Such projects require the builder to become an investor in the project, allowing it to partake in earnings and play a role in management instead of just acting as building contractors.
The government will earmark an extra 5 trillion won ($4.43 billion) in funds to help local companies secure such projects. It will get financial institutions to set aside 300 billion won worth of "joint loan guarantees" that will mainly go to helping small and medium-sized builders. Lenders will make available 1 trillion won worth of indirect lending to all companies wanting to expand abroad.
There will also be larger credit lines and multilateral development bank loans that can be used to win orders.
Notable projects include two or more System-integrated Modular Advanced Reactors in Saudi Arabia that would invigorate South Korea's atomic energy exports that have made slow progress in the past few years. The SMART plan could also permit South Korea and the Middle East kingdom to jointly export the reactor to other countries.
The reactors have one-tenth the output of conventional commercial power plants, with many countries considering such units.
Besides construction and plant exports, the government said it will meet the steadily rising demand for halal foods, whose global market reached $1.08 trillion in 2012 and is expected to grow to $1.62 trillion in 2018, roughly 17.4 percent of the global total.
Halal foods refer to products consumed by Muslims under Sharia law that are prepared in a specific way according to Islamic customs.
"As of last year, South Korean firms shipped out $680 million worth of halal products, but it aims to increase this by setting up a specialized production complex that can better allow supervision," the official said. The goal is to export $1.23 billion worth of halal foods in 2017.
The government said it will also hone in on expanding ties in the service sector through at least 150 billion won in funds to support health and medical related projects in the second half of this year.
Medical services are promising because Middle East countries have far smaller numbers of doctors per capita than other countries and one-tenth the number of hospital beds compared with South Korea.
For cultural contents, a 200 billion won fund will be created to promote joint projects.
For foreign investment, the government said the goal for 2015 was to attract at least one service-oriented investment region in the country while drastically slashing existing restrictions to attract more investments. In the past, foreign direct investments have been centered on manufacturing.
The government plans to incorporate 14 new service businesses as being eligible for tax breaks.
Related to FDI, the finance ministry said the Saemangeum reclamation region in the southeastern part of the country will become a special development project with various incentives to overseas investors.
The region, covering 409 square kilometers of land, is idyllically situated across the Yellow Sea to be used as a launching base for companies interested in selling products to or operating in China.
"The region will be given favors in the hiring of foreign workers and immigration rules, as well as a host of financial benefits and easing of building and development rules," Jeong said.
The government will ease requirements for permanent residence visas for foreigners who work in key research and development fields, the official said.
At present, such visas are given only if a person resides in the country for five years, but this may be lowered to three.
The easing of rules can encourage immigration of highly qualified workers, especially since the country's population growth is slowing down.
The government hopes that closer ties with the Middle East will help South Korean nationals find more work abroad. In 2014, some 5,000 workers were sent abroad, with the goal to double the number by 2017.
Deputy Prime Minister Choi Kyung-hwan said after the meeting that dispatching of workers to the Middle East is promising because these countries already rely extensively on outsiders for its industrial sectors.
"These countries can become an outlet for South Korean job seekers with skills in nuclear power generation, IT and medical expertise," the policymaker said.
The industry ministry said it plans to spend some 12.4 trillion won on safety infrastructure projects in 2015, with money going to improving safety standards and into the development of cutting-edge technologies.
"Because locally built reactors, as well as other plants, will be going online, such facilities can hire South Korean safety workers, which can help with employment," said Park Chung-won, deputy minister of industrial policy.
Large local companies will invest some 3 trillion won, or 700 billion won more on-year, in safety technology this year, aiming to export some of the technology and know-how to the Middle East and Southeast Asia. (Yonhap)
