Ministry ramps up financing for small builders

The government is ratcheting up efforts to shore up cash-strapped small- and mid-size builders by bankrolling their overseas expansion.

The Ministry of Land, Transport and Maritime Affairs said Sunday it will provide 3.01 billion won ($2.66 million) for new construction projects this year, up more than 38 percent from 2011. It plans to frontload 2.84 billion won, or 94.4 percent, in the first half to sponsor 76 programs.

Sixty small and midsize companies will receive at total of 2.44 billion won, or nearly 86 percent of the total. About 75 percent of their projects were designed for on-site negotiations and client invitations, while the remainder focused on feasibility studies, the ministry said.

“The funds will alleviate the financial burden on SMEs that lack experience in the international construction market and broaden their business domain to untapped regions in the Middle East, Central and South America and Africa,” the ministry said in a statement.

The government has been striving to help teetering builders secure new revenue streams as they grapple with doldrums in the domestic real estate market.

Between 2003 and 2011, the ministry channeled some 11.9 billion won into 467 programs, which resulted in 52 contracts worth $3.07 billion.

While conglomerate-backed major players enjoy their growing clout abroad, however, a decline in housing sales and new orders here prompted a series of bankruptcies among mid-size builders last year, with some facing delisting on the stock market currently.

“Despite relatively sound overseas performances and an improving local housing market, construction firms are confronting a murky business climate and investors are shying away from their high-spread shares,” Hyundai Securities said in a recent report.

Still, ministry officials remain upbeat this year as stalled energy and infrastructure projects are poised to pick up, accelerating a reconstruction drive in the Middle East and North Africa on the heels of a civil war.

The government aims to reach $70 billion in overseas orders this year, up from $59.1 billion on-year, and pledged aid for ailing builders for technology exports and local housing projects.

At home, the ministry plans to build 450,000 new homes and implement 64 percent of its social overhead capital budget, worth 13.7 trillion won, during the first half of this year.

IHS Global Insight, a research firm, expects the global construction market to grow 6.2 percent in 2012 to top $8 trillion, driven by brisk power plant and infrastructure programs in emerging economies. That reflects a 2.7 percent rise from last year’s $7.3 trillion.

By Shin Hyon-hee (heeshin@heraldcorp.com)