It has been reported that a percentage of Korean builders have yet to receive any payments for construction projects abroad, mostly from oil-producing countries in the Middle East that are experiencing financial difficulties due to low oil prices.
Work on a $6 billion refinery project in Iraq being led by Hyundai Engineering & Construction (E&C) has been recently suspended due to the Iraqi government's late construction payment, raising concerns about its solvency.
According to a market analyst, "It is almost impossible right now for Korean companies to receive construction payments from countries that heavily depend on oil exports, such as Venezuela and Iraq."
He also stated, "Unpaid construction payments could burden Korean builders that have already experienced difficulties in sales along with the global recession."
According to a construction report, the nation's top five builders have yet to receive a total of 8.81 trillion won ($7.5 billion) of outstanding payments from all their construction projects at home and abroad as of the first quarter of this year. Of them, Hyundai E&C is due payments of 2.5 trillion won while Daewoo and GS E&C are due 2.1 trillion and 1.7 trillion won, respectively.
Experts say unpaid work on overseas projects would especially strike a heavy blow to the finances of these companies.
Hyundai E&C has yet to receive a total of 1.5 trillion won from the 10 major overseas projects that account for 5 percent of the company's annual sales. Of them, six projects worth 838.3 billion won are in Middle East countries, including Qatar and Iraq. Venezuela has yet to pay for the construction of a refinery worth 223.2 billion won.
Likewise, GS E&C also has yet to receive 828.6 billion won for 18 overseas projects. Of them, 11 projects worth 565 billion won are in the Middle East. Also, another major builder Samsung Construction & Trade reportedly has yet to receive a total of 583.2 billion won for projects it is building in the Middle East.
Experts point out those such delinquencies in the Middle East took place because Korean builders clinched construction orders before determining their buyers ability to pay.
Due to the decline in the nation's housing market in the late 2000s, Korean builders shifted their work to the overseas market and won many construction projects in the Middle East without considering the projects costs and their future solvency.
Hyundai E&C has completed 99 percent of a construction project in the United Arab Emirates but has yet to receive more than 100 billion won for the work. GS E&C reportedly completed more than 95 percent of its construction projects in several Middle East countries but has not yet received any payments.