Comprehensive and Specialized Construction Industries, Partitioned Business Area Regulations to Be Abolished

[Asia Economy Reporter Yoo In-ho] Starting next year, the invisible barrier between general construction and specialized construction will be dismantled. With the abolition of the compartmentalized territorial regulations between general and specialized construction that have lasted for 40 years, mutual market entry between construction businesses has become possible.

The Ministry of Land, Infrastructure and Transport announced on the 10th that it will begin a legislative notice from the 11th for the amendment of subordinate laws to implement the "Framework Act on the Construction Industry," which abolishes territorial regulations between general and specialized construction as part of construction industry innovation measures.

With the abolition of territorial regulations between general and specialized construction, construction businesses registered in two or more specialized fields can receive prime contracts for general construction composed of specialized works corresponding to those fields.

General construction businesses will also be allowed to receive prime or subcontracting for specialized works corresponding to their registered construction fields in a phased manner (public projects in 2021 → private projects in 2022).

However, to protect small specialized construction companies, subcontracting is only allowed to specialized construction businesses for contracts under 1 billion KRW, and for specialized works under 200 million KRW, subcontracting to general construction businesses will be permitted starting in 2024.

The government decided to abolish the territorial regulations between general and specialized construction because since the introduction of specialized construction in 1976, side effects such as reduced fair competition, an increase in paper companies, and hindrance to corporate growth have occurred. The system (Article 16 of the Construction Industry Act) that allows only general construction companies to perform complex projects (prime contracts) and only specialized construction companies to perform single projects (subcontracts) has been criticized as a Galapagos regulation with no precedent in advanced countries.

Through this amendment of subordinate laws, the Ministry of Land will organize detailed matters such as mutual recognition of performance and strengthen and improve the direct wage payment system to ensure that the achievements of construction industry innovation are delivered without leakage to construction workers and others.

According to the main contents of the legislative notice, a basis for the announcement of construction qualification decision and ordering guidelines (Article 19, Paragraph 1) has been established. Since confusion regarding construction qualifications is expected in the early stages of abolishing territorial regulations between general and specialized construction, the government has prepared a basis to announce ordering guidelines so that ordering parties can select construction businesses suitable for the project to facilitate early settlement of the system.

The legislative notice period is from the 11th to July 21st, and after consultations with related agencies, regulatory reviews, and legal affairs office reviews, the subordinate law amendment will be finalized by October.

Minister Kim Hyun-mi stated, "With the abolition of the compartmentalized territorial regulations between general and specialized construction that have lasted for 40 years, mutual market entry between construction businesses will be possible, promoting fair competition and expanding the ordering party’s choice of construction companies, thereby reorganizing the market centered on construction capabilities. We will conduct nationwide education and publicity for ordering institutions and construction businesses before the law takes effect in January next year to ensure the early settlement of the new construction production structure."

She added, "We will also promptly prepare amendment bills after discussions at the Construction Innovation Committee this month regarding industry restructuring plans such as the major classification of specialized construction to promote their entry into the general market, the public announcement system for main fields, and the reorganization of facility maintenance businesses."

This content was produced with the assistance of AI translation services.