Government to Fund Up to 60% of Overseas Construction Investments... Joint Funds with Macquarie and Others Planned

The government will significantly strengthen financial support to enable domestic construction companies to enter profitable overseas investment and development projects based on their technological capabilities. The key strategy is to shift from the traditional focus on engineering, procurement, and construction (EPC) contracts to a model that combines finance and technology (EP+F), thereby maximizing profitability. On December 12, the Ministry of Land, Infrastructure and Transport approved the "New Government Overseas Construction Policy Direction" at the Ministerial Meeting on External Economic Affairs.

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First, the government will introduce a new "Corporate Partnership Fund" (tentative name), where the government shares the burden of capital procurement and risk with companies. When a domestic company pursues an overseas development project that requires equity investment, the Korea Overseas Infrastructure & Urban Development Corporation (KIND), under the Ministry of Land, Infrastructure and Transport, will jointly establish a fund with private companies to provide capital together. The support ratio will be 50% for large corporations and up to 60% for small and medium-sized enterprises (SMEs) with limited financial resources. From the companies' perspective, this reduces their initial investment burden to less than half. In particular, to ensure that diplomatic achievements such as Korea-US trade cooperation lead to actual contract awards, the government will strengthen support for government-to-government (G2G) projects. The government will utilize the emergency feasibility study system to accelerate project commercialization, and KIND will proactively participate in projects to reduce risk.

To support these measures, the government will increase KIND's capital and significantly expand its investment scale. This responds to concerns that the previous per-project investment size was too small to secure sufficient equity, making it difficult for companies to obtain decision-making authority or leadership in projects. The average investment per project, currently between 30 billion and 100 billion won, will be increased, and the number of annual investments will be expanded well beyond the current nine cases. The capital base (currently 600 billion won) will also be further increased. For construction management (CM) and project management (PM) companies participating in investment and development projects, KIND's investment limit will be relaxed from the current "1x contract effect" to "3x contract effect."

The government will also seek to discover high-quality projects using the global financial network. Joint funds will be established in partnership with global developers specializing in large-scale infrastructure projects, such as Macquarie of Australia, Vision Invest of Saudi Arabia, and Sumitomo of Japan. Through these joint funds, direct investments will be made in projects involving Korean companies, and if there is a high likelihood of a Korean company winning a contract, the government is considering exceptionally allowing investments through private equity funds (PEFs). KIND is also pursuing joint funds with major sovereign wealth funds such as the Oman Investment Authority (OIA) and Indonesia Investment Authority (INA), matching funds on a 50:50 basis. The government plans to establish partnerships by signing memoranda of understanding (MOUs) with these entities and proactively secure valuable project information in which Korean companies can participate.

Collaboration with multilateral development banks (MDBs) such as the World Bank and the Asian Development Bank will also be strengthened to expand opportunities for Korean companies. The government will support Korean companies in participating from the initial consulting stage of MDB-commissioned projects by providing bidding information and assisting with proposal preparation. The strategy is to create favorable conditions for Korean companies from the early stages, thereby increasing the likelihood of winning main contracts. To this end, the existing "Overseas Infrastructure Cooperation Centers" in seven key countries will be strategically repositioned as global financial hubs and given functions for project development and investment, providing on-site support for Korean companies' overseas expansion.

According to the Ministry of Land, Infrastructure and Transport, the profit margin for simple EPC projects such as plants and infrastructure is only 3-5%, whereas investment and development projects can yield returns of around 10%. With the simple construction market becoming a "red ocean" due to low-price competition from emerging countries like China, the government aims to transform the industry structure through package contracts that combine finance.

Employees are inspecting the progress of work at an overseas plant construction site of a domestic company. The government has decided to introduce a corporate matching fund and significantly strengthen financial support to assist our companies in advancing overseas investment and development projects.

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The government will actively promote convergence-type contracts in which construction companies collaborate with other industries, such as manufacturing, rather than bidding alone. When Korean manufacturing companies such as semiconductor or automobile makers build overseas factories, proven domestic construction companies will be encouraged to participate. For large-scale projects that require the integration of construction and industrial equipment technologies, such as nuclear power plants or industrial plants, a pan-ministerial support team will be mobilized to provide comprehensive government-level support.

The government will also actively support entry into new markets related to digital and smart technologies in response to rising demand for artificial intelligence (AI). Exports of data centers will be expanded, and cooperation in the construction of battery energy storage systems (BESS) and power transmission and distribution networks will be strengthened. Digital twin projects, in which IT companies and construction firms collaborate, have also been identified as promising models. A representative example is the 2023 contract secured by Naver, Korea Land and Geospatial Informatix Corporation (LX), and Korea Water Resources Corporation to build digital twin platforms in five Saudi Arabian cities. Railways and airports will be exported as core package products that integrate design, construction, and operation.

The government expects that as multilateral development banks (MDBs) such as the World Bank and Asian Development Bank introduce quality-focused procurement regulations, opportunities for technologically advanced Korean companies to enter these markets will expand.

Administrative regulations that have hindered overseas operations will also be significantly relaxed. The number of government notification categories under the Overseas Construction Promotion Act will be reduced from seven to six, and the reporting deadline will be changed from "10 days before the scheduled bid date" to "before the scheduled bid date," allowing companies to respond to urgent local bidding schedules. In addition, ambiguous "accident" reporting standards have been clarified to eliminate concerns about unnecessary fines.

Support measures to address labor shortages at overseas sites have also been included. When SMEs and mid-sized companies hire young workers, the on-the-job training (OJT) subsidy will be increased from 1 million won to 1.5 million won per month, and the support period will be extended from 12 months to a maximum of 24 months. The designation of specialized high schools and universities for overseas construction, plant, and PPP projects will also be expanded.

Minister of Land, Infrastructure and Transport Kim Yoonduk stated, "We will spare no policy support to enhance our companies' technological capabilities and financial strength so that they can secure leadership in the overseas construction market." He added, "Korea's construction balance contributes to the current account at the highest level globally, and last year, cumulative overseas orders surpassed 1 trillion dollars. We will actively foster the overseas construction industry, a key pillar of our economy, to create high-quality, high value-added jobs."

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