1. Lee Seung-Bok 14-15th November 2013 The 19th ASIA CONSTRUCT CONFERENCE 2013 Economy and Construction Industry - KOREA -

2. Contents Review of Macro Economy 1 Overview of Construction Industry 2 Construction Outlook 2013 3 1.1 National economic conditions 1.2 Main economic indicator 1.3 Exports and imports 1.4 Five major trading countries 2.1 Construction investment 2.2 Construction company and employee 2.3 Productivity and wage 2.4 Annual export of construction services 3.1 Korean economy outlook 3.2 Construction outlook

3. 1. Review of Macro Economy

4. The Korean economy has successfully passed through the global financial and economic crisis. - An improvement in domestic demand helped by improving terms of trade and inflation The Outlook of Korean economy is expected to be positive growth, and it’s pace might strengthen. - Due to the Increase of domestic demand and the recovery of world economic situation - GDP growth : 0.3% ⇒ 2.0% ⇒ 2.8% (2009) (2012) (2013, forecast) 1.1 National Economic conditions 1

5. 1.2 Main Economic Indicator The GDP growth rate recorded 0.3% in 2009, and it had greatly been up to 6.2% in 2010. However, the GDP growth rate and the construction sector has been slow down since 2010. - The overall consumption showed a slight decline, despite the strength of cordless telephone and automobilecar demand. The GDP growth rate’s provisionally increased and expected by 2.8% in 2013. [Figure 1.1] GDP growth rate by economic activity (in year on year terms) (unit : %) 2 1. Review of Macro Economy

6. 1.3 Value of Import and Export Goods account was recorded a surplus of $20.0 billion in the first half of 2013. - The sharply increase of export exceeding the increase of import During the first half of 2013, export grew by 0.6%, and import decreased by 2.8% compared to the same period of last year. - Due to the effects of cordless telephone, automobile market recovery and the investment in china, south America and so forth. Export and Import (unit: bill. US$) 20062007200820092010201120122013.2Q Export (increase rate) 325.5 (14.4) 371.5 (14.1) 422.0 (13.6) 363.5 (-13.9) 466.3 (28.3) 555.2 (19.0) 547.8 (-1.3) 276.6 (0.6) Import (increase rate) 309.4 (18.4) 356.8 (15.3) 435.3 (22.0) 323.1 (-25.8) 425.2 (31.6) 524.4 (23.3) 519.5 (-0.9) 256.6 (-2.8) Balance of trade 16.114.6-13.342.641.130.828.320.0 3 1. Review of Macro Economy

7. 1.4 Five Major Trading Countries The major trading countries of Korea in 2013 are China(US$ 695 billion), Japan and America. - Saudi Arabia and Qatar are the major countries of oil imports. The major trade goods - Exports: automobile, cordless telephone, electronic IC, ships etc. - Imports: oil, electronic IC, gas, petroleum products etc. Major Trading Countries in the first half of 2013 (unit: mill. US$) Rank ExportImport CountryValueCountryValue 1China69,537China40,979 2America31,299Japan30,500 3Japan17,120America20,834 4Hong Kong13,477Saudi Arabia18,199 5Singapore12,053Qatar13,634 4 1. Review of Macro Economy

8. 2. Overview of Construction Industry

9. 2. Overview of the Construction Industry 2.1 Construction Investment The construction contract since 2007, showed the minus growth rate except 2011. - Until 2007, the construction business has risen helped by buoyant housing business. With the global financial crisis, however, domestic housing business was greatly shrunken in the end of 2007. - Since early 2008, the expansionary policy’s been led the by korean government to rise mainly for infrastructure projects. - The residential construction contracts in 2011 increased rapidly into 22.4% brought the positive growth in total. - However, construction contracts including civil and privates deeply decreased by the domestic recession since 2012. In the first half of 2013, the construction contracts showed negative growth 0f 24.2% reaching a value of US$ 44.3 billion. 5

10. 2. Overview of the Construction Industry 2.2 Construction Company and Employee The number of Contractors by Type - Since 2010, the number of total construction company has slightly decreased. ▪ Equipment contractors have kept increasing. By contrast, Specialized trade contractors and general work contractors have steadily decreasing. - The numbers of small construction company has increased ▪ As the bidding system for public project is insufficient to discriminate, small companies that compete with huge companies are suffering from bidding. The number of Construction Company 20062007200820092010201120122013.8 General contractors 12,91412,84212,59012,32111,95611,54511,30411,058 Specialized contractors 35,04036,42237,10637,91438,42638,10037,60537,542 Equipment contractors 5,3875,4785,7685,9946,1516,3306,4636,619 Total 53,34154,74255,46456,22956,53355,97555,37255,219 6

11. 2. Overview of the Construction Industry 2.2 Construction Company and Employee The number of construction workers - The number of workers shows up-and-down pattern in the construction industry. ▪ The number of workers in 2008 decreased slightly and sharply fell by 1.72 million workers in 2009 with the deepest recession affected by global financial crisis. The number of employee in September 2013 has already achieved the same amount of level as the previous year. The number of workers in Construction (unit : thousand person) 20062007200820092010201120122013.9. Employees1,8331,8491,8121,7201,7531,7511,7731,788 7

12. 2. Overview of the Construction Industry 2.3 Productivity and Wage The value added per employee - In 2008, the index of value added product per employee was changed into 100. - The value added per employee construction dropped from 118.4 in 2009 to 84.6 in 2012. The value added per employee in each industry has been gradually worsen since 2010 in spite of the growth in manufacturing. The value added per Employee (unit: %) 20082009201020112012 Construction109.6118.4100.089.984.6 Manufacturing91.192.4100.0103.8106.2 Service97.396.1100.099.6 Primary sector95.8102.0100.098.099.9 8

13. 2. Overview of the Construction Industry 2.3 Productivity and Wage Wage - The wage has gradually increased since 2005 - In September 2013, the average wage per day ▪ chief workers : about 90.7 dollars ▪ special daily wage : about 87.1 dollars ▪ normal daily wage : about 81.1dollars [Figure 2.1] Average Salaries in the Construction Industry (unit : Korean won) 9

14. 2. Overview of the Construction Industry 2.4 Annual Export of Construction Services - Total exports in construction are 45.1 billion dollars in September 2013, compared to 32.6 billion dollars in the same period of 2012. - Top five major countries for construction export are usually included Middle- east Asian countries, Vietnam and so forth. - In 2010, there was United Arab Emirates (U.A.E) nuclear power plant contract. Top five countries for construction export (unit: million US $) Rank 201020112012 2013.9 Country Value Country Value Country Value Country Value 1 U.A.E25,602 Saudi Arabia 16,588 Saudi Arabia 16,167 Saudi Arabia 8,266 2 Saudi Arabia 10,531Brazil4,606Iraq9,636Australia5,855 3 Kuwait4,893Iraq3,666Kazakhstan4,161Singapore3,435 4 Vietnam3,298Vietnam3,459Vietnam3,416Vietnam3,151 5 Australia3,246Singapore3,289Singapore3,345 Turkme nistan 2,471 10

15. 3. Construction Outlook 2013

16. 3.1 Korean Economy Outlook Korean Economy is stagnant between 2 and 3 percent. * forecast - Korea's GDP growth has increased since 2012 but the rate not changed quickly. - In 2010, however, the growth rate rose into 6.8% with economic activity increasingly led by the private sector. - The growth rate in 2013 is projected to be 2.8% due to the successful achievement in the export of the cordless telephone and automobile. [Figure 3.1] Korea’s GDP growth (unit : %) 11

17. 3. Construction Outlook 2013 3.2 Construction Outlook The construction investment was -2.2% in 2012. - Due to Korean government policy to cut down the construction investment and domestic demand reduction. The construction investment is forecasted to achieve 2.2% growth in 2013, but public construction sectors to drop about 4%. - The Korean government still plans to cut down the budget about 20.1 billion dollars in 2013. Prospect of Construction Investment in 2013 (unit: %) Segment2012 annually1 st half of 20132 nd half of 20132013 annually Construction Investment -2.22.41.72.2 12

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