Trillions of won in Ukraine reconstruction, Korean construction companies say "just a pipe dream"

◇ Dominance in the U.S. and Europe... Domestic construction companies are in the early stages

According to industry reports on the 20th, Ukraine's reconstruction project is evaluated as a massive initiative that goes beyond simple recovery to rebuild the country's entire infrastructure. According to joint analysis by the World Bank and the European Union (EU), the cost of restoring roads, railways, power grids, and housing destroyed by the war is estimated to be about 1,200 trillion won (9 trillion dollars). The plan also includes rebuilding essential facilities such as airports, ports, hospitals, and schools, as well as the long-term introduction of smart cities and eco-friendly infrastructure. It is expected to have direct and indirect impacts not only on construction but also on related industries such as construction machinery, cement, and steel.

Although a super-large construction market is opening, the domestic construction industry’s response is lukewarm. The most significant factor is considered to be the high entry barriers. The Ukraine reconstruction market is already dominated by American and European companies. German building material company Knauf has established a manufacturing facility locally, and French Saint-Gobain is also operating a construction material factory. American nuclear power company Westinghouse has taken the lead in Ukraine’s nuclear power expansion project and has established itself as a key player in the market.

Meanwhile, domestic construction companies' market entry remains in its early stages. Hyundai Engineering & Construction signed an MOU for the reconstruction of Boryspil International Airport in Ukraine, and Samsung C&T entered into an agreement with Lviv City for smart city development. However, most of these efforts are still in the initial phase and have not yet led to substantial project awards.

◇ Government support is 'minimal'··· Concerns over project suspension and accounts receivable risks

Our government's support for Ukraine amounts to 850 million dollars (about 1.1 trillion won), ranking 14th among all supporting countries. This is in stark contrast to the United States and European countries, which fully support their domestic companies' market entry. Industry officials in the construction sector point out that it is realistically difficult to win large-scale projects without sufficient financial support and diplomatic cooperation from the government. A representative from a major construction company stated, "It is realistically difficult for domestic construction firms to independently secure large-scale projects in a market dominated by American and European companies."

Another obstacle to market entry is geographical and cultural limitations. Ukraine not only shares language and business practices with European companies but also has established a solid trust relationship through long-term exchanges. Domestic companies are considered to be in a relatively disadvantaged position.

The special situation of reconstruction projects after the war is also a burdensome aspect. The unstable political situation means construction could be halted at any time, and there is a high risk of not receiving payment for the construction costs on time. Domestic construction companies may lower their prices to compete, but there are concerns that this could reduce profitability and lead to potential losses for the companies.

Industry experts agree that a cautious approach is necessary, focusing on the long-term market perspective rather than immediate profits. A representative from a major construction company stated, "Now is the time to carefully examine realistic risks rather than expecting a reconstruction boom," and added, "Proactive government support and thorough business viability analysis by companies should come first."

However, there is also an expectation that the construction machinery and building materials industries are more likely to benefit from the reconstruction boom in Ukraine. HD Hyundai Construction Equipment and HD Hyundai Infracore have held the top two market shares in Ukraine even before the war. This suggests that additional orders utilizing these existing networks are anticipated. Furthermore, the increase in reconstruction demand is expected to serve as a 'downward support line' to defend against falling building material prices. Industries such as cement and steel are expected to benefit from increased demand, as their production capacities are difficult to expand in the short term.

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I hope that even in this economic downturn, the war will end quickly and positive developments will occur for our country...