A 2nd Middle East Boom for Korea?

The landmark deal worth 40 billion U.S. dollars to build and run four nuclear power plants in the United Arab Emirates is expected to give Korea an edge in the global market for nuclear reactors. Furthermore, Korea is likely to win a contract for power plant construction in Turkey worth up to 20 billion dollars. This bidding process is expected to begin in the first half of next year. The Korean government will also make forays into countries with high demand for nuclear plant construction such as India, Jordan, Kazakhstan, Thailand, Vietnam, South Africa and Indonesia. Though trade with Iran faces U.S. sanctions, the Islamic nation is also likely to turn to nuclear power to solve its power shortages.

Around 430 nuclear plants are expected to be built worldwide by 2030. The value of the global market is estimated as high as one trillion dollars, including plants ranging from as little as several billion to tens of billions of dollars. With the UAE deal, Korea has become the world’s sixth exporter of commercial nuclear plants along with the U.S., France, Japan, Russia and Canada. Nevertheless, Korea should step up and boost its bidding chances by gaining global recognition of its competitiveness in price, quality, safety and maintenance of the reactors. International power dynamics are also at play in the market, but Korea can overcome its competitors in the sector by providing tailored service to its customers as it did in the UAE deal.

The job creation effect of the UAE deal is probably less than that of the first Middle East boom of the 1970s and 80s. Construction of nuclear power plants requires fewer workers as that of expressways and ports, and most of the work must be commissioned abroad. The annual number of workers to be sent to the UAE over the next 10 years is expected to range from 4,000 to the tens of thousands. Yet even a conservative estimate for the number of jobs to be created in Korea from the deal should be at least 106,000.

Korea has just 5,000 highly skilled experts in nuclear power plant construction, and significantly raising this number is an urgent matter. The job creation effect from the deal will depend on such efforts. Unlike in the past, the country has stronger competitiveness in financial services, information and communications technology, and the green industry, which means they can be exported together with nuclear plants. This is where Korea can achieve indirect employment.

Whenever Korea saw an increase in the number of Mideast construction orders over the last 10 years, optimism grew over the potential for a second Middle East boom. The scale this time is humongous, however. The government can effectively make up for the shortage of jobs in Korea through the UAE deal and potentially with other Mideast countries. Seoul expects 200,000 jobs to be created next year, but private think tanks have a much lower forecast of 100,000 to 160,000. Amid the phenomenon of jobless growth, the nation is desperate to create even a single job.