Second Middle East Boom

In early 1975, approximately a year after the first oil shock hit the world, Hyundai Group Chairman Chung Ju-yung announced his conglomerate’s advance into the Middle East. “Global money is flowing into the Middle East, a source of oil. The Middle East is not only the cause of the global recession but also the answer to overcoming it. This is the very reason we have to go to the Middle East,” he said. In his autobiography, he wrote, “Behind Hyundai’s rise as Korea’s largest business was its advance into the Middle East.”

Teheran Road in Seoul’s southern district of Gangnam symbolizes Korea`s previous business boom in the Middle East. In June 1977, Samneung Road was renamed Teheran Road in commemoration of the Iranian capital mayor`s visit to Seoul. The Middle East boom started with Korean companies building roads and harbors but started to fade in the mid-1980s due to falling oil prices, rising emerging markets such as China and Southeast Asia, and the outbreak of the Persian Gulf War. In the 21st century, oil prices skyrocketed again to give Mideast countries hundreds of billions in oil money. Under these circumstances, Korean companies began entering the Middle East again.

The U.K.-based Financial Times said Korean companies last year won 36 billion dollars worth of construction projects in the Middle East, or one quarter of the region’s total and more than 15 times Korea’s 2003 figure of 2.3 billion dollars. While the daily has often criticized Korea in exaggerating the country’s economic woes, it reported on Korean business success in the Middle East in emphasizing the country`s landing of a huge order to build nuclear power plants in the United Arab Emirates. The Times said Korea is enjoying a second Mideast boom following that of the 1970s.

The search for a buyer for Hyundai Engineering and Construction, the group’s pioneer in the first Middle East boom, is underway. Korea Exchange Bank is expected to find a managing underwriter for the builder early this month. The bidding will likely be led by Hyundai Heavy Industries and the Hyundai-Kia Automotive Group. Amid the second Middle East boom, whether the value of the Hyundai Group will rise is drawing interest. No matter who buys it, Hyundai Engineering and Construction will attract attention should it spearhead another Korean advance into the Middle East.

Editorial Writer Park Yeong-kyun (parkyk@donga.com)