S. Korea and the Gulf: Another golden chance


It was in the mid-1970s when South Korea succeeded for the first time in its history in establishing a foothold in the Middle East. It did that by exploiting the region’s first oil boom and consequent development plans to win contracts for its engineering companies.

Between 1975 and 1982, South Korean firms were heavily involved in tens of projects that were totally valued US$ 56 billion to build roads, ports, shipyards, and industrial and housing complexes in Saudi Arabia, Kuwait, the UAE, and Bahrain. As a result, the number of Korean workers in the Gulf gradually increased, reaching a peak of 100,000 men. This led, at the time, to some Arabs repeatedly talking about a conspiracy involving Seoul and Washington to eventually use these workers to seize oil fields and installations. Their claim was based on the fact that South Korea, a close ally of the West, imposed compulsory military service and therefore its labourers had the necessary qualifications for the alleged task.

Such talk, however, proved to be baseless as South Korean firms and workers perfectly completed their jobs and returned home, leaving behind a magnificent reputation.

In the 1980s, South Korean firms’ involvement in the region notably decreased as a result of the completion of most infrastructural projects on the one hand and the outbreak of Iran-Iraq war on the other. And unlike Seoul’s expectation of securing a big share in the post-1991 Gulf war reconstruction plans in Kuwait, the number of contracts won by the Koreans was smaller compared with that of 1970s. This was first attributed to severe competition from Western and Japanese companies and later to the consequences of the 1997 Asian financial crisis, which considerably affected South Korean firms.

However, the advent of the third millennium brought with it a golden opportunity for South Korea and the Gulf countries to develop their mutual relations and move towards new forms of cooperation, especially considering that both sides’ image and economic status have greatly developed since the time when they first established contacts.

Big South Korean firms (such as Hyundai Engineering & Construction, Hyundai Heavy Industries, GS Engineering & Construction, Doosan Heavy Industries & Construction, and Sungwon Corp.) have got rid of their financial and operative problems and seems to be now in a much stronger position with excellent accumulated experiences, something that makes them highly capable of competing oversees. A recently published report said that they have received this year alone orders totaling US$ 9.2 billion from foreign countries, including $ 3 billion from the UAE.

On the other hand, South Korea is moving ahead to be a regional centre in finance, transportation, high-tech industries, and knowledge revolution, having succeeded in past years to emerge as the world’s leading shipbuilder, second-ranking manufacturer of home electrical appliances, fifth-ranking producer of passenger cars and petrochemicals, and sixth-ranking steel producer. In the course of these developments, Seoul adopted several measures to move away from the policy of protectionism, and liberalize the economy.

Meanwhile, South Korea’s demand for oil and gas is increasing with greater concerns about securing sufficient supplies in a world characterized by severe competition from the Chinese, Indians, and Japanese. This has led Seoul to be more enthusiastic with regards to developing ties with its traditional suppliers in the Gulf.

As far as the Gulf region is concerned, it has been witnessing an economic boom in recent years, similar to that of the 1970s, with hundreds of development and construction projects being initiated. Much of this, of course, is attributed to the dramatic increase in oil revenues. According to a report, such a trend is expected to continue, given that the region’s total revenues from exporting oil and gas in the next 10 years may reach as high as $ 3 trillion, based on $40 per barrel.

Having learned lessons from their past mistakes in the 1970s oil boom, the Gulf countries are now more careful about investing their gigantic oil revenues. They are very concerned about directing larger investments towards those industrial and economic sectors that significantly contribute to their GDPs. There is also an emerging agreement among Gulf decision-makers that investment in human resources and advanced education on the Asian model should be given the priority at this historical phase. Nothing proves this better than a recent announcement by H. H. Shaikh Mohammed bin Rashid Al-Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai to allocate $10 billion for the purpose of human development and the promotion of knowledge and culture in the region.

Taking this into consideration, it was not surprising to describe Shaikh Mohammed’s two-day visit to Seoul last month as a historical event that took place at the right time. In fact, the UAE is in a position to successfully lead a wider-ranged economic cooperation, which combines the Korean technological and industrial power and experience and the Gulf natural resources and financial clout.

The UAE is South Korea’s second largest oil supplier, with 158 million barrels last year. Trade between the two countries has been steadily growing, rising from 8 billion in 2003 to $16 billion in 2006. Investments by UAE businessmen in South Korea have been increasing, with $8 billion being invested between 2002 and 2006 alone. The involvement of South Korean firms in the multi-billion dollar projects in Dubai is large as their number jumped from 57 in January 2006 to 105 last month. And finally, the UAE is currently the Middle Eastern headquarters for more than 50 South Korean companies of global competitiveness.

A more important factor, however, is the progressive vision held by Shaikh Mohammed, the mastermind of the Dubai miracle, and other UAE decision-makers who have learned from Asian models of development that nothing is impossible and that enlightened leadership, careful planning, decisiveness, dependence on gifted administrators, and reliance on figures and statistics, rather than outdated ideological concepts or revolutionary slogans, would lead to miracles.

Academic researcher and lecturer on Asian affairs

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