South Korean companies are increasingly concerned that Seoul's worsening ties with Libya and Iran may deal a blow to their businesses in the countries, industry sources said Wednesday.
The deportation of a South Korean diplomat suspected by the Libyan government of spying sparked diplomatic turbulence between the two countries in mid-July, and on Tuesday, the U.S. asked the South Korean government to work together on the Iranian nuclear standoff by freezing the assets of the Seoul office of Bank Mellat, an Iranian bank.
The sources expressed worries that the continuation of the strained relations would hit South Korean builders and exporters hard since Libya is a key overseas construction market and Iran is a major export destination.
As of August, about 20 South Korean builders, including the local top builder Hyundai Engineering & Construction Co., were conducting construction projects worth a combined US$9.2 billion in Libya, whose construction market is the local builders' third-largest overseas market, according to the International Contractors Association of Korea (ICAK).
In the first six months of the year, the local builders won $104 million in new orders from Libya.
The builders are worried that they may fail to clinch new orders from Libya, giving up the country's construction market to foreign rivals, unless Seoul and Tripoli improve their relationship at the earliest possible time, the sources said.
Local exporters like steelmakers, chemical producers and small- and mid-sized auto companies remain wary over whether the tough economic
sanctions against Iran by the U.S. and European Union may hurt their exports to the Middle Eastern country, the sources said.
Iran is South Korea's biggest trading partner among the Middle Eastern countries. According to the state-run Korea Trade-Investment Promotion
Agency (KOTRA), two-way trade reached $4 billion last year.
KOTRA estimates that bilateral trade between the two countries dropped by about $300 million last month due to the international sanctions against Iran that were launched in June.
Three local builders, including Daelim Industrial Co., are carrying out
their construction projects worth $1.5 billion in Iran, said ICAK.
However, South Korean builders are sitting on their hands when it comes to obtaining new orders, the local construction association said.
GS Engineering & Construction Co.'s $1.2 billion deal with Pars Oil and Gas Co., a wholly owned unit of National Iranian Oil Co., was scrapped last month mainly due to the U.S.-led economic sanctions against Iran.