By Leo Lewis business.timesonline.co.uk
The three towers rise grimly into the skyline, the worldfamous logo just visible through a freezing fog that has grounded flights and made Seoul even grumpier than usual. It is a drab starting-point for the romantic-sounding “New Silk Road” — the re-emerging network of trade links between Asia and the Middle East that, some say, stands to connect the regions in one giant band of growth and to redraw the global economic map.
The three towers perched at this easternmost end of the New Silk Road form the new HQ of Samsung, the conglomerate that drives more than one eighth of South Korea’s economy and whose flagship electronics division is poised to leapfrog Hewlett-Packard as the world’s biggest technology company. Thousands of miles west along the New Silk Road, soaring from the dunes of Dubai, is the world’s tallest building: the 828-metre-high Burj Khalifa, also brought to you by Samsung.
“I think we can expect a taller tower to be built,” says Yeon Joo Jung, the new president and chief executive of Samsung C&T (construction and trading), who has been in charge for only two months but whose engineers are muttering already about plans for a building soaring a kilometre into the sky. “The ambition is never going to go away. Fortunately, we are the only construction company in the world with building experience above 500 metres.”
Samsung has made a speciality of the spectacular. Other landmarks on the New Silk Road — the Taipei 101 tower in Taiwan and Petronas Towers in Malaysia — are Samsung-built demonstrations of what happens when cash combines with one-upmanship.
But the Burj Khalifa has taken Samsung’s construction business into new realms. When the contract was awarded in 2004, it was the first big project that South Korea had won in the Middle East for many years. It has acted, Mr Jung says, as the ultimate calling-card: in the five years since Samsung broke new ground with the Burj, Korean companies have stormed in from the wilderness. By 2009, they had picked up a quarter of all big construction contracts in the Middle East and North Africa — business worth a total $71 billion (£45 billion) to South Korea last year alone.
And, suddenly, Samsung and its cohorts are no longer seen as niche experts in tall buildings. In December, a few days before the official opening of the Burj, Samsung joined a consortium that won the biggest-ever overseas contract landed by South Korea: a $40 billion deal to build and run four nuclear power plants in Abu Dhabi.
The Korean bid was understood to have come in 40 per cent lower than rival offers, sending a stunning message both to potential clients across the Middle East and to the traditional giants of the nuclear industry in the United States, France and Japan. It is a message touting South Korea as a contractor of low cost and high quality — and one that Samsung is seeking to play up as it bids for contracts in the petrochemical industry and as countries such as Libya, Saudi Arabia and others pour oil money into infrastructure.
Bridges, railways and tunnels, Mr Jung adds, are another area where Samsung intends to establish itself as Asia and the Middle East’s contractor of choice. Samsung C&T has even managed to gain a foothold in alternative energy. It recently struck a $7 billion, 20-year deal with Ontario to build a 2,500MW wind farm. “We are basically looking at any construction that requires advanced technology. In developing markets, we have a key competitiveness because of that.”
He is more cautious about prospects in the next stop west along the New Silk Road: China: “Globally, the trend among governments is to strengthen their protectionist policies — and that includes China. For construction industries, that means governments are enforcing requirements for using local resources and companies … Of course, there are many construction companies in China, so they can do a lot of projects locally. We are considering setting up an office there, though: the Burj project has promoted us strongly everywhere.”
Burj — notwithstanding the recent closure of its observation deck for technical reasons — also provided a rich source of engineering experience that no other construction company currently has. Pumping concrete to a level of 601 metres, calculating the effects of the wind at 828 metres and the whole issue of building on sand have given Samsung what Mr Jung calls unique intellectual “assets”.
China may be a candidate as the next country to commission the world’s tallest tower. “The Chinese mentality is prone to scale; they like bigness but they lack efficiency and detailing. We might be able to find a niche in the Chinese market that requires meticulous detailing.”
The ambition of being the developing world’s default provider of high-value and high technology will push Samsung’s construction business into the same battle with Japan Inc that Samsung’s electronics division has been fighting for years. Historically, Japanese companies have a reputation as the detail-mavens of Asia, but Mr Jung believes that things are changing: “Japanese companies are very skilloriented and very meticulous and sophisticated, but the problem is their ability to integrate their technologies and skills.”
He believes that Korean electronics companies, in particular, have acquired “intangible” assets that draw diverse parts of the business together and allow them to overcome the silo mentality that has dogged Japanese firms. “For a construction company, the integration of different processes is our intangible asset. People should be inspired with proactivism and volunteerism and the company has to promote an environment where workers think their personal development is directly linked to company developments.”
In Japan, he concludes, the staff base is very experienced, but older. “I think that this new generation [in Samsung] thinks three-dimensionally.”
Mr Jung dwells on this point. Japan’s birth rate is low and its population ageing fast — but then the South Korean birth rate is among the lowest in the world. The difference, he suggests, is that Korea may have the edge in allowing younger people greater responsibilities. “Korean traditional culture is ingrained with Confucianism, which gives a very rigid society of vertical hierarchies. But our efforts to become globally competitive in the digital market actually opened us up as a society and made us change views and lifestyle … that had an effect on construction in Korea as well.”
As the New Silk Road binds Asian and Middle East growth more tightly, Samsung is getting ready to bid more ambitiously: projects in Saudi Arabia and Kuwait worth a combined $20 billion are on the table, and Korean contractors are no longer outsiders. But this does not mean that Samsung will let anyone take its place as master of the “supertall”. There are tower projects being discussed along the length of the New Silk Road, from China to Libya. “From a business point of view, the desire to build the world’s tallest building will never cease. And we can always build one higher than the last.”
Born March 15, 1950 Place of birth Daegu, South Korea Family married to Jong Im Kim, two daughters Education 2003 completed e-business course at Seoul National University 1998 master of tax accounting at Hongik University, Seoul 1973 bachelor of business administration at Dongguk University, Seoul Career December 2009 — present president and chief executive of Samsung C&T January 2003 — present president and chief executive of Samsung Engineering January 2001 — January 2003 executive vice-president and chief financial officer Joined Samsung in 1976 Honours and awards October 2009 Gold Tower Order of Industrial Service Merit, awarded by the Ministry of Knowledge Economy December 2006 recognised as chief executive of the year by Forbes Korea and Korea Ratings Person he most admires Kun Hee Lee, former chairman of Samsung