Issue Focus

January 2006, the Ministry of Land, Infrastructure and Transport introduced the direct construction obligation system, which requires construction companies to directly construct a certain portion of the construction work contracted as a general contractor, in order to ensure proper construction of construction projects and promote sound development of the construction industry.

● In addition to the direct construction obligation system stipulated in the “Construction Industry Framework Act,” a policy has been announced to strengthen and expand the direct construction obligation and scope of general contractors for domestic metropolitan and local government (local government) construction projects with the goals of improving unfair subcontracting practices and enhancing quality through responsible construction.
- The Ministry of the Interior and Safety will introduce a “direct construction evaluation system” that will reflect the direct construction ratio of bidders in the evaluation for all general construction projects worth KRW 3 billion or more ordered by local governments from January 1, 2025.
- The Seoul Metropolitan Government has been promoting various forms of direct construction expansion policies since 2016, and recently announced plans to make direct construction mandatory for key major types of work with the goal of achieving ‘Zero Defective Construction in Seoul.’

● However, the direct construction policy, which is being strengthened centered on local contracts, is likely to cause various problems, such as causing confusion in the construction production system that has been maintained for a long time, which is different from the original purpose of the direct construction obligation system, and it is expected to cause various adverse effects, including the contraction of the local construction industry.

● Therefore, this study examines the issues of the direct construction obligation system from various angles, focusing on the changes in the local contract system for the introduction of direct construction evaluation and the Seoul Metropolitan Government policy promoting the direct construction expansion policy, and proposes reasonable policy improvement measures based on the identified problems.

● This study examines how ESG management, which has recently emerged as a new management paradigm, can generate future results at the level of construction companies and the construction industry. ● As a result of analyzing previous studies, the promotion of ESG management by construction companies is expected to have a positive impact on corporate performance in the long term through the path of enhancing corporate sustainability and improving financial performance. ● First, ESG management's path to enhancing corporate sustainability is divided into a path to reduce sustainability threats from stakeholders and a path to respond to ESG-related market transitions and stranded assets in the future. ● Second, the financial performance improvement path of a company is divided into the cost reduction path of a company and the output increase path of a company. - The cost reduction path is divided into direct cost reduction such as energy/resource cost and regulatory violation cost, and indirect cost reduction such as financing cost, civil complaint management and dispute cost. - The performance improvement path is divided into the performance of preoccupying new markets related to ESG management, such as green construction and renewable energy plants, and the improvement of transaction/collaboration performance with stakeholders. Examples of improving transaction/collaboration performance include increasing follow-up orders by improving the reliability of the client, improving productivity by improving employee immersion/loyalty, and improving the performance of pre-sale/rental projects by improving reputation. ● The performance improvement from the promotion of ESG management can be seen not only at the individual construction company level but also at the construction industry level. - Expanding ESG management to the construction industry means that all participants, including comprehensive and professional construction companies, material manufacturers, orderers, and licensing agencies, practice ESG management and establish the value of ESG management in the industry. ● If all participants in the construction industry, including construction companies, practice ESG management, structural problems such as the culture of A, corruption practices, and excessive safety accidents, which have been negatively affected by the rebirth of the construction industry, can be improved. ● To create ESG management performance at the construction industry unit, we first extract core values of ESG management and apply them to the four structural problems of the construction industry to derive improvement directions and action tasks to improve problems from the ESG management perspective. - As a result of extracting core values of ESG management, responsibility for the environment and society, stakeholder consideration, win-win and public, compliance and ethics, long-term performance pursuit, and financial/non-financial performance balance were extracted. - Directions for improving the four structural problems of the construction industry through the application of core value factors: ① Conflict/conflict structure between participants under the original contract structure → Win-win cooperation based on fairness and trust and long-term mutual benefit maximization ② We are vulnerable to corruption due to the nature of the industry dependent on orders and licenses → Spread sound business practices based on fairness/ethics ③ Vulnerable safety accidents due to outdoor production and continuous on-site changes → Establishment of safety-first practices and cultures ④ Damage to the natural environment and characteristics of pollutants/carbon emissions of construction activities → Conservation of the natural environment and securing a preemptive response system to climate change

● Studies on the construction industry's manpower in the early 2000s mainly dealt with the shortage of young skilled manpower, but in recent years, the shortage of young technical manpower has also become serious. Accordingly, it seeks to find the reasons for the decline in values that the young generation values and job attractiveness of the construction industry, and to prepare strategies to secure young talent. ● The current youth generation is evaluated as the smartest and most creative generation in history and the generation with excellent digital capabilities. Cooperation between the young generation with technical competencies and the older generation with abundant work experience will be the basis for the sustainable growth of the construction industry. ● The youth generation is the fastest group to accept and lead changes in the times, and their values and perceptions are important indicators for predicting the future of the construction industry. This study summarizes the values of the youth generation into 'seeking growth' and 'a member of an advanced society', and suggests strategies for securing young talent in the construction industry in these two directions. ● Based on the values of the young generation of pursuing growth and being a member of an advanced society, the following three strategies are derived to secure young talent in the construction industry. ● Close cooperation among all participants in the construction industry, such as companies, academic and research circles, cooperative organizations, and educational institutions, is required to secure young talent in the construction industry. In addition, the government's policy efforts to secure good jobs and establish a growth ecosystem in the construction industry, which is the basis for securing young talent, are also very important.

● Since the inauguration of the Yoon Seok-yeol administration, supply measures (August 16, 2023, September 26, 2024, January 10, 2024) have been announced every year, but concerns about supply instability from 2025 to 2026 remain as it does not lead to a visible increase in supply. - The recent reduction in construction could lead to a decrease in completion in 2025. - By region, the Seoul metropolitan area is likely to affect the market from 2025 and the provinces from 2026. ● This study examines policies by major sectors such as ① public housing, ② maintenance projects, ③ non-apartments, and ④ regulation and demand growth. Through this, it is intended to reflect on the meaning of the housing supply policy and suggest the direction of future policies. ● It is intended to expand the volume of (public housing) and speed up the construction. It will be possible to convert unstable demand into standby demand only when rapid housing supply is made in the area where the green belt is released. - The proportion of supply in public housing sites during the completion of apartments is high at 33.6%, and the short-term mass supply effect is also large. If it is supplied quickly from a symbolic location, a market stabilization effect similar to that at the time of supply of nesting housing can be expected. ● It supports simplification of procedures and improvement of business feasibility, but it is difficult to feel the policy effect in a short period of time due to the specificity of a long-term project. While maintaining the direction of revitalizing the maintenance business, it is important to restore market trust through rapid legislation. - As the most important means of supplying housing in the city center, 65.4% of the completion of Seoul apartments accounted for maintenance projects. However, it is difficult to feel the effect of policy support as a long-term project with an average project period of 14 years. - Due to the effect of the expansion of integrated deliberation, the number of complexes that have moved to the construction deliberation stage has increased, but the increase in new entry complexes is insignificant. The direction of shortening the business period, such as fast track, is positive, but it will help increase the number of workplaces in the entry stage only when market trust is restored through rapid legislation. ● Public new construction purchase agreements, which are strong policy interventions (non-apartments), are attracting market attention. Strengthen monitoring of purchase performance in the short term. In the long term, it is necessary to find a balance with urban management. - BEPART is experiencing major housing supply channels or supply declines, accounting for 26.6% of all houses, so direct public purchases are sufficient. As if representing market difficulties, there is a lot of interest in public new purchase agreements, but the performance situation may be different, so monitoring of implementation is necessary. ● (Regulation and demand increase) It is necessary to find mid- to long-term countermeasures against the local market undergoing structural changes and to improve the sensitivity of supplier financial support. - Local markets, such as population decline, are facing structural demand changes, requiring long-term consideration, and supplier financial support requires efforts to increase the experience of policy support from the perspective of companies. ● (Comprehensive Evaluation) Regardless of fluctuations in housing prices, the supply of affordable housing is a direction that the government should continue to promote. However, it is more important to maintain a stable policy direction as it is effective over a long period of time compared to the demand policy.

● With Korea entering an aging society where the vitality of society is declining due to a decline in the fertility rate and an increase in the proportion of the elderly population, it is expected to enter an ultra-aged society next year Local small and medium-sized cities overlap with population outflows, and the risk of regional extinction is increasing. ● Amid the rapid supply and aging of Korea's infrastructure in the 1970s, extreme climate changes such as heavy rains and heat waves also increase due to global warming, increasing the risk to facilities. - Facilities older than 30 years from 2028 are expected to exceed 40% of all facilities ● Although the size of Korea's economy has continued to expand, low growth and low national competitiveness have continued recently, and public happiness is also low. ● Both the United States and Europe have recently expanded infrastructure investment, and in common, they promote people's safety and economic growth through infrastructure investment. ● Infrastructure investment has proven various investment effects such as economic ripple, job creation, and income distribution in many domestic and foreign literatures, and the United States recently emphasized the effectiveness of infrastructure investment once again in the Presidential Economic Advisory Organization (CEA). - In the 2016 Economic Report of the President, the U.S. Presidential Economic Advisory Organization analyzes that raw material purchases and labor demand increase in the short term, and in the mid- to long-term, the overall productivity of the economy and the potential economic growth rate increase - The European Investment Bank analyzes that infrastructure investment has increased because modern, properly functioning infrastructure is critical to national competitiveness and economic growth and provides social benefits for many years ● SOC was continuously supplied, but Korea's SOC stock is not much compared to major advanced countries. - As of 2018, the SOC capital stock, which combines Korea's land facilities (road, rail, etc.) and aviation facilities, is 21.5% of GDP, lower than France (31.3%), Germany (28.7%), and the United States (22.0%), and is more than 5%p lower than France and Germany ● While Korea's SOC fiscal investment has repeatedly increased and plummeted, it is far below the level of 2010 when real prices are converted considering price levels, and the future investment is not large. ● Meanwhile, the appropriate SOC investment in 2025 considering economic growth and inflation is expected to be KRW 58 trillion to KRW 60 trillion, and the central government's SOC investment is expected to be KRW 0.6 trillion to KRW 2.1 trillion short. - The size of SOC investment in 2025 (central government + local government + private investment + public corporation investment) is 54.7 trillion won, 0.6 trillion won to 2.1 trillion won short of 58.0 trillion won to 60.0 trillion won to achieve the economic growth rate ● Public construction investment centered on disaster and disaster-related facilities and aging infrastructure that can cause human damage is more important than ever to cope with aging in Korea, such as low birth rate, aging, regional extinction, and decline in national competitiveness. - While central and local governments need to expand SOC investment, incentives are needed to expand private SOC investment that can be partially supplemented

● Housing remodeling is being promoted with complex motives such as improving the residential environment, economic effects, and government policies. - Housing remodeling targets all inventory houses except "old and defective buildings" that need to be reconstructed, and remodeling can promote social and economic benefits by substantially improving the residential environment and inducing the longevity of housing. - If the total floor area of the building is reduced due to the strengthened floor area ratio, building ratio, and parking lot regulations after demolition of old houses, remodeling that can maintain the existing area will be selected. - The average life expectancy of domestic apartment houses is about 30 years, about 1/2 to 1/3 of that of major countries. The short-term repetition of housing construction causes waste of resources, environmental pollution, and increased social and economic costs, and the need for housing longevity through remodeling increases. - Remodeling maintains and utilizes major structures of buildings, which is environmentally friendly due to low carbon emissions compared to reconstruction, and the need for green remodeling old houses is high, so support policies from the government and local governments are being promoted. ● Housing remodeling accounts for 3% of all building remodeling. Housing remodeling is centered on detached houses, and apartment remodeling is still in the inactive stage. - Based on the building construction area in 2023, the proportion of new construction and remodeling is 80:20, of which the proportion of non-residential and residential use is 97:3, and the proportion of single-family houses and multi-family houses among residential use is 82:18, that is, in the overall remodeling market, only 3% of the houses (apartments, row, and multi-family houses) are remodeled. - The proportion of apartment remodeling in apartment remodeling has increased from 15.9% for three years (2010-2012) to 38.4% for 2021-2023, and apartment remodeling is currently insignificant, but it is expected that future growth potential is high. ● Housing remodeling is divided into "full remodeling" and "partial remodeling." Apartment remodeling is very interested in full remodeling, and partial remodeling such as green remodeling and convenience facility expansion is also needed. - "Partial Remodeling" will improve indoor architecture, construction facilities, floors and walls, interior materials, external finishes, external spaces, and energy facilities to promote green remodeling parking lots and complex environmental improvements. - "Front Remodeling" promotes flat expansion such as plane structure change, vertical, horizontal, and annex expansion, and in the case of apartments, it is actually competitive with reconstruction due to remodeling at the level of reconstruction. ● Various support for housing remodeling is needed in consideration of the net social and economic function of the long-lived housing. In particular, the government's full support for green remodeling should be provided. - If green remodeling, which must be carried out at carbon neutrality, is left to market autonomy, it is expected to fail, and the government needs to actively intervene such as providing construction subsidies, low-interest loans, tax benefits, and easing construction regulations - In the case of old low-rise houses, "partial remodeling" is required in residential areas with high possibility of redevelopment, "partial and full remodeling" is implemented in existing areas, and systematic collective housing remodeling is required by forming a "low-rise housing remodeling combination." - Green remodeling of old apartments, improvement of residential environment (such as securing parking lots), and improvement of indoor environment of individual houses need to be activated in connection with long-term repair plans - The uniformity of government policies as "reconstruction" or "full remodeling" limits consumers' rational choices, requires activation alternatives tailored to each characteristic, and reconstruction and remodeling should be complementary.

● For the introduction and activation of smart construction technology to work more effectively, it is necessary to establish the concept and scope of smart construction technology applicable to our construction industry and to diagnose the systematic level of activation based on it. - Therefore, it is necessary to establish the concept and technology classification system of smart construction technology to provide the basis for the use of smart construction technology, diagnosis of the level of activation in the industry, and establishment of support policies for the use of smart construction technology. ● The purpose of this study is to establish a smart construction technology classification system for construction companies to diagnose their use of smart construction technology as part of a study on the role of each subject and institutional improvement measures for the spread of smart construction technology application. - To this end, prior studies dealing with the concept and classification of smart construction technology were reviewed, domestic trends were analyzed, and a smart construction technology concept and classification system was proposed based on a review of construction and technology classification systems in other fields. ● The establishment of a smart construction technology classification system should be configured to be used to diagnose and establish support policies at the level of activation in the industry to revitalize smart construction technology and strengthen competitiveness, considering that the current construction industry's introduction and application of smart construction technology is in the early stages. - Therefore, it is necessary to establish a technical classification system that considers the stages to which smart construction technology is applied and the application fields or characteristics during the life cycle of the construction project. ● In addition, in many cases, the same smart construction technology can be applied throughout the life cycle, and it is necessary to reflect the contribution to the digitalization, automation, and de-siteization of construction production methods. - In addition to the classification according to the stage of construction projects, the area is divided into digitalization, automation, and de-siteization so that smart construction technology can be considered for innovation in the construction production system, and it is necessary to include it as a key area considering that many smart construction technologies and equipment are developed and introduced to improve the safety and quality of the site. ● This study proposed a smart construction technology classification system that consists of two dimensions according to the stage of construction projects and the characteristics of production system innovation, and individual technologies in each area are assigned codes according to the initials and order of the steps and characteristics to facilitate classification. - The implementation stage is divided into the planning and design stage, the construction stage, and the operation and maintenance stage, and the innovation area is divided into digitalization, automation, de-siteization, and safety and quality improvement, and individual technologies corresponding to each sector are included. - Individual technologies corresponding to the classification system are configured to be able to identify technologies and continuously add new convergence and new technologies by assigning numbers to identification codes. - Technologies that may be applied to several stages or corresponding to a plurality of innovation areas may be registered in each area in duplicate, so that even with the same technology, it is possible to distinguish according to the application stage and characteristics of the technology. ● The classification system proposed in this study needs to be continuously reviewed, revised, and supplemented through the addition of individual technologies for each area, and based on this, it will be used for systematic diagnosis of smart construction technology utilization and introduction plans by domestic construction companies in stages and areas.

This study defines governance (G), the core of ESG management, and establishes the current status and direction of construction industry governance. - With the recent expansion of ESG discussions around the world, our government is also working to advance ESG by preparing ESG-related policies, but ESG in the construction industry remains at a lower level than its importance. Governance can be defined as "the right decision-making system for all stakeholders" and is a key area of ESG closely linked to the environmental (E) and social (S) sectors. - Good governance includes values such as sustainability, participation, responsibility, transparency, fairness, inclusion, and trust, and is a broader concept than 'corporate governance', which means the ownership and control structure of a company. It is very difficult to quantify the level of governance of a company. Therefore, governance-related systems are limited to 'corporate governance' rather than 'governance', and are applied to some companies as an early stage of system preparation, but they are expected to spread gradually. - The corporate governance report disclosure system was introduced in the form of self-disclosure in 2017 and was converted to mandatory disclosure for companies with assets of 2 trillion won or more from 2019. It plans to gradually expand the target companies to the entire KOSPI listed companies from 2026. In the construction industry, despite the importance of governance than other industries due to the characteristics of the industry, ESG responses centered on large companies are being made, and responses from small and medium-sized companies are insufficient. - Governance is very important not only for successful business performance, such as winning orders and financing, but also for promoting sound and sustainable growth by protecting the rights of numerous stakeholders who interact with the construction industry. - About 20 construction companies have published sustainability management reports and corporate governance reports. Considering that the total number of construction companies is 87,239 (as of 2022), only a few large companies are implementing ESG management, and the ESG activities of mid-sized and small-sized companies are insufficient. The direction of response according to the importance of construction industry governance is as follows. - ① ESG management promotion and performance sharing: Leaders' will to promote ESG management and establish a management promotion system are needed. - ② Improving corporate governance: Protecting shareholders' rights, transparency and soundness of the board of directors and audit organizations should be established. - ③ Compliance and Ethics Management: It is necessary to establish a system for promoting compliance and ethics management within a company to build trust with stakeholders. - ④ Risk management: A stable operation of a company should be promoted and sustainability should be increased by preparing a system for prevention and response to various risks. Establishing an efficient system for companies is of course important, but fundamentally, both companies and individuals in the construction industry must share the value of consideration and respect pursued in governance. - Just as an individual cannot live alone in a community, no single company can survive alone. There is a need for a change to a mature legal personality that considers and respects stakeholders and considers the future. - ESG management will be able to play an important role in restoring trust and increasing sustainability in the construction industry.

This study aims to suggest what construction companies should do in the ESG society(S). To this end, 10 indicators and 40 detailed indicators suitable for the construction industry were derived in the social sector. Based on the derived social domain (S) ESG sector, (1) itemized importance/urgency assessment and (2) itemized current level of construction companies are evaluated. First, as a result of assessing the importance/urgency of ESG indicators in the social sector(S), it was found that 'occupational health and safety' and 'quality management' are important in the construction industry and urgently need to be improved. As a result of investigating the level of construction firms in each detailed index of the social sector, the smaller the size of construction firms, the weaker they are evaluated in all areas of the social sphere. In the future, safety and quality will continue to be key issues in the construction industry. Therefore, the importance of managing the prime contractor and related subcontractors will inevitably be highlighted. Therefore, in order to advance social sector in ESG, it is necessary to internalize ESG among employees first, and in the mid- to long-term, supply chain-related risk management (including labor, employment, social responsibility, etc.) should be achieved.

This study forecasts the growth potential of the zero-energy building and green remodeling market, outlining policies and tasks for construction companies to meet green building supply targets under the carbon-neutral scenario. The zero-energy building market size is estimated to be KRW 15 to 20 trillion in 2022, projected to reach KRW 93 trillion to KRW 107 trillion in 2030 with the full implementation of mandatory zero-energy building certification road map. The zero-energy building market is expected to grow to KRW 180.4 trillion by 2050, reflecting the requirement for all buildings to be constructed as zero-energy buildings in line with the carbon-neutral scenario. Green remodeling of existing buildings, totaling 2.95 billion to 4.82 billion ㎡ in floor area according to the carbon-neutral scenario, is estimated to create a market worth KRW 1,706 trillion to KRW 2,781 trillion from 2023 to 2050. Both zero-energy building and green remodeling are anticipated not only to achieve carbon neutrality but also to yield socioeconomic benefits such as technological innovation, job creation, improved residential environments, and income redistribution. Government initiatives, including subsidies, low-interest loans, tax benefits, and building regulation relaxation, are deemed essential for private building green adoption (97% of all buildings). Companies should focus on developing core engineering capabilities, building partner networks, and strategizing for future market growth.