South Korea plans to strengthen financial support for local builders so they can better win overseas construction contracts in the face of stiff challenges, the government said Wednesday.

The plan outlined by Vice Finance Minister Joo Hyung-hwan at a meeting in Seoul calls for the introduction of an "on-lending"

arrangement by the government, which can get more private financial institutions to help fund builders' overseas projects, with the support of the state-run Export-Import Bank of Korea (Korea Eximbank).

The move comes as South Korean construction companies secured $66 billion worth of orders last year, the second-largest annual tally after $71.6 billion in 2010. According to the International Contractors Association of Korea (ICAK), local builders' combined overseas orders for this year reached $10.6 billion as of Tuesday, despite a drop in orders from Middle East countries.

Under the latest scheme, Korea Eximbank will provide funds to local financial brokerage institutions, which will then give direct loans to mostly small and medium-sized builders who have a harder time getting loans.

The official said this arrangement can reduce risks for private lenders while facilitating the timely transfer of funds that is critical for boosting the competitiveness of builders.

Initially, a 500 billion won ($445 million) pilot project will be set up, and depending on the response, the total sum will be expanded, as well as the number of brokerage institutions that can handle the work. For starters, three to five banks will be involved in the on-lending scheme.

In addition, the finance ministry said more efforts will be made to establish new credit lines and framework agreements with Latin American countries and the Commonwealth of Independent States (CIS), which are less affected by the recent drop in crude oil prices.

It said Korea Eximbank plans to give special allowances on financial support to countries such as Egypt, Vietnam and Turkmenistan, which are expected to place large building orders.

Besides financial support, the government plan aims to get local companies to engage in more value-added deals, such as marine plant service, which supports the operation, assembly, daily running and maintenance of marine facilities.

It said that to support such moves, the government will use its $1.6 billion overseas investment vitalization fund and even set up separate funds in the future.

The need to go upscale has taken on urgency as many orders won by local builders are subcontracts.

Such subcontracts are being challenged by the emergence of Chinese builders that are undercutting bids by South Korean construction companies in the global market.

Related to the need to diversify operations, ICAK said that past efforts to expand its presence into emerging markets are starting to bear fruit. It said that while orders so far in 2014 are some 35 percent less than the $16.2 billion secured the year before, it is not bad overall in light of overall market conditions.

It said that companies such as GS E&C and Hyundai Engineering & Construction Co. have won large projects in Venezuela and Singapore.

Industry insiders added that President Park Geun-hye's recent trip to Kuwait, Saudi Arabia, the United Arab Emirates and Qatar may reduce the impact on order cuts from the region.

Expectations are high that South Korean companies will win the $6.2 billion New Refinery Project in Kuwait.

This deal is important because many Middle East countries have opted to delay placing orders in the face of weak crude oil prices. (Yonhap)