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Korean companies may not be able to enjoy the benefits they have anticipated from Saudi Arabia’s NEOM project, as the Middle Eastern country appears to be scaling down the urban development project amid its prolonged financial difficulties, according to industry officials, Monday.

Major construction firms in Korea initially sought to win large-scale orders for the project to overcome a recent slump in the domestic housing market.

When Saudi Crown Prince Mohammed bin Salman Al Saud visited Seoul in 2022, heads of Korea’s leading conglomerates met him in person seeking lucrative business opportunities. In 2023, President Yoon Suk Yeol visited Riyadh with business leaders to promote Korea’s capabilities in smart city construction.

After Samsung C&T and Hyundai E&C received orders two years ago for the construction of tunnels for The Line vertical city, however, there have been no additional orders placed with Korean construction firms.

Overseas news outlets also reported in April that the Saudi sovereign wealth fund’s lack of cash led to a reduction in the length of The Line to 2.4 kilometers from 170 kilometers, although the Middle Eastern country has denied the news. Last month, the planned construction of a desalination plant on Oxagon industrial city was canceled, thwarting the participation of Saudi Arabia’s Enowa, Japan’s Itochu and France’s Veolia in the $1.5 billion project.

In addition, it was reported that Saudi Arabia sold only $11.2 billion worth of shares in Aramco, falling short of the maximum amount the world’s largest oil company could have raised in such a deal, which was intended to attract foreign investments amid falling crude oil prices.

“It is inevitable for Saudi Arabia to scale down the NEOM project, as its government is pushing ahead with various other large-scale projects,” a Hyundai E&C official said. “However, we seek to participate in construction works at The Line’s Hidden Marina zone, considering the ongoing bids for the construction of tunnels and basement structures in the zone.”

Another construction industry official said on condition of anonymity that most memorandums of understanding (MOUs) signed for the NEOM project will not lead to main contracts.

“The NEOM project is very challenging, and its size may exceed the initial estimation of $500 billion due to internal and external factors,” International Contractors Association of Korea researcher Park Hyung-jin said. “The Red Sea shipping crisis has delayed shipping and increased delivery costs, having a negative impact on Saudi Arabia’s giga-projects.”

NEOM CEO Nadhmi Al Nasr, however, said in the latest newsletter that significant advances have been made in the development of NEOM’s regions.

“Our construction teams have been working tirelessly to shape the physical landscape and we are witnessing the transformation on the ground,” he said. “We believe that 2024 will be a great year."

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Autor(en)/Author(s): Park Jae-hyuk

Quelle/Source: The Korea Times, 10.06.2024

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