Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Saudi Arabia's NEOM project unlikely to match Korean firms' expectations
Samsung Electronics Executive Chairman Lee Jae-yong, center, inspects Samsung C&T's tunnel construction for NEOM's The Line vertical city in Saudi Arabia in this October 2023 file photo. Courtesy of Samsung Electronics
By Park Jae-hyuk
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.
Saudi Crown Prince Mohammed bin Salman Al Saud / AFP-Yonhap
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.
Hyundai Motor Group Executive Chair Chung Euisun, right, inspects Hyundai E&C's tunnel construction for NEOM's The Line vertical city in Saudi Arabia in this October 2023 file photo. Courtesy of Hyundai Motor Group
“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.”
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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."