South Korean companies may not reap the anticipated benefits from Saudi Arabia’s NEOM project as the West Asian country scales back the urban development amid prolonged financial difficulties, The Korea Times reported today, citing industry officials. Initially, major Korean construction firms aimed to secure large-scale orders from NEOM to counteract a slump in the domestic housing market.
During Saudi Crown Prince Mohammed bin Salman’s visit to Seoul in 2022, Korean conglomerate leaders met him, seeking lucrative business opportunities. In 2023, President Yoon Suk Yeol visited Riyadh with business leaders to showcase Korea’s smart city construction capabilities.
Although Samsung C&T and Hyundai E&C received orders two years ago for constructing tunnels for The Line vertical city, no additional orders have been placed since.
Overseas media reported in April that Saudi’s sovereign wealth fund’s cash shortage reduced The Line’s length from 170 kilometres to 2.4 kilometres, a claim Saudi Arabia denied. Last month, the planned construction of a desalination plant in Oxagon industrial city was cancelled, thwarting the participation of Saudi’s Enowa, Japan’s Itochu, and France’s Veolia in the $1.5 billion project.
Saudi Arabia also sold only $11.2 billion in Aramco shares, falling short of the maximum potential to attract foreign investment amid declining 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,” said a Hyundai E&C official. “However, we seek to participate in construction works at The Line’s Hidden Marina zone.”
An anonymous construction industry official mentioned that most memorandums of understanding (MOUs) signed for NEOM would 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,” said Park Hyung-jin, a researcher at the International Contractors Association of Korea.
Despite these setbacks, NEOM CEO Nadhmi Al-Nasr expressed optimism. “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.”
