Saudi Arabia

Neom Project Uncertainty Alarms South Korean Builders

With news of Saudi Arabia’s marvelous Neom City scaling back, one might imagine only Crown Prince MBS and his team feeling disheartened. However, the $1.5 trillion project, including megaprojects like The Line, Sindalah, Oxagon, Trojena, and its own high-speed railway, is engaging experts from around the globe. From construction to technology, Neom City aims to deliver a city of the future with assistance from the best in the business from all corners of the world. South Korean builders, who were heavily invested and hopeful of Neom City coming to fruition as initially planned, are now left feeling nervous about possible setbacks in the Middle East.

Korean construction firms secured $2.4 billion in orders from Middle Eastern countries in the first quarter of this year, representing 44 percent of their total overseas project value for the period. Instability in the Middle East has forced Korean construction firms to monitor Saudi Arabia’s economy closely, particularly its $1.5 trillion development on the Red Sea coast.

Their dreams faced a reality check when Neom’s ambitious smart city, The Line, originally planned to be a whopping 44 times the size of Seoul with a total budget of 700 trillion won and stretching for 105 miles (170 km), is now expected to reach just one and a half miles by 2030. Despite having signed memoranda of understanding (MOUs) worth 40 trillion won for the project, the Korean construction industry now has concerns about the fruition of these contract signings.

“Although the Neom Project was publicized as a large-scale project worth 700 trillion won, the actual amount of work secured by Korean construction companies is only 1 trillion won,” said a Korean construction industry official, per BusinessKorea. “Anticipation was high about winning orders for the Saudi Neom Project in 2022, but only Hyundai E&C and Samsung C&T signed actual contracts after their MOUs.” This sudden turn of events has left the Korean construction industry in a state of unease and uncertainty.

South Korean firms are vying for contracts for the mega-city Neom. Their internet leader, Naver Corp, also won the contract to build and operate a cloud platform for the Kingdom. The construction companies are, however, not precisely on the winning side. In 2023, Korean firms’ total construction orders amounted to $33.3 billion, with $9.5 billion coming from Saudi Arabia. With news of scaling down being so rampant, their anxiousness is expected. Neom City, which was planned as a 170-kilometer-long straight-line city, would have been a game changer for Korean contractors. However, only Hyundai E&C and Samsung C&T have been awarded parts of The Line Project and are working on it.

Per the chief officer of Neom, media reports of The Line project scaling back are false. He regularly shares video footage of the breakneck development happening in the vast expanse. Perhaps it is not the end of the road for South Korean construction companies but a mere speed bump. This reassurance may help alleviate some of the concerns and anxieties that the audience may be feeling about the future of South Korean construction firms.

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