Daewoo, Hanwha win .7 bil. construction project in Saudi

Korea has opened a new chapter of its history of overseas construction. A new town twice the size of Bundang New Town in Seongnam City of Gyeonggi Province will be built in Saudi Arabia. With the total project scale reaching 23 trillion won (19.7 billion U.S. dollars), it is going to be Korea’s biggest overseas construction project.

In the presence of Saudi Housing Minister Majed al-Hogail, Korean Land Minister Kang Ho-in, Daewoo E&C CEO Park Yeong-sik, and Hanwha E&C President & CEO Choi Kwang-ho, Daewoo and Hanwha on Thursday announced the news about the memorandum of understanding they had signed with Saudi Arabia to build 100,000 houses over the next 10 years at JW Marriott in Seocho-gu, Seoul.

The project, which will be funded by the Saudi government and whose contract has been awarded by the Housing Ministry of Saudi Arabia, is aimed at building a new town named Dahiyat al-Fursan, 35 kilometers north from the capital city of Riyadh, which will be almost twice the size (38 km²) of the Korean new town in Bundang (19.6 km²). Capable of accommodating approximately 600,000 residents, the new town will house a total of 100,000 houses and infrastructure.

While the total amount of project expenses has yet to be determined, it is estimated to range between 18 billion and 20 billion dollars. Construction will be conducted by Daewoo E&C, Hanwha E&C and SAPAC Consortium, a construction giant in Saudi Arabia. A formal contract will be signed in the latter half of the year, and construction will begin as early as late 2016.

While the actual orders could vary depending on the share of each construction company, it will be the largest construction project ever clinched by a Korean company, surpassing the UAE nuclear power plant project that KEPCO Consortium won a bid for in 2009. As an overseas new town project, the project is also the largest ever, going beyond the scale of the Iraqi new town in Bismayah (10.1 billion dollars), which was constructed by Hanwha E&C.

This project is expected to serve as a welcome rain for Korea’s overseas construction industry which has been suffering a bout of drought since last year amid the plummeting construction orders in the Middle Ease owing to low oil prices. “Development of new towns is in high demands not only in the Middle East such as Saudi Arabia or Iraq but also in South American countries,” said Kim Jae-jeong, chief of the Construction Policy Division of the Ministry of Land, Infrastructure, and Transport. “The government will make an all-out effort to cooperate with the private sector so that the new urban development project can yield a breakthrough for the sluggish construction industry in Korea.”

김재영기자 redfoot@donga.com