Next Year Overseas Construction to See Double-Digit Growth Only in the 'Middle East'... "Let's Enjoy the Saudi Special"

High Oil Prices Expected to Drive Over 10% Growth in Middle East
Crown Prince Bin Salman Visits Korea, Signs 40 Trillion Won Investment Deal
Team Korea: "Accelerating Main Construction Contracts Following MOUs"

Muhammad bin Salman, Crown Prince of Saudi Arabia / Photo by Yonhap News

[Asia Economy Reporter Noh Kyung-jo] While the growth forecast for the global construction market has been revised downward, the Middle East region is expected to grow by more than 10% next year, supported by the high oil price trend. The government and business circles are determined to ignite a second Middle East boom through securing the main construction contract for Saudi Arabia's Neom City project.

◆Middle East Construction Market Expected to Lead Growth Rate Again Next Year

According to the Overseas Construction Association on the 20th, global market research firm IHS Markit forecasted in data released last month that the global construction market will grow by 3.9% and 4.0% compared to the previous year in 2023 and 2024, respectively. The market size is expected to be $13.4446 trillion and $13.9824 trillion, respectively.

However, this year's growth rate was lowered by 1.1 percentage points (p) from the July forecast (5.0%) due to the judgment that a market atmosphere with mixed growth factors and inhibiting factors will continue.

Growth factors include ▲priority policies on public infrastructure in various countries ▲improvement in order environment in Middle Eastern oil-producing countries if high oil prices persist ▲normalization of the construction market due to the COVID-19 endemic. Inhibiting factors include ▲investment contraction due to economic recession ▲inflationary pressures ▲geopolitical risks.

There was a large regional disparity. In particular, the Middle East's growth rate for this year was revised upward by 1.8%p from the previous forecast (10.2%). This reflects expectations for improved order conditions in major Middle Eastern countries due to the high oil price trend. The order is Middle East (12.0%), Latin America (10.9%), North America & Pacific (7.8%), Africa (7.4%), Asia (2.7%), and Europe (0.5%).

Next year, IHS Markit predicts that only the Middle East (14.4%) will grow by more than 10%. It is followed by Africa (8.2%), Latin America (7.4%), Asia (4.5%), North America & Pacific (2.6%), and Europe (0.8%).

◆'Ask and Double' Following the 40 Trillion Won Neom City Agreement, Main Construction Expected

Saudi Crown Prince Mohammed bin Salman (far right) is seen conversing with heads of domestic companies at Lotte Hotel in Sogong-dong, Seoul, on the 17th. (From left) Kim Dong-kwan, Vice Chairman of Hanwha Solutions; Chung Eui-sun, Chairman of Hyundai Motor Company; Chey Tae-won, Chairman of SK Group; Lee Jae-yong, Chairman of Samsung Electronics. / Photo by Saudi Arabia State Media SPA website

The Middle East construction market is led by Saudi Arabia's Neom City project. The government and domestic companies recently united as 'One Team Korea' to visit Saudi Arabia, and when Crown Prince Mohammed bin Salman, who leads the project, visited Korea, they discussed practical cooperation measures.

Neom City is a project worth about 670 trillion won. Among this, an investment contract worth 40 trillion won was signed during Bin Salman's visit to Korea. Crown Prince Bin Salman reportedly said, "We want to dramatically strengthen cooperation with Korea in three areas: energy, defense industry, and infrastructure/construction."

In the construction sector, Hyundai Engineering & Construction and Samsung C&T consortium previously won the tunnel construction contract for 'The Line' ordered by Neom Company. HanmiGlobal secured the special overall program management (e-PMO) service for The Line last year.

The Line refers to the commercial and residential district of Neom City. According to the blueprint, within a glass wall structure 170 km long, 200 m wide, and 500 m high crossing the desert, a population of 9 million will form a linear residential pattern. On the surface, pedestrian walkways and green spaces will be created, and underground there will be two different levels for high-speed rail and infrastructure.

Regarding the high-speed rail, during Bin Salman's visit, Hyundai Rotem signed a memorandum of understanding (MOU) worth 2.5 trillion won with the Saudi Ministry of Investment for 'Neom Railway Cooperation.' Five companies?POSCO Holdings, Samsung C&T, Korea Electric Power Corporation, Korea National Oil Corporation, and Korea Southern Power?signed an MOU with the Saudi Public Investment Fund (PIF) for the Neom City green hydrogen and ammonia plant construction project.

Daewoo E&C signed an MOU related to oil, gas, and petrochemicals, and a consortium consisting of Hyundai E&C, Hyundai Engineering, and Lotte E&C agreed to participate in S-Oil's 'Shaheen Project.'

Although currently at the MOU stage, the construction industry expects that orders will increase once Neom City construction fully begins next year. A construction industry official said, "It will take a little more time to get into the details like individual projects," adding, "We will work hard to achieve good results through public-private cooperation."

Samsung C&T's MOU signed with PIF on modular construction on the 17th is also known to be aimed at securing the 'Neom Beta Community' project. The Ministry of Land, Infrastructure and Transport plans to hold a 'Korea-Saudi Housing Cooperation Joint Seminar' with the Saudi Ministry of Municipal and Rural Affairs and Housing in Korea on the 28th and 29th of this month.

This content was produced with the assistance of AI translation services.