They Called It a Order Jackpot... But 'NEOM' Is Quiet

Neom Orders Reach Only Around 1 Trillion Won in the Past 3 Years
Falls Short of Expectations Amid Tens of Trillions Won Order Boom Anticipation

The domestic construction companies' order performance within the NEOM project, a key initiative of 'Mr. Everything' Mohammed bin Salman, Crown Prince and Prime Minister of Saudi Arabia, has been revealed to be lackluster. Despite Crown Prince bin Salman's visit to South Korea in November 2022 to introduce the project and President Yoon Suk-yeol's reciprocal visit to Saudi Arabia in October last year, the anticipated 'second Middle East order boom' has failed to materialize. Construction companies are struggling to secure project viability and raise investment funds for orders. As a result, order announcements have ceased since mid-last year. Although large-scale projects are scheduled to be issued in NEOM this year, the expectation of a 'jackpot' in orders is gradually fading.

Order Performance Falls Short of Tens of Trillions of Won Expectations

Crown Prince Mohammed bin Salman of Saudi Arabia (right) is seen conversing with heads of domestic companies at Lotte Hotel in Jung-gu, Seoul, in November 2022. From the left, Kim Dong-kwan, Vice Chairman of Hanwha Solutions; Chung Eui-sun, Chairman of Hyundai Motor Group; Chey Tae-won, Chairman of SK Group; Lee Jae-yong, Chairman of Samsung Electronics. / Photo by Saudi Arabia's state media SPA website capture

According to the Overseas Construction Association on the 15th, from 2021 to recently, a total of five NEOM-related overseas construction contracts (excluding undisclosed projects) reported to the association have been recorded. The total order amount does not even reach $200 million. These include HanmiGlobal's The Line special overall program management (e-PMO) service ($2.333 million), Yooshin's Spine Box Running Tunnel detailed design for sections 4 and 5 ($5.37 million), Seojin Tech's Spine Tunnel ground improvement excavation works phase 1 ($4.953 million) and phase 2 ($918,000), and Hyundai Engineering & Construction's NEOM to Yanbu 525kV ultra-high voltage direct current transmission line construction project ($145 million).

Even when adding The Line underground tunnel project (total length 28 km), which is excluded from the association's tally due to confidentiality agreements with the client, the total order amount does not exceed $1.2 billion. This project, worth about $1 billion, was secured early on by Samsung C&T and Hyundai Engineering & Construction forming a consortium with the Spanish construction company FCC. Including HanmiGlobal's contract for monitoring services of the NEOM construction workers' accommodation complex, the total order amount is in the range of 1.5 trillion won.

The NEOM project is a city construction initiative included in Saudi Arabia's 'Vision 2030,' announced by the Saudi government to shift away from an oil-centered economic structure. It aims to build a city larger than Abu Dhabi in the United Arab Emirates (UAE) on a 26,500 km² site located in the northwestern Tabuk Province, investing $500 billion (approximately 650 trillion won). The project is broadly divided into the eco-friendly residential and commercial city 'The Line,' the octagonal high-tech industrial city 'Oxagon,' the eco-friendly mountain tourism complex 'Trojena,' and the luxury resort 'Sindalah.'

The order performance is very poor compared to the rosy forecasts of a tens-of-trillions-of-won order boom during Crown Prince bin Salman's visit to South Korea. Since Seojin Tech's excavation contract in late October last year, there have been no further order announcements. Construction companies appear to be focusing more on their existing core markets. For example, Daewoo Engineering & Construction has made no additional moves since failing to win the second bid for the $1 billion Oxagon Duba port expansion project in October last year. They consider it more efficient to actively pursue existing overseas construction projects in places like Iraq. GS Engineering & Construction and others have also stated they currently have no plans to enter NEOM.

Only Samsung C&T and Hyundai Engineering & Construction have bidding plans. Although their consortium failed to win the Spine Tunnel precast concrete (PC) construction contract last year, they are currently bidding on the Spine Tunnel project with a 50% stake each and awaiting results. A Samsung C&T official said, "We are also looking into the NEOM modular business." Previously, Samsung C&T signed a memorandum of understanding (MOU) for modular business cooperation with the Saudi Public Investment Fund (PIF).

"Concerns Over Project Viability" vs. "Construction Companies Need to Be More Proactive"

A bird's-eye view of 'The Line' in Saudi Arabia's NEOM project. / Photo by NEOM official website

The construction industry views the project as highly uncertain in terms of viability, contrary to the government's rosy blueprint. In particular, the fact that Saudi Arabia cannot fully finance the NEOM project with its own funds and is pursuing a public-private partnership (PPP) model involving foreign capital investment is seen as an obstacle. Given the domestic real estate market slump causing financial difficulties for construction companies, raising funds for the NEOM project is virtually impossible. Doubts remain about whether the NEOM project can actually be realized. A construction company official said, "Saudi Arabia is indeed a large market, but the business environment in the Middle East is not always favorable," adding, "Each construction company has regions they have invested a long time in, so there is no need to divert efforts to NEOM."

Some argue that since NEOM is a mega project requiring detailed business plans, the issuance and bidding processes inevitably take time. Notably, the NEOM green hydrogen project broke ground at the end of last year, leading to expectations that orders related to it will pour in this year.

The government maintains that it has sufficiently paved the way for construction companies through state visits and the dispatch of One Team Korea. A Ministry of Land, Infrastructure and Transport official said, "We have recently increased personnel in the Middle East division of the Overseas Construction Support Department to fully support order acquisition," adding, "Construction companies need to be more proactive in competing for NEOM orders." However, it has been confirmed that there are no plans for a Saudi visit at the One Team Korea level.

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