Korean companies, once hopeful of receiving orders worth billions for the construction of Saudi Arabia's Neom City, are shattered by the scaling back as they now face a lack of orders and inaction even after signing MOUs.

Saudi Arabia’s Neom City is a magnum opus in the making that’s got the world excited for several reasons. Many are looking forward to it as a tourist destination par excellence, some are eyeing it from a business opportunity perspective, while for others, it’s a splendid investment into the future. Still, it is not all smooth sailing as Korean companies may not be able to enjoy the benefits they have anticipated from Crown Prince MBS’s $1.5 trillion project. As news of Neom scaling down started circulating, so did the morale of construction firms in Korea that were hopeful of winning large-scale orders for the project. This was the lifeline they were counting on to overcome a recent slump in the domestic housing market.

Chung Euisun, the chairman of Hyundai Motor group inspects a tunnel constructed by their company at NEOM’s The Line. Image – Hyundai

Till now, companies like Samsung C&T and Hyundai E&C have received orders to construct tunnels for The Line, but no other Korean construction firm has been employed. An insider from the construction industry, who spoke on condition of anonymity, said that most memorandums of understanding (MOUs) signed for the NEOM project will 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. “The Red Sea shipping crisis has delayed shipping and increased delivery costs, negatively impacting Saudi Arabia’s giga-projects.”

Also read - Japanese company plans a $245million eco-friendly Saudi Stock Exchange headquarters

Samsung Chairman Lee Jae-Yong at the Neom construction site in Tabuk Province. Image – Samsung

In addition to grand, almost unachievable plans, developments like canceling a desalination plant in Oxagon only added fuel to the fire. The plan would have united Japan’s Itochu, Saudi Arabia’s Enowa, and France’s Veolia in the $1.5 billion project. There may be umpteen speculations on Neom and how it will eventually shape up, but officials assertively deny the rumors and maintain that significant advances have been made in the development of NEOM’s regions.

Also read - After getting Ronaldo and Neymar for eye-watering sums, the cash-rich Saudi Pro League is now luring top referees with $400,000 contracts

Neom has been sharing regular updates on the construction activity of their various projects.

“Our construction teams have been working tirelessly to shape the physical landscape, and we are witnessing the transformation on the ground,” NEOM CEO Nadhmi Al Nasr said. “We believe that 2024 will be a great year.” Certainly not for the Korean companies.