S Korean constructor deems Saudi Arabia project ‘reliable’

South Korean constructor says housing deal with Saudi Arabia ‘reliable’ in which two South Korean and one local construction firm work together

Photo by: AFP (Archive)
Photo by: AFP (Archive)

A picture taken on March 9, 2016 shows towers under construction at the King Abdullah Financial District in the Saudi capital Riyadh.

A South Korean constructor that jointly won a $20 billion housing deal with Saudi Arabia said Monday it was confident the project would go ahead despite the impact of slumping oil prices on the Gulf nation's coffers.

Under the deal, for which a memorandum of understanding was signed in Seoul last week, a three-party consortium will build 100,000 housing units and related infrastructure for a new town near the capital Riyadh over the next 10 years.

The consortium includes two South Korean firms, Daewoo Engineering & Construction and Hanwha Engineering & Construction, along with local construction firm Saudi Pan Kingdom.

Share prices of Daewoo and Hanwha have declined on the Seoul stock market in recent days, amid questions as to whether the oil-rich kingdom would be able to fund the massive project given the current oil price squeeze.

But Daewoo Construction spokeswoman Hong Soo-Jin said the company was "fully confident" the project -- the biggest-ever overseas construction deal won by South Korea -- would be realised.

Hong noted that it was a pet project pushed by King Salman bin Abdulaziz, who took the throne last year.

"Given this is one of the policy priorities of the new leader, we view the project as very reliable and trustworthy," Hong said.

The project to build the new town, Dahiyat Alfursan, is part of efforts to relieve a chronic housing shortage in Saudi Arabia, particularly in the over-populated capital Riyadh.

The Saudi government announced in January a plan to invest $400 billion for the next seven years to build as many as 1.5 million houses, according to Daewoo.