Saudi Aramco signs $6bn deal with Korea Eximbank

Korea Eximbank, also known as the Export-Import Bank of Korea, has signed a $6bn (SAR22.5bn) framework deal with Saudi Aramco, a move that is expected to help South Korean companies win lucrative contracts in the Gulf state’s gigaprojects, according to state-run Yonhap News Agency.

The three-year deal is a follow-up measure to support a “second Middle East boom,” referring to potential business opportunities. It was signed between Korea Eximbank chairman Yoon Hee-Sung and Aramco chief financial officer Ziad Al-Murshed.

Under the agreement, Korea Eximbank can lend as much as $6bn to Aramco, which in turn pays South Korean companies involved in projects whose orders were placed by the state-owned oil major.

Korea Eximbank said of the $6bn, $1bn is set aside for the hydrogen and renewable energy deals.

Eximbank signs US$6 bln framework agreement with Saudi Aramco https://t.co/CPfkwXmvD7

— Yonhap News Agency (@YonhapNews) March 7, 2023

“The deal could give a big boost to South Korean companies in winning contracts in the Middle East,” Hee-Sung was quoted as saying by Yonhap.

The deal between Korea Eximbank and Aramco comes amid expectations of lucrative business opportunities in the kingdom and the Middle East following the November visit to Seoul by Saudi Crown Prince Mohammed bin Salman.

Korea Eximbank said South Korean entities are seeking to win construction deals in Saudi Arabia’s $500bn project to develop eco-friendly and smart cities in the kingdom’s northwestern Tabuk Province.

Korea Eximbank eyes Saudi megaprojects

Meanwhile, Saudi Arabia is undergoing a profound transformation and the economy is getting a boost from this social transformation and the government’s renewed efforts to diversify its economy away from heavy reliance on oil and gas.

With $620bn in assets under management, Saudi Arabia’s Public Investment Fund (PIF) is financing some of the Gulf state’s mega-projects to boost tourism including the Red Sea project, the entertainment offering Qiddiya and the Amaala wellness tourism initiative.

Read: Saudi Arabia’s PIF announces Diriyah as its fifth giga project

PIF says its giga-projects are designed to stimulate the economy and their benefits are expected to expand significantly beyond the real estate and infrastructure sectors.

Earlier in January, Saudi Arabia said it was adding the Diriyah tourism project to the portfolio of the wealth fund to enhance investment efficiency and public-private cooperation – expanding the number of mega projects in PIF’s portfolio to five. The $20bn Diriyah Gate is expected to add 20,000 homes to Riyadh’s residential stock by the time of its completion in 2027.

PIF’s NEOM project was established in 2019 and the futuristic city is now in the building phase with the first destination – Sindalah – due to open its doors for business in 2024. Construction is underway in all NEOM regions including THE LINE, Trojena and Oxagon.

The fund unveiled Qiddiya, a 334 km entertainment, sports and art city in April 2017. Construction on the entertainment megaproject commenced in 2019 and the first phase of the project is scheduled to open this year.

Similarly, the development of the Red Sea Project started in the second half of 2019, and Phase One of the project is scheduled to be completed in 2023. Phase One of the Red Sea Project will comprise 16 hotels and 3,000 rooms across five islands and two inland resorts.

“With over 555,000 residential units, more than 275,000 hotel keys, over 4.3 million sqm of retail space and over 6.1 million sqm of new office space expected by 2030, the planned construction in the kingdom will easily make Saudi Arabia the largest construction site the world has ever known,” said Faisal Durrani, Partner – Head of Middle East Research.

Knight Frank said in September 2022 that the total value of the real estate and infrastructure projects since the launch of Saudi Arabia’s National Transformation Plan in 2016 has crossed $1.1tn.