Seoul to offer $3 bn credit insurance on Saudi's megaprojects

Korea Trade Insurance Corp. (K-Sure) has agreed to provide $3 billion in trade credit insurance to Saudi Arabia to help South Korean companies win orders for the kingdom's ambitious development projects of over $500 billion.

In return for the insurance coverage, Saudi Arabia will invite Korean companies to the $500 billion Neom project to build a smart city and the $8 billion Qiddiya entertainment city project, the Korean government agency said on Jan. 8. 

Under the agreement, K-Sure will provide payment guarantees for $3 billion in loans to be borrowed by the Middle Eastern country to pay Korean firms for the project-related orders over the medium to long term.

“This credit insurance will provide support to Korean companies, suffering from the resurge of the COVID-19, to win overseas orders,” K-Sure Chairman Lee In-ho said in a statement.

Back in February 2020, K-Sure reached an agreement on the financing deal with Saudi Arabia's National Debt Management Center on condition that Korean firms would be guaranteed a place in the list of companies winning orders for the projects.

Several Korean companies are preparing to participate in auctions for the projects, a K-Sure source added.

Construction industry sources believe the credit insurance will put Korean companies in an advantageous position over competitors from other countries.

“Financial capabilities are the key to the success of government-led development projects. Saudi Arabia must welcome this credit insurance,” said one of the sources.

The Neom project is to build a new cross-border city, about 43 times bigger than Seoul, on the shores of the Red Sea over 26,500 km. Qiddiya is one of the tourism megaprojects to be established in Saudi Arabia. Both projects are part of the Saudi Vision 2030 aimed at growing and diversifying the oil-dependent economy.

K-Sure has been concentrating on providing trade insurance for Middle East-related projects. In 2019, the government agency provided Abu Dhabi National Oil Company (ADNOC) with $3 billion in payment guarantees.

Saudi Arabia is the biggest overseas market for South Korean builders and related industries. The kingdom had placed cumulative $70.5 billion in orders to South Korean companies over the past 10 years, or 15% of the total they awarded foreign countries during the period.

Write to Soo-Young Seong at syoung@hankyung.com
Yeonhee Kim edited this article.