Samwhan to watch over ME

23 December 2005
Korean civil contractor Samwhan Corporation, which left the Middle East in 1997, is making attempts to stage a comeback.

Feast and famine, Samwhan Corporation has seen them both. Riding the wave of high oil prices, the South Korean civils and plant contractor made its Middle East debut in 1973 with a bang, when it was awarded a $24 million contract to build the 164-kilometre Yanbu-Rada dual-carriageway in Saudi Arabia. Over the next few years, it snapped up a further $400 million worth of contracts in the kingdom. Two decades later, with oil prices waning, it exited from the region. Samwhan’s last project was the $71 million civils and erection package for the 3,500-tonne-a-day cement works at Tabuk, also in Saudi Arabia.

The Korean firm may have departed from the region unnoticed, but its Middle East career was distinguished in several ways. "We were the first Korean contractor to be awarded a civils job in the region. This opened the doors for several others to follow," says Jong Hur, Samwhan’s vice-president. "We were driven by a pioneering spirit of being the first. It is part of our company policy to take on challenges and venture into new areas."

Further evidence of Samwhan’s pioneering spirit was visible in 1978, when the Korean contractor was awarded its first project in Yemen: an $83 million contract to build a 204-kilometre dual-carriageway from the Saudi border to Hodaidah. The Korean firm won the contract at a time when there were no diplomatic relations between Seoul and Sanaa. "It did not come as a hurdle. We were invited by the client [Highway Authority of Yemen] and we informed Seoul of our intention to bid. We managed to win in a closely contested bidding round," Hur says.

As a new entrant, Samwhan had to overcome several other hurdles. "It was a totally different culture and work atmosphere. We imported labour from South Korea and very often our staff found it difficult to work in the heat. With day temperatures rising to 50°C, we worked in the night with lamps," Hur says.

With such experience, taking challenges head-on has not surprisingly continued to be its policy. "We did not come to the region to lose. We were very confident we would succeed, as we had the advantage of endless supplies of manpower and equipment, which we brought with us." The results were predictable.

During its 24-year presence in the Middle East, Samwhan was awarded more than 70 civils and industrial contracts worth a total of about $3,000 million. From the headquarters buildings for the Saudi National Guard and the General Organisation for Social Insurance (GOSI) in Riyadh to the 27-storey office tower and six-level car park for The National Commercial Bank in Jeddah, the Korean contractor left its mark on the kingdom (see table).


Maintaining good relations with clients is an important tool for any contractor. And Samwhan knows it all too well. Its experience in carrying out schemes for the US Army Corps of Engineers (USACE) in South Korea came in handy in the Middle East. More than $1,425 million - or about 50 per cent - of its total contracts in Saudi Arabia were placed by USACE. They included the construction of warehouses, access roads, administration buildings, accommodation complexes and related facilities at various locations.

Along with maintaining close links with clients, Samwhan’s ability to deliver projects within budget and ahead of schedule also opened doors. "Our work for the beautification of Jeddah city was noticed by the mayor and in the late 1970s we were awarded contracts worth [a total of] $100 million on a negotiated basis. This was a big contract value at that time," he says.

While Saudi Arabia was very much at the heart of the Korean firm’s Middle East business, it also concentrated on neighbouring Yemen and Jordan, carrying out several projects. Along with civil and infrastructure projects, Samwhan diversified into the oil and gas, power and water and healthcare sectors. Its biggest project was the 15,000-cubic-metre Hodaidah water supply and sewerage scheme, built at a cost of $41 million.

With oil prices sliding and project activity shrinking in the region, the curtains came down on its winning streak. "We left the region and started bidding for projects in Vietnam, Bangladesh and Laos," Hur says.

Following the Asian economic meltdown, Samwhan was forced to look elsewhere again. With oil prices starting to rise and that growth being translated into major project activity, the Middle East was an obvious choice. "We were collecting project information and realised the Middle East market had changed drastically in the past 24 years. Dubai was an obvious destination, but we decided not to bid. [UAE] contractors had developed major capacity and our prices would not be competitive," he says. "Instead of civils and building projects, we decided to go after oil and gas, airports, roads and bridges."

With the UAE out of the picture, Samwhan decided Saudi Arabia was probably the safer bet. Its first contact point was the Presidency of Civil Aviation (PCA). In 1987, the Korean contractor had built the new 3,850-metre runway to serve Medina airport, besides upgrading the existing facility.

In November, the Korean contractor signalled its first effort to return to the region, with the submission of bids for the runway upgrade package at Jeddah’s King Abdulaziz International Airport (KAIA) expansion project. Elsewhere in the Middle East, it is due to submit revised prices for the two mechanical and erection packages on the Yemen liquefied natural gas (LNG) project. Samwhan is also eyeing opportunities in Qatar and Bahrain.

Samwhan’s attempts to stage a comeback will be put to the test in late December when it is due to start clarifications with the PCA for the KAIA contract. Having submitted a low bid, Samwhan is already ahead of the game. However, local Saudi contractors are closing in. The Korean firm’s offer of $245 million is about 0.4 per cent lower than the next best offer. "The field is still open. We hope to win. We built the runway at the new Incheon International Airport [in South Korea] and have used the same team to price the Jeddah airport tender."

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications