Builder receives upfront payment of $775 million for $8b project near Baghdad


Hanwha Engineering and Construction Co. said it received $775 million (about 870 billion won) from Iraq’s National Investment Commission in the upfront payment for the $8 billion housing project near Baghdad.

Company officials said it took the advance payment, about 10 percent of the total contract amount through the Iraqi central bank on Sept. 13.

The payment dispelled some concerns about a possible delay in the massive construction project to build 100,000 homes in Bismayah near the Iraqi capital by 2019.

Iraq’s advance payment to Hanwha was supposed to be made within two months after the contract between the two sides was signed on May 30.

There had been speculation that Iraq’s unexpected delay might have something to do with the imprisonment of Hanwha Group chairman Kim Seung-youn.

Hanwha E&C CEO and vice chairman Kim Hyun-chung flew to the Middle Eastern country and has held a series of talks with the Iraqi government and commission officials to try to resolve the issue of the upfront payment, according to the Hanwha official.

Last month, Korea’s Land Ministry also supported the company as its minister reportedly sent a letter to the Iraqi commission via Hanwha to ensure that chairman Kim’s imprisonment would not jeopardize the deal.

“There had been several difficulties in proceeding with the project. But the Iraqi government’s strong trust in chairman Kim and Hanwha has enabled the deal to be sealed,” said CEO Kim Hyun-chung. “This will be good news for some 100 companies that will be involved in the project.”

CEO Kim also expressed his willingness to fully cooperate with the company’s subcontractors, so that the massive housing project will progress smoothly.

This project is the single largest construction contract ever won by a Korean builder.

It involves the development of a 1,830-hectare new town in the Vismaya region, which is 10 kilometers southeast of the capital city Baghdad. It is similar in scale to the Seoul suburb of Bundang.

The project includes building 100,000 homes, as well as the roads, water and sewage to support them. The company plans to build Islamic traditional houses and modern houses.

The whole project will take seven years to complete and will employ the Design-Build method, through which one company carries out the planning, procurement and construction.

Company officials said growth is expected to be shared with small and medium-sized businesses and the creation of jobs through subcontractors, contributing to the development of Korean economy.

To push for the construction in earnest, Hanwha has increased its task force team members to 350, according to company officials.

Early in September, Hanwha set up an “Initial Camp” in the construction site and plans to launch the leveling work to build homes.

The company expects a “second construction boom in Middle East” because many Korean small builders will participate in the Hanwha project.

Company officials said more than 1,000 workers from about 100 subcontractors will be used in the housing project.

“The project will be a good model for shared growth between conglomerates and small companies and will help tide over the economic difficulties facing the nation by creating 550,000 jobs,” said a company spokesman.

By Chung Joo-won (joowonc@heraldcorp.com)