President Lee In-ho of Korea Trade Insurance Corp. (K-SURE) shakes hands with President Fahad A. Al-Saif of the National Debt Management Center of Saudi Arabia after signing an MOU on Feb. 25, 2020.

Korea Trade Insurance Corp. (K-SURE) agreed to extend a 3.3 trillion won ($3 billion) long-term financing facility to the Saudi Ministry of Finance.

The financing facility is extended on the condition of guaranteed participation of Korean companies in the Saudi government’s projects to boost the economy.

K-SURE announced the signing of the long-term financing facility on Jan. 7.

The latest deal came after K-SURE and the Saudi Finance Ministry agreed last February to provide a long-term facility on the condition that Korean companies will participate in the Saudi government’s economic stimulus projects.

K-SURE will provide a 3.3 trillion won guarantee to arrange funds for the implementation of Saudi projects from international financial institutions. In return, the Saudi government agreed to allow Korean companies to participate in massive stimulus projects such as Neom Smart City and Qiddiya Entertainment Multi-purpose Project.

The funds, to be borrowed from international financial institutions in return for K-SURE’s guarantee, will be used to pay for Korean raw materials and equipment exports related to projects involving Korean companies.

Losses, to be incurred in the case of principal and interest in arrears by the Saud Finance Ministry, would be compensated by K-SURE.

The Neom Smart City Project calls for building an advanced new city 43 times bigger than Seoul at a combined cost of about 500.5 trillion won.

The Qiddiya project calls for creating a multi-purpose entertainment complex, including a theme park and hotels at a cost of 8.8 trillion won. Several Korean companies are expected to participate in the mega project, K-SURE officials said.

With K-SURE’s provision of the guarantee, Korean companies are evaluated to be in a better position in competition to win Saudi projects. For the Saudi government, the latest deal will be a win-win arrangement since it lessens its financial burden related to the implementation of the state projects. Korean companies are expected to benefit from the winning of Saudi projects.

Of late, K-SURE has been focusing on extending export financing facilities to the Middle East region.

One of K-SURE’s representative financing facilities in Saudi Arabia was a 3.3 trillion guarantee, extended to Abu Dhabi National Oil Company (ADNOC) in 2019.

K-SURE plans to strengthen its function as financial platform through project financing so that Korean companies can land more overseas projects.

Korea ranked first among countries in terms of winning overseas projects by landing orders worth $70.5 billion, accounting for 15 percent of the total for the past decade.

K-SURE President Lee In-ho said, “K-SURE’s provision of the financing facility is expected to be a much boon for Korean companies who are still grappling with a difficult situation, caused by the resurging of the COVID-19 pandemic.”

K-SURE will spearhead financing support by expanding strategic partnerships with major project owners so that massive economic stimulus projects in the Middle East can serve as Korean companies’ opportunities to gain momentum in winning orders, he said.

A view of K-SURE headquarters in Seoul Jongno-gu. (Photos: K-SURE)