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Hanhwa Engineering & Construction Co. has pulled out from its mega construction project in Iraq, and with the move, it stands to lose about $581 million. It was reported that the South Korean firm had to withdraw to avoid more financial losses.
Hanhwa E&C is also trying to prevent the losses from spreading to other units within the company thus, the decision was made. The company just dropped a $10 billion project where it was contracted to build the Bismayah New City in Baghdad, Iraq.
The company revealed that it withdrew from the project after the Iraqui government failed to pay for years. Hanwha E&C is expecting massive losses amounting to as much as KRW828 billion or $581 million if it will not be able to get back dues that it did not receive yet.
According to The Korea Economic Daily, the construction and engineering company informed Iraq’s National Investment Commission (NIC) last week about its decision to abort the project in Baghdad. The NIC is the government agency that awarded the Bismayah New City construction job to Hanhwa E&C 10 years ago.
The Bismayah plan was dubbed the biggest city development in the entire history of Iraq, and it was first proposed in 2010. In 2012, Hanhwa E&C secured the deal to build it, and the contract involves the construction of 100,000 housing units on 1,830 hectares of land.
The site must be completed with all the necessary features, including power infrastructure, transport, water, health and education centers. Originally, the target date for completion was in the last part of 2020, but it was changed to 2027 due to various issues, such as the pandemic and geopolitical conflicts.
Hanhwa E&C resumed the construction works when the hostilities in the country ended, however, it was forced to stop again when the COVID-19 pandemic struck. NIC also failed to pay the company thus, the company could no longer continue with the project.
Korea Joongang Daily reported that although the new city is still incomplete, Hanhwa E&C has already finished building about 38% of the houses and 26% of the infrastructure. Currently, the completed areas are already inhabited by around 100,000 people.
“We have officially informed the Iraq National Investment Commission of the revocation of the contract to prevent further loss of our profit,” a Hanhwa E&C official said in a statement for the contract termination. “We will collect as much outstanding payments as possible by exercising our contractual rights and dispute procedures. But as the Iraqi government is strongly willing to complete the project, there is a possibility of resuming construction after some negotiations.”
