Korean group to build US$2b Cambodia city

A group of South Korean companies said it would spend US$2 billion (HK$15.6 billion) on building a new city in Cambodia, the biggest single investment in the impoverished country still recovering from decades of war.

The residential, commercial, cultural and business complex would be built on 119 hectares on the northern edge of Phnom Penh, the group said Wednesday.

The group, which includes Busan Mutual Savings Bank and property development company Landmark Worldwide, had been wary of Cambodia because of the country's violent recent history, marketing director Lee Yunyoung said.

"But actually when we came here we realized that it is really safe," he said at the ground-breaking ceremony.

"So we want to start our project before others start."

Deputy Prime Minister Sok An said the project would help attract more investors.

"Our population continues to increase sharply, so we need to expand our old city to meet the needs of the people," he said. "Foreign investors also need good infrastructure to run their businesses."

Cambodia's growth has been remarkably high in recent years. Its economy grew 10.4 percent last year, when foreign direct investment hit a record US$4 billion.

In another development, Samsung Engineering, South Korea's biggest engineering company, signed a preliminary agreement to build an ammonia plant in Saudi Arabia for US$946 million, the company's largest single contract.

The factory is for Saudi Arabian Mining and will be completed by December 2010, Samsung Engineering said. The company now expects to exceed a previous target for US$3.5 billion in orders this year.

Samsung Engineering and South Korea's other contractors are more than half way to matching a record set in 1981 for orders from the Middle East. Saudi Arabia has awarded the most contracts.

"It will only get better as a number of major projects are expected to be awarded this year in the Middle East," said Byun Sung Jin, an analyst at Mirae Asset Securities in Seoul.

"This contract will put Samsung Engineering in a better position to win some of those orders."

Saudi Arabia - the world's largest oil producer - is the biggest single source of overseas revenue for South Korean contractors, who have received US$58.1 billion in orders in the 34 years they have been doing business in the Arab kingdom, according to the International Contractors Association of Korea.

Shares of Samsung Engineering gained 7.6 percent to a record close of 85,000 won (HK$714) in Seoul. The stock has almost doubled this year, compared with a 16 percent climb in South Korea's KOSPI index.

Saudi Arabia is expected to invest about US$76 billion until 2010 for refineries and other chemical plants, according to Samsung Engineering. The ammonia plant will have the capacity to produce 3,300 tonnes of the chemical a day, making it the largest in the country.

South Korean contractors have received a combined US$7.45 billion in new orders from the Middle East this year, with almost half of that coming from the United Arab Emirates, the contractors' association said.

REUTERS, BLOOMBERG