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President Park Geun-hye

The initial story that President Park Geun-hye told about construction projects she claimed as the accomplishments of her summit with Iran is being called into question following the news that MOUs (memoranda of understanding) have not been signed for some of them and that others may ultimately be awarded to Iranian companies. This is likely to lead to further criticism that the Blue House inflated its claims of economic deals worth US$37.1 billion.

According to various figures in the construction industry on May 9, South Korean construction companies have still not managed to sign MOUs for the Chabahar-Zahedan railroad project (US$1.7 billion) and the Mianeh-Tabriz railroad project (US$600 million). A statement released by the Blue House on May 2 while Park was in Iran detailing the economic deals she had made during the summit claimed that South Korean companies had signed MOUs with Iran for these two projects.

The orders for these two projects, which involve building freight and passenger railroad lines on sections that are 600km and 160km long, respectively, will be awarded by the Construction and Development of Transportation Infrastructure Company (CDTIC), which is under Iran’s Ministry of Roads and Urban Development.

In South Korea, Hyundai Engineering and Construction and Hyundai Rotem have been working together to win this project. “The fact is that we weren’t able to sign an MOU during this visit to Iran. Even so, we’re still working to secure the contract,” said a source at Hyundai E&C.

Comments by the CEO of an Iranian public company have also raised the possibility that another construction project that the Blue House claimed as a success may actually fall through.

On May 8, Iran’s Tasnim News Agency reported that Ali Nourzad, CEO of the CDTIC, as saying that the MOU that South Korean companies signed with the Tehran-Shomal Freeway Company stated that the South Korean companies would have to meet the obligations specified therein within four months for the MOU to become operational.

“The official went on to say that if the Korean company fails to fully implement the project, the CDTIC is ready to sign a deal with the Khatam al-Anbia Construction Base,” Tasnim News reported.

Nourzad did not specify what the MOU contained.

Daewoo Engineering and Construction and the Export-Import Bank of Korea have set up a consortium in an attempt to win the US$1 billion contract for building the Tehran-Shomal Freeway, a 121km freeway that would link the Iranian capital Tehran with the province of Mazandaran in the north. The contract for this project will also be awarded by the CDTIC.

“Since we are supposed to get funding from the Korae Eximbank, it’s very unlikely that the contract will not go through. I think the project will take place as planned,” said a source at Daewoo E&C.

To be sure, there is still a chance that these South Korean companies will be awarded these projects. The point is that three of the seven construction projects in the area of railroad, roads and water management that the Blue House boasted as being part of Park’s successful visit to Iran are facing difficulties not mentioned in the Blue House‘s initial announcement.

By Kim Sung-hwan and Choi Jong-hoon, staff reporters

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