Economy, Business And Markets

Seoul’s Multibillion-Dollar Deals With Iran Remain Grounded

South Korean President Park Geun-hye (L) was welcomed by her Iranian counterpart Hassan Rouhani in Tehran’s Sa’dabad Palace on May 2, 2016. (File Photo)South Korean President Park Geun-hye (L) was welcomed by her Iranian counterpart Hassan Rouhani in Tehran’s Sa’dabad Palace on May 2, 2016. (File Photo)

South Korean President Park Geun-hye’s historic state visit to Iran back in May, which Cheong Wa Dae (the executive office and official residence of the president of South Korea, located in the capital city of Seoul, figuratively refers to the government) has boasted as a multitrillion-won “economic jackpot”, is likely to have ended in vain.

It has been six months since Cheong Wa Dae’s big media hype over President Park’s “sales diplomacy”, saying it hit a total of 52 trillion won ($45 billion) in deals with an Iranian counterpart, but a single deal has yet to be officially concluded so far, The Korea Times reported.

Most agreements during Park’s visit were non-binding memoranda of understanding, and follow-up negotiations based on these agreements are also in stalemate due to a decade of financial sanctions on Tehran and consequent difficulties among Iranian firms.

Contrary to Cheong Wa Dae’s rosy expectation that the Middle Eastern country could be the El Dorado for Korean export firms, Iranians understand the summit the other way round: “Korea will invest billions of dollars in Iran.”

According to the International Contractors Association of Korea, Korean companies clinched a total $2.49 billion worth of orders in Iran in 2009, an all-time-high volume in the history of the two countries’ bilateral relations.

However, the volume plunged at $19.3 million in 2013 and $9.69 million in 2014. Korean firms did not win any orders in Iran 2015.

This year, Korean firms have clinched only two orders worth a total of 777 million won ($680,000) in the country.

Daelim Industrial has reportedly sealed two provisional contracts worth $6.8 billion to connect the Isfahan-Ahvaz railroad and build a hydroelectric power plant in Chaharmahal-Bakhtiari Province of Iran while Hyundai Engineering signed a similar deal to build a gas-processing facility in South Pars, but neither has yet to reach an actual deal yet.

In the meantime, Iranians expect the Korean government to invest in their country’s infrastructure as President Park reportedly promised to “provide a total of $25 billion in finance for infrastructure projects in Iran” to support relations with the country.

“Iran is the second-largest country in the Middle East with a highly educated population of 81 million. With Korea’s technology transfers and investments, the two countries will enjoy a win-win situation in the global market,” said Mojtaba Mousavian, director of Iran’s Trade Promotion Organization.

“However, Korea should invest and share its technologies with Iran first if it wants to make inroads into the Middle East’s second-largest market. We will not roll out the red carpet for Korean firms without any incentives. We have other global partners like China. Investment and technology sharing should come first.”

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