x Abu Dhabi, UAEFriday 28 July 2017

The deal with Arabtec confirms and extends the powerhouse Samsung’s vital interests in the Middle East.

It’s hard to understand, without visiting Seoul, how all-pervasive the Samsung brand is in South Korea.

Big buildings with the blue and white logo – headquarters of this or that division – loom on nearly every street corner, it seems. The engineering headquarters, a 20-minute drive from downtown, is a small, self-contained town, with a population of more than 8,000 and its own hospitals, banks and dentists.

The Samsung electronics store in upmarket Gangnam is an Asian version of the Apple stores now common in many cities in the world, attracting technology enthusiasts from all over the country for new product launches or simply to play with the high-tech devices in the store.

The Samsung group of companies, with interests in construction, cars, retail, finance and clothing as well as engineering and electronics, account for an enormous 23 per cent of Korea’s GDP.

Quite simply, without Samsung there would have been no South Korean “economic miracle”, which over the past three decades has transformed the country from a primarily agrarian society producing cheap copies of Japanese electronic goods, into a leading global manufacturer and exporter.

Arabtec has married into this powerhouse of a corporation via its joint venture with one part of the Samsung empire – the engineering division.

Engineering is a big part of the Samsung group, which with revenue of US$268 billion and net profits of $26bn last year and 425,000 employees around the world, is a corporate big hitter.

It only got into the Middle East engineering relatively recently, with its first project in Saudi Arabia in 2001. But others have swiftly followed, and now as much as 50 per cent of engineering revenue comes from the wider region

So the deal with Arabtec confirms and extends Samsung’s vital interests in the Middle East, and especially in the heavy-end engineering business of building refineries, petrochemical plants and other oilfield services plant.

The market certainly looks full of potential. With oil prices still historically high and Arabian Gulf countries increasingly consuming more of their own output, the case for new refineries is persuasive.

Some estimates put the value of contracts to be awarded in this fast-growing sector as high as $1.4 trillion over the next few years. Inward investment by the region’s oil exporters is at an all-time high.

Samsung recognised the value of getting hitched to one of the region’s best-known names in contracting. Arabtec is the biggest quoted contractor in the Gulf, and has a string of eye-catching successes behind it, such as Burj Khalifa, Emirates Palace and many other five-star hotels in the UAE. It is currently involved in the Louvre project in Abu Dhabi.

Samsung must also have been impressed by Arabtec’s new relationship at the very top of Abu Dhabi’s power structure. This was symbolised by the surprise involvement in the joint venture of Tasameem Property Investment, a company linked to the capital’s power elite.

The Koreans are calculating that Arabtec will be their door-opener to the many projects currently up for grabs across the region.

For Arabtec, the deal is a big step along the path signalled by the new management structure under the chief executive Hasan Ismaik. Engineering is, on the one hand, a dramatic and capital-intensive departure from the old business. But on the other, it could be presented as a natural extension of its past successes, such as Burj Khalifa, which is as much an achievement of engineering and technology as of simple contracting.

The real significance of the joint venture is that it is not, as is often the case in such deals, a project-specific move. It will be a permanent corporate fixture, almost like the launch of a new company.

And it brings with it the tantalising promise of genuine technology exchange, with the Koreans helping Emiratis match their own skills in engineering via the establishment of a permanent training college in the UAE, a significant boost for the Emiratisation programme.

The trick will be converting the fine words from Seoul into hard contracts in the Middle East. But that is the challenge facing Arabtec’s new management. Now they have the backing of one of the world’s biggest corporate brands in their efforts.

fkane@thenational.ae