December 21, 2005
Korean construction and shipping companies have agreed to write off up to 80 percent of outstanding debts on contracts signed with the Iraqi government in the ’70s and ’80s.
Hyundai Engineering and Construction Co. said yesterday that the company’s board agreed to settle for 20 percent of the $1.7 billion it is owed for construction projects in Iraq. Including interest payments of $350 million, the company expects to recoup a total of $681.3 million by 2028.
The International Monetary Fund and the Iraqi government have recently been exerting strong pressure on Korean companies to forego 80 percent of the money they are owed for the past construction of roads, railways and power plants in Iraq.
Lee Ji-song, Hyundai Construction’s chief executive officer, said the debt write-off will not hurt company finances because 70 percent of the loss has already been factored into the company’s accounts.
Iraq has been defaulting on the debts since the United Nations imposed sanctions on the country in the wake of the first Gulf War in 1991. Samsung Corporation, which is owed $240 million for work on construction projects in Iraq, said it is to receive 20 percent of the debt, or $48 million, over 23 years starting in 2006. Samsung said that the ongoing instability in Iraq prompted the company to give up its attempts to recover the full debt.
Hyundai Corporation also decided to accept the Iraqi government and IMF’s proposal of recovering 20 percent of the company’s debts from the Middle East country.
Other Korean companies such as Namkwang Engineering and Construction, which is owed $13.9 million by Iraq, are expecting repayment of 10 percent of the debt from the Iraqi government sometime next month.