Long-term benefits for GCC rail investments

Oil-rich GCC countries are investing heavily to create and expand rail infrastructure, and a significant portion of the $172 billion – the total amount of investment earmarked for Middle East rail projects – will be allocated to the Arabian Gulf. In addition, $78bn will be invested into GCC rail projects over the next 24 months.

The CEO of Qatar Railways Company, Saad Al Muhannadi, says there will be $45bn worth of rail-related projects in Qatar alone. Recently, Qatar awarded $740 million in design and construction contracts to Larsen and Toubro (L&T) – India’s largest engineering and construction firm. The total value of order for the joint venture is estimated at $3.3bn. L&T, which is currently building the Gold Line of the Doha Metro, also won a $1.4bn contract for the Riyadh Metro project in Saudi Arabia.

Out of a total 236 rail ‘business opportunities’ in the region, 54 per cent is in railway infrastructure, covering construction and operations maintenance, while 37 per cent will be focused on rail technology tenders. The on-going projects bode well for the region’s employment market, as the boom in the GCC’s rail segment is expected to create 80,000 jobs over the next five years, according to an official from the Saudi Railways Organization.

In a joint study, research firm AT Kearney and Gulf Petrochemicals and Chemicals Association say the growth of GCC economies, GDP and population requires support of mega infrastructure projects in the region and the acceleration of rail projects is in line with medium- to long-term plans of GCC governments. “Rail is well positioned to absorb expected demand increases by passenger transport, while air and road segments are expected to increase significantly over the next five years and beyond,” the report reveals.

Although cross-border, intra-GCC trade hovers around a miniscule three per cent of the overall GCC GDP, with the outlook ratio stable over time, rail connectivity is set to create various opportunities. “Firstly, at a minimum, freight volume addressed by rail will grow at the same rate as real GDP growth, leading to at least a five percent per annum growth rate until 2020. Secondly, an integrated GCC railway infrastructure can become an important catalyst in driving increased economic co-operation between GCC countries, fostering economic regional and national development agendas, while supporting growth and strengthening national capacity integration within the GCC region. Thirdly, rail can raise the profile of the importance of intra-GCC trade in the overall balance,” adds the joint study.

In the not so distant future, regional governments have plans to expand the reach of the GCC rail network beyond this region. “Looking forward, the railway plans to integrate and connect beyond the GCC, linking other countries in the Middle East region. Following a detailed feasibility study, this includes specific plans for connecting to the Yemen Border. Other planned connections include reaching Jordan through the North-South Railway in Saudi Arabia and Iraq through Kuwait.

“Syria and Turkey are also target destinations, representing an important step toward a European connection. In the long term, this will include exploring the possibility of extending a link via Central Asia and China, as well as other dynamic Asian economies.

“Similarly, linking with Turkey’s rail through Jordan will give GCC member states access to the European rail grid. The goal is to become an important strand of a reconstituted ‘Silk Road’ to position GCC member states and the wider MENA region as significant players on the transportation and logistics world map,” the study concludes.