Significant rail investment in the GCC adds promise to increased trade

With every GCC member state investing in transport, the region is currently undergoing something of a road and rail boom. In the first three quarters of 2013, about $30bn in rail construction contracts were awarded across the GCC, and while some estimates suggest as much as $200bn could be spent over the next five years on regional rail development initiatives.

Ambitious Goals

In the years ahead, the GCC could indeed be playing host to a seamless network of rail links which criss-cross its various borders. This achievement would also mark the level of cooperation the GCC was designed to facilitate.

Notwithstanding, this transportation surge poses considerable challenges too – from engineering high-speed rail links in desert climates, to ensuring the necessary international cooperation and political commitment to keep different project goals on track and for cross-border trains to run on time. Few can doubt though the need for such projects as the region sees continued, robust economic growth coupled with accelerating population numbers. Linking up GCC countries also promises greater market access for a range of local and international businesses; the possibilities created by spreading the construction process across multiple national frontiers offers competitive advantages for local operators across a range of sectors. Indeed, this should expand even more once greater intra-regional transportation is on offer.

Growing Focus

In the longer term, the GCC transport grid – and GCC rail in particular – will likely become a key factor in the continued and sustainable development of each country’s economy, as well as the wider region. A recent report on construction activity in the GCC plus Iraq by London-headquartered consultancy firm EC Harris estimated that around 22% of all spend on major construction projects (those worth more than $1bn) over the 2014-19 period will be on transport-related schemes. Almost all of this number is taking place among GCC member states, with the lion’s share covering road and rail projects.

Pan-Arab

Indeed, a quick run down of these projects reveals initiatives taking place across the region. In the south for instance, construction on the 2244-km Oman national railway project forms the main plank of the government’s infrastructure development efforts. Construction of the $15.6bn rail scheme is expected to commence in the fourth quarter of 2014 and is slated for completion by 2018. The rail network will link industrial centres across the Sultanate, including Sohar and Duqm, where port expansions are also under way, as well as airport facilities, specifically Sohar and Muscat, where a $5.2bn expansion project is also covered under the programme.

In the UAE transport spending is also up. Etihad Rail, which is a key part of the UAE’s national development plan – Vision 2021 – is overseeing the construction of a 1200-km network that will eventually link Fujairah and Ras Al Khaimah in the east through Sharjah, Dubai and Abu Dhabi to Ghwefat at the Saudi border in the west. Spur lines will also extend to Shah and Al Ain. Phase 1 of the project (which covers the stretch from Shah and Habshan to Ruwais) will be operated by DB Schenker. It was reported in early 2014 that freight services would be ready for launch by the end of this year. While the tender for Phase 2 had yet to be announced at the time of writing, a decision was expected by mid-2014.

Other UAE transport projects include Dubai’s Al Sufouh Tram Project, Emirates’ SkyCargo terminal at Al Maktoum International Airport – which is itself undergoing major development – and the expansion of Terminal 2 at Dubai International Airport. All of these projects will feed into the rail network.

Elsewhere in the region, Saudi Arabia is engaged in its $16.5bn Makkah Public Transport Programme (MPTP), which involves both metro and bus networks, and will stretch to some 114 km when finished in 2024. The MPTP will help ease the flow of a projected 6.5m Hajj pilgrims and 10.8m Umrah pilgrims to the Holy City by 2029, with 62 stations to be added to the metro network. March 2014 saw invitations to pre-qualify issued by the Development Commission of Makkah and Mashaaer for Phase 1 of the rail work on the project. In addition, two other initial rail lines were also awaiting tender results.

The 449-km, $14bn Haramain High Speed Rail (HSR) project, meanwhile, will link Makkah, Madinah, Jeddah and King Abdullah Economic City, and is expected to be completed by 2016, with around 50% finished as of early 2014. The $22.5bn Riyadh Metro is another major rail project, with contracts awarded in 2013 and drilling breaking ground in April 2014. Construction work is due to take four years. Jeddah too is also working on a metro, at an estimated cost of $11bn.

Other Projects

In Qatar, meanwhile, a transport master plan is being implemented that includes a fully automated metro system, a light rail and a long distance railway network. The first of these, the Doha Metro, is well under way, with QR20bn ($5.48bn) of contracts awarded in 2013 by Qatar Railway Company, which is the body overseeing the project. The metro, which had two of its lines under construction in 2014 and is set to transport its first passengers by 2019, will consist of 212 km of track, with 85 stations, some of which will link to the wider rail network. This will include the Lusail Light Rail Transit System, due to run its first cars in 2017. A third, 350-km HSR network is also under planning and is expected to be functional by 2029, connecting Qatar through to Saudi Arabia. Construction is set to begin in late 2015.

Bahrain, meanwhile, has a number of ambitious rail projects, including plans for two causeways – one to Saudi Arabia and another to Qatar – that would carry rail traffic across these respective borders.

Kuwait, meanwhile, is pressing ahead with a $7bn metro system, the Kuwait Metropolitan Rapid Transit System Project (KMRT). This five-phase, public-private partnership will see 160 km of track and 69 stations constructed, with services set to begin in 2020. The KMRT feeds into a wider overhaul of the local transport infrastructure, which includes the 22.5-km Al Ahmed Bridge and 550 km of rail track, which accounts for Kuwait’s contribution to the GCC rail network.

Joining Up The Dots

Indeed, many of the rail schemes across the GCC feed into the wider, 2177-km Gulf Railway network. Estimated to cost between $20bn and $200bn – depending on the method of calculation – the scheme will join up the rail projects under way into a single integrated, GCC grid. This may also eventually extend to Yemen, if current feasibility studies produce a favourable result. The network will also branch out to neighbouring Jordan and Iraq, providing an even greater reach. The existing plans, approved by GCC transport ministers in 2008, appear to be gaining momentum from the work currently being done on national rail systems.

The rationale behind the GCC Railway seems clear: projections of population growth within the GCC widely forecast a doubling by 2024 over the 2010 figure, with GDP growth averaging around 5% across the region as a whole. These numbers factor in strong potential demand for both passenger and freight transport, with rail widely seen as the most efficient way to meet this growing need. Intra-GCC trade – which has averaged around 3% of GDP over the past decade – is also thought to be a potential growth area in the years ahead. A lot of this trade is currently by road and sea, and consists of various bulk inputs for the petrochemicals industry. Much of this could be more efficiently transported by rail.

Challenges

The plan is mainly for single track, standard gauge line, carrying both passengers and freight, with double track on the most popular routes.

Central to realising this is the GCC Railway Authority, which is coordinating the link-up, region-wide. This involves working with each national authority to make sure that its own domestic rail development plans dovetail with the needs of the GCC-wide network. The creation of uniform technical standards is also a part of the vision, as is the standardisation of procedures. There are, however, a number of engineering challenges that need to be addressed. With summer temperatures often well above 40°C, as well as the major temperature changes that occur at night, rail lines have to be able to withstand significant fluctuations in climatic conditions. There is also the issue of keeping the desert sands at bay, as dunes shift.

Another issue is human resources. With each GCC state pursuing its own individual rail project, a shortage of experienced and trained personnel to work on the GCC Rail initiative may be a hurdle. In addition, Customs and border checks between GCC members are not always as smooth as some might wish. Ensuring that transit across frontiers is as efficient as possible is crucial to the project’s success. Yet with the rail boom in the Gulf now clearly in full swing, the chances of the GCC Rail link-up happening have never been greater. The benefits for businesses and investors are clear too, from those groups directly involved in rail infrastructure to the many that might benefit from faster and more cost efficient regional transport.