11/03/2012

GCC rail boom to widen trade routes

 

Arab News
3 November 2012:

DUBAI: A century after Lawrence of Arabia cut the Damascus-Madinah railway, governments are embarking on plans to restore long-distance rail transport in the region and extend it across the Arabian Peninsula.Official figures suggest around $ 100 billion may be spent by the end of this decade laying over 6,000 km of track for both national lines and a route linking all the states in the Gulf Cooperation Council: Saudi Arabia, the UAE, Kuwait, Qatar, Oman and Bahrain.

A freight train is seen at a railway station in Riyadh. (Reuters)

Arab News

3 November 2012:


DUBAI: A century after Lawrence of Arabia cut the Damascus-Madinah railway, governments are embarking on plans to restore long-distance rail transport in the region and extend it across the Arabian Peninsula.
Official figures suggest around $ 100 billion may be spent by the end of this decade laying over 6,000 km of track for both national lines and a route linking all the states in the Gulf Cooperation Council: Saudi Arabia, the UAE, Kuwait, Qatar, Oman and Bahrain.
The governments face big technical challenges, such as making six national rail systems compatible and building on the shifting sands of remote deserts.
But success could have far-reaching effects on economies in the region, cutting their dependence on expensive road and air travel, boosting trade and even bringing the GCC closer together politically.
“It will undoubtedly transform the economies as any major piece of railway does,” said Keith Hampson, director of global rail transit at Aecom, a US-based transport planning firm.
“It opens up all sorts of trading relationships that probably otherwise would not have existed.”
The Turkish-built Hejaz Railway to the Saudi city of Medina was never rebuilt in Saudi Arabia after Lawrence of Arabia’s raiding parties destroyed parts of it during World War I.
Rail transport has been neglected in the Gulf since then; trade depends heavily on columns of smog-spewing trucks running along desert highways.
Currently, the only major rail systems operating in the GCC are a 60-year old freight and passenger link between Riyadh and the port of Dammam in Saudi Arabia, and Dubai’s metro.
But that is set to change dramatically as growing populations and countries’ desire to diversify their economies away from oil exports cause them to pour money into railway construction.
Saudi Arabia is building a 2,750 km line from Riyadh to its northern border with Jordan, aiming to complete it in 2014. About 2,260 km of additional lines are planned in Saudi Arabia, including metro systems and high-speed train projects.
In the UAE, Etihad Rail has started building a link that is to transport granulated sulphur from desert gas fields to the southern port of Ruwais after it is finished in 2014.
The national networks are to be connected to a joint GCC line that would run from Kuwait along the Gulf coast to Muscat in Oman. The Gulf states are expected to prepare a detailed engineering design for the $ 15 billion joint line by end-2013 or mid-2014, an official at the GCC’s Secretariat General said.
“Hopefully by the beginning of 2018, the railway will start operating,” said Ibrahim Al-Sabti, director of the transportation department at the Riyadh-based secretariat.
The network could help develop remote desert and mountain areas of the GCC which have not fully benefitted from the region’s petrodollar wealth.
“You put a railroad station and before long you have got some shawarma (sandwich) shops, and then you get outlets for aspirin and water and pretty soon you get a bank. It just grows,” said John Lesniewski, director of sales and commercial agreements at the UAE’s Etihad Rail.
Trade within the GCC and its re-exports to other countries are expected to get a boost. Intra-GCC trade rose from $ 19.8 billion in 2003 to $ 65.4 billion in 2010, still only a tiny fraction of last year’s total GCC trade value of $ 1.3 trillion.
Ports in the GCC are making plans to expand partly on the assumption that they will be connected to the railway. One of them is the port of Salalah in the far south of Oman, near the border with Yemen.
In May this year, Oman revealed plans to more than double port cargo handling capacity at Salalah by 2014, when it also aims to finish building a cargo terminal at the city’s airport.
The rail network “is probably good news in particular for those established trade hubs like Dubai, and for Oman and its plan of beefing up the port of Salalah,” said Farouk Soussa, Citigroup’s chief economist for the region. “Other trade hubs will find it very difficult to compete.”
In 2009, a GCC feasibility study forecast the joint GCC rail line would open in 2016, carrying 29 million tons of freight out of 61 million transported by all means in the region. Annual passenger traffic was projected at 4 million people in 2016-2020, with passenger revenue of $ 240 million in 2016 rising to $ 600 million in 2045.
A rise in trade and passenger traffic among GCC countries could strengthen political ties between them, adding pressure to move further ahead with joint projects such as a full customs union, which would involve revenue-sharing between states.
There could be other geopolitical effects. Yemen has expressed interest in joining the rail network; if it can overcome security problems and eventually does join, perhaps with Saudi aid, that could help to stabilize the impoverished, violence-torn country by integrating it with the prosperous GCC.
Also, Salalah will become a major link between the GCC and the rest of the world. Because the port lies outside the Strait of Hormuz, it will reduce the GCC’s vulnerability to threats by Iran to close that key shipping route.
Despite the huge cost of the rail network, high oil prices and large state budget surpluses in the Gulf mean financial considerations look unlikely to block the project, at least in wealthy Saudi Arabia, the UAE and Qatar.
Politics and national pride may prove bigger obstacles in a region where governments have failed to agree on other areas of cooperation, such as creating a single currency and building a regional natural gas grid.
“A key challenge is ensuring that the railways being built do actually connect,” said David Lupton, transport economist and a former project manager of the GCC rail feasibility study. “I get the impression that national priorities may dominate.”
An Omani transport ministry official said recently that electricity would be the preferred energy source for its trains, while other GCC states plan to use diesel locomotives, creating a potential compatibility problem.
“It’s not one project, it’s not one country,” said Bashar Almalik, projects director at Saudi Railway Co. “Unless you have the whole network completed and connected, it’s useless to have one link connected to the borders.”
Another issue that GCC countries will need to resolve to make the rail system economically effective is customs procedures. Inefficient procedures have caused massive traffic jams of trucks at the Saudi-UAE border.
“We are trying to put together a regime with customs authorities so the train does not stop at the border,” Etihad Rail’s Lesniewski said.
Acquiring the necessary land in countries including Saudi Arabia may become a major obstacle. A big technical challenge is the unstable dunes of some of the region’s deserts, where sand builds up on tracks, increasing the wear and tear on them.
“We did everything you can imagine, there is no solution. All you can do is continuously clear the line of sand,” said Almalik. “Trust me, no matter what you do, you can’t mess with the sand. You can move sand dunes, but they will come back.”
Lesniewski said Etihad Rail had adjusted the route of its tracks after consulting local tribespeople on which locations had the most stable sands.
Such obstacles are not deterring scores of international firms, from US engineering giant Bechtel to South Korea’s SK Engineering & Construction, from hunting aggressively for railway business in Saudi Arabia, the UAE and Qatar. The weakness of government finances in many other parts of the world makes the Gulf rail contracts particularly alluring.
“Everybody is jumping in from across the planet. American, Brazilian companies are here. It’s terrible,” SK’s regional general manager Mike Cho said of the stiff competition.