Saudi Arabia spending big on rail projects

Published December 16th, 2012 - 12:56 GMT
Saudi Arabia is planning a big investment in the rail industry
Saudi Arabia is planning a big investment in the rail industry

Rail transportation is playing an increasing role in the Saudi transportation sector. The government has launched a number of initiatives to develop this sector through major railway expansion projects connecting the different regions of the Kingdom. Presently, the current value of executed projects is estimated at SR 50 billion, according to a report by the National Commercial Bank (NCB).

Saudi Arabia's Railway Master Plan (SRMP) shows about SR 365 billion will be invested for railway infrastructure by 2040.

The Kingdom's growing economy, on the back of high oil prices, has led to heavy investments in railway infra-structure. Nominal GDP for the Transport and Communication (T&C) sector grew at a CAGR of 9 percent between 2002 and 2011. In 2011, T&C's nominal GDP was valued at SR 69.8 billion, accounting for 3.23 percent of total nominal GDP. In 2014, this is expected to reach SR 90 billion, accounting for 3.63 percent of total nominal GDP.

The Saudi Railway Organization (SRO) and Saudi Railway Company (SAR) are government-owned entities that oversee and manage the railway system. SRO supervises the existing railway system which connects Riyadh with Dammam, while SAR manages the implementation and operation of the North-South project. SRO aims to improve operation standards as well as the quality of materials and equipment. These developments have led the railway sector to push for privatization by inviting national and foreign investments.

In 2008, the Saudi Railway Regulatory Commission was established to provide efficient guidelines and to enforce a railway regulation system. The Commission is also responsible for ensuring safe and efficient operations, and issuing railway licenses and safety certifications.

The Public Investment Fund has played an active role by funding and developing most railway projects to date. It plans to continue its investments in the sector over the medium to long-term, the NCB report said.

As for projects, the North-South railway is considered the largest freight rail project that will have strategic importance for freight exports to the Gulf. At 2,750 km long, it is valued at an estimated SR 20 billion. The Landbridge project is another important freight line estimated to cost SR 26.6 billion. Owned by SAR, it will link the port cities of Jeddah, Dammam and Jubail, passing through Riyadh. The Haramain High Speed rail project, owned by SRO, is built to transport pilgrims and Umrah visitors from and to the holy cities passing by Jeddah and Rabigh. The project consists of two phases, costing about SR 51.5 billion.

The government has also started examining the construction of railways within heavily populated cities to alleviate congestion. One such project includes the SR 9.3 billion Riyadh Light rail. Owned by Arriyadh Development Authority, it is still in the bidding phase and is expected to be completed by 2018. The Jeddah metro is another planned project which is budgeted at approximately SR 35 billion and owned by the Ministry of Transportation. It is expected to be awarded in 2013.

Some projects face several challenges such as a shortage in the number of local qualified contractors and the lack of adequate rail financing. Sand is another issue, as the Kingdom's largely arid landscape makes tracks susceptible to becoming buried, therefore increasing the chances of accidents. SRO aims to ensure safety through the introduction of modern technologies like integrated signals and communication systems.

Moving forward, the Kingdom plans to construct more railway lines to link all parts of Saudi together. Several projects, worth SR 93 billion, will be awarded in 2013 and 2014. Under the 9th Development Plan, it is expected that the number of railway passengers will increase to reach 3.37 million passengers by 2014 using the existing railway system, North-South line, and the Haramain high speed rail. As for freight, 15 million tons of goods and materials is expected to be transported through railways by 2014, of which about 3.51 million tons will be transported by existing lines, while the North-South line is likely to transport about 10.35 million tons of mineral products, the NCB report said.

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