While prospects and opportunities prevail in infrastructure development of both rail and roads, there is a modal shift towards rail in the GCC region.
Industrial development led by economic diversification and increasing trade within and outside the GCC region has increased demand for improved transport infrastructure that is comparable to global standards.
TJ Sivan, Senior Consultant, Transportation & Logistics Practice, Frost & Sullivan, says,´The region is an important transit point and logistics hub for Europe-Asia trade lane, and the location also makes it ideal to serve the east coast of Africa by sea and Central Asia through land.´ He adds,´The region is positioning itself as a logistics hub, and thus, all countries are focusing on strengthening their transportation infrastructure including road, rail and sea ports.´ The economic integration and harmonisation of trade regulations are supporting the establishment of regional transportation corridors and this trend is likely to continue till 2025.
However, for Andrew Jeffery, Managing Director in Capital Projects, Deloitte & Touche ME, there is undoubtedly a lot of uncertainty in this sector, following reductions in many of the GCC´s government capital programme budgets. He says,´We believe that strategically important lines will continue to be built, especially where the economic benefits are proven. It does seem inevitable that things will be quiet in the heavy or freight rail sector, evidenced by some recent high level scheme deferments. For light rail, the picture is a bit brighter, with metro lines in some of the regions´ largest cities likely to continue to reduce congestion, increase connectivity, in turn allow urban expansion.´
Leading the race
As the countries vary in terms of geographical area, infrastructure requirement also varies significantly among the GCC countries. Lower oil prices have an adverse impact on government finances, and hence, funding is available for transportation and infrastructure related projects. Oman has developed robust network of roads and the quality of Oman´s roads has been ranked second in the GCC, followed by Bahrain´s road network being ranked 22nd, Saudi Arabia 26th, Qatar 34th and Kuwait ranked 48th.
Oman: Nagarjuna Construction Company International LLC, Muscat, Oman (NCCIL) has executed and completed three of the prestigious roads in Oman consisting of Al Ameerat Quariat Road (OMR 60 million), Wadi Adai Road (OMR 56 million) and Bathina Coastal Road Project (OMR 136 million) and is now executing package Bathina Expressway 2 Project valuing OMR 142 million. Narayana Raju Alluri, Managing Director, NCCIL, Muscat, Oman, says,´The main roadways, currently under construction in Oman, include, dualisation of the Bidbid/Sur Project (stage 1 and 2); the Sinaw-Mahut-Duqm Road (part 1 and 2); the dualisation of Taqa/Mirbat Road; Al Batinah Expressway (packages 1-6); dualisation of Adam-Thumrait Road Project (part 1 and 2); dualisation of Jibrin-Ibri (phase-II); dualisation of the Barka/Nakhal Road; dualisation of Ibri-Al Dariz-Maskan (part 1 Hijairat-Maskan); and the dualisation of Ibri/Yanqul Road (phase-II).
While Oman continues to focus on road network, which is crucial for the country´s infrastructure and networking and connecting all important cities and ports, the nation is investing in developing 2,135 km of railway network connecting Oman to other GCC countries. The project cost is estimated at US$ 15.5 billion.´The first phase of the network encompasses the 170 km link from Sohar to AL Buraimi on the UAE border in the north of the sultanate, construction of which is expected to start in 2016, with a target completion date being end of 2018,´ informs Alluri.
For Sivan, Oman´s Sultanate of Oman Logistics Strategy (SOLS) 2040 focuses on strengthening national transportation infrastructure and development of freight corridors in the region to support movement of goods from Oman ports. He says,´Oman has also established 680 km road links with Saudi Arabia, this stretch will be extended to Sohar Port located on the sea of Oman coast and connect with Riyadh in the KSA. This is expected to ease movement of goods traffic from Sohar Port to different parts of Saudi Arabia, reducing the travel time by more than 500 km. Following delays in Phase-II of UAE rail network agency Etihad, Oman is likely to strengthen the national rail infrastructure to support the growth of exports from the country´s Northern provinces.
Saudi Arabia: The Kingdom is in the process of implementing a number of transportation projects such as rail, road modernisation and upgradation of rail, road, ports, and industrial cities.
For Jeffery, Saudi Arabia currently leads the investment in the infrastructure sector, both in projects planned as well as in execution. The net sum of their investment is $144 billion. The most relevant project under construction is the Riyadh metro with a value of $23 billion, expected to be completed by March 2019.
Sivan adds,´As a part of the 10-year expansion plan with the total required investment of US$ 140 billion, US$ 90 billion is likely to be spent on transportation projects between 2015 and 2025. Key rail projects include Riyadh Metro, Dammam Rail, Haramain Rail, and Makkah Railway. GCC regional rail network in Saudi with a total length of 663 km and development of 200 km (approximately) is under progress.´ What´s more, Taif -Khamis Mushayt-Abha Line, Jeddah and Jizan Line, Yanbu-Jeddah Line are the other upcoming rail projects planned by the Saudi Railways Organization.
Qatar: Qatar is strengthening its road and rail infrastructure to prepare for the 2022 FIFA World Cup. Sivan points out to key rail projects which include,´development of Msheireb-Doha Metro rail network.´ He elaborates,´Contract value of Expressway Programme related projects is estimated at US$ 4.39 billion (QR 16 billion), with about 18 major road projects being under progress with an expected completion date of 2017. Qatar also made progress in its GCC rail network line covering 146 km from the Saudi border to New Doha Port on the east coast.
For Jeffery, after Saudi, the next significant investments come from Qatar and UAE. He says,´With Qatar preparing to host football´s 2022 FIFA World Cup, the country has the most pressing reason within the GCC to fulfill its plans for a rail network. A total of 400 km of mainline rail and 260 km of metro and light rail are planned, and need to be completed before the World Cup begins. The estimated cost of the projects is $40 billion.´
UAE: Mega-events like Expo 2020 in Dubai are driving development of transportation infrastructure. Expo 2020 related projects included construction of three international airports and related linked road projects in Dubai and Abu Dhabi. As part of the GCC rail network, Sivan shares,´UAE rail network agency (Etihad) has completed stage 1 of the project, which comprises 264 km stretch of railway track, but stage 2 involving 628 km of rail network is expected to be delayed. Roads and Transport Authority (RTA) of UAE has allocated approximately US$ 1 billion (Dh 3.696 billion) for transport related projects. These allocated funds are likely to be used for constructing 55 projects comprising 12 new road projects and 43 ongoing projects.´ He further informs that as part of Vision 2021, the Ministry of Public Works in UAE has approved three vital federal road projects namely Sharjah-Dhaid Road, Shaam-Al Dara Road and Western Khorfakkan Road, which are likely to be completed in the second-half of 2016 or 2017.
And, although relatively lower than their GCC partners, Kuwait, Oman and Bahrain are also committing considerable amounts of money to the long-term improvement of rail and road based transportation. Their investments are $28 billion, $26 billion and $8 billion, respectively, which are by no means minor. (Refer to list of upcoming rail and road projects in the following pages.)
The challenge zone
Synchronised plans at the design and construction phase of the project are critical for the successful completion of transportation projects.
Funding and government budgets continue to be a challenge. To this, Sivan says,´National level plans to identify clear sources of funding from government and private sources, with realistic timelines for execution of large scale projects, can minimise technical, bureaucratic and other administrative delays.´ Project financing difficulties and lack of proper coordination among the agencies involved in implementation of transportation projects leads to deviations in the project schedule. Jeffery points out to the challenge of assembling the right delivery teams and partners, who are able to successfully deliver. Due to the combined investment in the region of some $300 billion, there is likely to be a strain placed on professional and design, supervision and construction.
This is heightened by the fact that there are less specialised providers for the infrastructure (particularly rail) and that this will likely cause bottlenecks as well as potential escalation of CAPEX.
He suggests,´Setting up of training academies and ensuring operations are run by local agencies is critical to the long-term success and sustainability of the investments planned.´
To this, Alluri shares his list of execution related challenges and the company´s approach to solving them:´Challenges include allocation of borrow areas, engineering products to be sourced only from Europe, design changes, deployment of manpower, etc.´ Such contractual issues are tackled by seeking client´s intervention. He believes that this is where local experience matters because there are no defined phenomena that can be adopted to overcome such challenges. These are dynamic in nature and solutions would differ from project-to-project. Jeffery adds,´Delivering high quality system that is safe in construction and operation, including planned preventative maintenance is a must.´ Also, a sustainability model that respects energy-efficiency is increasingly important in cutting edge rail design. Specific to rail infrastructure, this was one of the biggest constraint for both passenger and goods transportation in the region. Sivan agrees,´This has led to increased pressure on road transportation resulting in congestion, fatalities and delays in delivery of goods.´
As a solution, he further suggests that the National rail infrastructure can be strengthened to connect with the GCC rail infrastructure to improve efficiency in freight movement. He adds,´Infrastructure funding should not rely on sources that are vulnerable and sensitive to macroeconomic conditions and oil prices.´ Also, with PPP and FDI likely to ease the burden on national governments, investment climate has to be improved to attract funds from alternate sources.
Commenting on public-private funded partnership, Jeffery says,´Although these are not necessarily the norm in GCC countries, it may be that the principles of contracted capped capital and maintenance costs for 20 to 25 years may be worth reviewing on passenger rail systems in metros, and concession models for roads.´ This apart, it is equally important to ensure the structuring of the procurement models, that have a relative certainty around capita and life-cycle costs.
Jeffery adds to his list of challenges; for the railways specifically, he points out to:´Operations of the infrastructure post-handover, given that various cutting-edge rail management products require the knowledge of proprietary systems.´
This places a burden on any adjustments to the system during normal expansion and operational refinements such as growth.
He believes that extensive training and ongoing support from the service providers is something that must be considered in any procurement model.
State-of-the-art technologies are expected to be used in the rail and road network. These include advanced rail systems, signalling, traffic management navigation systems, automation in warehousing and material handling movement, surveillance and security of passenger and freight traffic, vehicle tracking and intelligent and intermodal transportation systems. To this Sivan updates,´Authorities are likely to opt for digital technologies to reduce dependence on manpower.´
Specific to rail construction, there are many aspects from improved track management systems, driver-less trains, like those in service on the Dubai metro, to real time integrated management systems that can monitor and predict track congestions and re-route to other lines in the network, which are less busy.
Jeffery adds to the list,´The management, signaling and telecommunications systems must be sufficiently specified and designed to maximise the benefit gained from the investment in rail infrastructure. This is done by ensuring that frequency of trains is enhanced while always maintaining stringent safety standards required of a rail network.´ Also, state-of-the-art maintenance depots are critical to the efficiency of rolling stock and network operation, as such technology reflects the need to reliably and efficiently manage rolling stock through the depots.
To this, Alluri shares some major construction materials, technologies and equipment the company opts for.´Generation of borrow fill materials are mechanised by using world-class machinery such as scalpers and power screens. Pavement layers are constructed by using sensor pavers of 12 m width. Also, most of the engineering products are imported from Europe. Moreover, the latest model of motor graders from CAT MAKE is more efficient to make embankment layers compared to any other machines in the market.
The need to improve transportation links across cities and countries for fast reliable transit of people and goods underpins economic development both in the country, and more importantly with cross border trade. These along with several factors have contributed to increased reliance on road transport for movement of passenger and freight movement. Sivan lists some factors:´Availability of cheap fuel for road transport, unfavourable geographic conditions, small geographic size of nations and high investment costs.´
For railways, Jeffery affirms,´The safe movement of people and convenience of speed and comfort have lead to growth of rail as a preferred mode of transport for many modern densely populated cities worldwide. The air conditioned, Wi-Fi enabled cabins of modern trains are preferred to other road-based modes, because primarily destinations in the inner city areas are otherwise congested with traffic. People can talk, use technology, and be assured of safe, fast and reliable transit on light or heavy rail networks.
And, for roads, Sivan says,´The high cost of air transport and the non-viability of coastal shipping have resulted in the GCC transportation industry being reliant solely on roads.´ However, he agrees that movement of products by road involves huge costs and long transit periods, which pose a major hurdle to the transporters. He says,´Such hindrances restrain the growth of economy and competitiveness due to higher logistics costs.´
Undoubtedly, the industry agrees that rail is the most efficient form to transport containerised cargo over long distances. For commodities to be transported in bulk quantities, rail is the best mode of transport as costs are low, especially over long distances. Hence, while prospects and opportunities prevail in infrastructure development of both rail and roads, low cost of freight for transportation of bulk commodities, safety of passengers and goods transport, lower emissions compared to road transport, are some of the factors contributing to modal shift towards rail in the GCC region.
Opportunities in Roads
UAE: Roads and Transport Authority (RTA): Infrastructure Projects Budget estimated at Dh3.696 billion (US$ 1 billion) for infrastructure projects, would be allocated for constructing 55 projects comprising 12 new road projects and 43 projects currently underway. The new projects include widening of Latifa bint Hamdan Road Project, Parallel Roads Project, Improvement of the 7th Interchange of Sheikh Zayed Road Project, and Improvement of Seih Assalam Road Project (Phase-II).
Sharjah-Dhaid Road: Divided into three phases, the project is expected to be completed by the end of 2017.
Shaam-Al Dara Road: Final designs of the UAE/Oman border towns have been completed. Expected to be completed during Q2 2016, the project will link the northern and southern regions to eastern and western regions, thus creating a highly efficient transport system.
Western Khorfakkan Road: The proposed project is a complementary route to the existing Khorfakkan, E99, and the Western Khorfakkan Ring Road and help smooth flow of traffic in Khorfakkan, as well as road safety and security.
Qatar: The Expressway Programme will provide a national roads network capable of sustaining the future development and expansion of a world-class infrastructure within Qatar. Projects include East West Corridor; Al Wakra Bypass; New Orbital Highway and Truck Route; Al Rayyan Road Phase-II; Lusail Expressway; Dukhan Highway East; Rawdat Al Khail Street; North Road Enhancements; Al Rayyan Road Phase-I; Muaither Area Sewage û Package 1; Doha Industrial Area û Package 1; Roads and Infrastructure in Rawdat Abal Heeran û Package 1; Lijmiliya-Leatooriya-Al Sheehaniya Road; Road Improvement Works in Al Rayyan Area (Zone 51 To 55, 80 and 81) Phase-III; Flow Diversion Schemes in Al Wajba and New Al Rayyan; Rawdat Egdaim / Bani Hajer Infrastructure Development Project; Improvement of the Traffic Flow in Various Areas of Doha, Zones 1 to 68; Dukhan Highway Central.
The Kingdom of Saudi Arabia: The KSA Government has announced US$ 168 billion allocation for the transport and infrastructure sector in 2015. The KSA seeks investment worth US$ 140 billion as part of public transport plan. The upgrade of existing roads and building new ones across the KSA along with infrastructure projects in the industrial cities of Jubail, Yanbu and Ras Al Khair are also the part of the ongoing development. Other projects include road connectivity with Oman and Sohar Port in South and Desert Road reconstruction and rehabilitation project in the North. Both these are expected to be completed by 2016 or 2017.
Source: Compiled from secondary sources
- SHRIYAL SETHUMADHAVAN