Transport could never escape the impact of the recession, whether in the air, on sea or on land. The slump in world trade is keenly felt at the region’s ports, and Middle East airlines have been hit by falling passenger numbers.
In that context, the money allocated for transport projects across the region is all the more staggering: $100bn is to be spent on port projects, more than $50bn on airports, and a further $50bn on railways.
These are not vanity projects. Ports and shipping are fundamental to the regional economy, and countries have redefined themselves through their national airlines. Railways will accelerate the transportation of cargo, and metro projects can offer solutions for gridlocked cities.
“Across the region, we have seen the government backing these key infrastructure projects,” says Daniel Fauquembergue, Algeria and Maghreb director for Germany’s Dywidag, which is extending the Algiers metro. “The recession has not really affected this.”
Progress has slowed on many projects as clients take stock of the short-term drop in demand, but few have stopped altogether. The dilemma has been whether to invest now in anticipation of the recovery, or to wait.
This is particularly the case with ports. UAE-based DP World has halted the planned expansion of its flagship port at Jebel Ali in Dubai and is assessing its operations abroad. The second terminal at Jebel Ali opened fully in February but plans for terminal three are unlikely to go ahead in the current climate.
Elsewhere, work that was already under way continues. Jeddah Islamic Port will open its new terminal by the end of the year and the first phase of Khalifa port in Abu Dhabi is due to open in 2010.
Other projects are reaching the bidding or study phase. The first package for New Doha Port was issued in May, while Oman is pushing ahead with developments in Salalah and Duqm. Bids were submitted in April to build a new port at Aqaba, as part of a redevelopment of Jordan’s maritime hub.
Jordan is now building the Amman-Zarqa light rail link as a public procurement scheme after terminating the contract of the winning consortium for the second time in April. Amman took over the project after the Kuwaiti-Spanish consortium that had won the contract failed to raise JD236m ($333m) in funding.
Jordan’s experience illustrates one of the prevailing trends in the market. Where schemes are state-funded there have been few issues, but banks are still wary of lending on build-operate-transfer projects.
In Saudi Arabia, home to the region’s largest and most ambitious rail projects, the $6bn Haramain high-speed line between Mecca and Medina, backed by the government, has made rapid progress. By contrast, Saudi Arabia’s $7bn Landbridge, which will link the Red Sea and Gulf coasts via Riyadh, is mired in bureaucracy. “It will get done because it would be too embarrassing if it didn’t, but who knows when,” says one source close to the project.
The Saudi government is willing to incur a budget deficit this year to push ahead with projects. At King Abdulaziz International airport in Jeddah, a flurry of contract awards is expected soon. “The government has made it clear it will back these major infrastructure projects through the downturn,” says one official at local developer Saudi Binladin Group. “The railways and the expansion at the ports and airports are important to the development of the economy here.”
By contrast, the future of Dubai’s flagship projects is being called into question. The Red line of the Dubai Metro will open as planned on 9 September this year, but only some stations will be operational on the day, and the Purple line is on hold. The US’ Parsons Brinckerhoff has begun work on a full integrated rail study for Dubai, which is not expected to be completed before the end of the year.
There are still doubts over the $33bn Al-Maktoum International airport at Jebel Ali. The first phase will open in June 2010, but beyond that the schedule remains uncertain.
Aviation is the jewel in the crown of the Gulf transport industry, but has also not been able to dodge the global economic crisis. The International Air Transport Association has predicted that losses among Middle East carriers will hit $900m this year.
In many ways, the recession has been a timely shock to the Middle East, forcing a reappraisal of which projects are essential and which can wait until the good times return. But while governments understand that they can afford to forego some high-rise towers, restricting investment in vital trans-port networks will hinder their long-term economic development.