Saudi Landbridge deal shows growing Chinese influence

25 October 2018
Region’s options to fund and execute non-revenue generating projects such as a railroad are limited

If finalised, the preliminary agreement appointing China Civil Engineering and Construction Company (CCECC) to implement the $10.6bn Saudi Landbridge rail project, which was first announced in 2005, will further strengthen the role of Chinese investors and contractors in the region’s projects market - particularly in the infrastructure sector.

The nature of the project, which is envisaged to link Jeddah seaports on the Red Sea to the capital Riyadh with a further provision to link to Dammam and Jubail on the Gulf coast, comfortably aligns with China’s multitrillion-dollar Belt and Road Initiative (BRI).

If successfully procured, financed and implemented by CCECC or a CCECC-led consortium, Saudi Landbridge will join Abu Dhabi’s Khalifa Port Terminal 2, among other planned and under way regional infrastructure projects that will be officially tied to China’s BRI framework.

BRI is a Chinese blueprint that entails the construction of power plants, railroads, ports, industrial zones and internet infrastructure across multiple continents in its pursuit to re-establish the ancient Silk Road.

While none of the GCC states are within the BRI’s direct maritime or railroad routes, most of them - including Saudi Arabia - are building downstream industries in the chemical, steel and textile sectors whose main output target export markets particularly Africa and the sub-continent, both of which are keenly targeted by BRI.

The region will continue to be a lucrative market for Chinese products, with Beijing increasingly looking for new opportunities abroad at a time of slower growth at home.

Indeed, projects such as the Saudi Landbridge are of strategic importance to China, not merely to ensure a market for its surplus output at a time of slower economic growth, but to ensure its shipping lines are kept busy carrying trade – both raw materials and finished products – into and out of the region’s ports.

The potential benefits appear less tangible for the region’s clients, which will then be tied up to long-term loans owed to Chinese banks or the Chinese government. But considering weakened fiscal stances due to oil price volatility and geopolitics, their options to fund and get non-revenue generating projects such as a railroad off the ground are more limited today than any time before.

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.