Sector outlook 2008: Transport

04 January 2008

Whether travelling by train, plane or car, transport in the Gulf will be taking a huge step forward this year.

Many of the GCC's most prestigious transport projects are approaching the end of their tender process and work is set to begin in earnest. In terms of rail links, Saudi Arabia is set to make the most progress. Work will begin on the $5bn Saudi Landbridge - arguably the most significant rail project under way anywhere in the world.

Bids were submitted in November, with a winner to be selected from four consortia early next year and construction under way before the end of 2008. The construction contract for the Mecca-Medina high-speed rail link will also be awarded in the spring.

Mounting pressure

In Dubai, pressure is mounting on the Mitsu-bishi consortium engaged in the construction of the Red and Green lines of the emirate's metro system to deliver the project on time for the scheduled opening on 9 September 2009.

Dubai's Roads & Transport Authority has already made it clear it is prepared to go significantly over budget to meet the schedule rather than grant the consortium an extension to its deadline. Huge progress has been made but the sheer logistics of the project may prove insurmountable in the time remaining.

In the aviation sector, steps will be taken across the region to accelerate the privatisation of national airlines. Royal Jordanian will undergo its first year of operations as a public company, providing an interesting case study for other nations following its lead.

The privatisation of Saudi Arabian Airlines was mired in bureaucracy throughout 2007, but the aviation regulator is hopeful of spinning off three more of it business units - ground handling, technical services and pilot training - over the next 12 months, with the process completed in 2009.

Iran and Kuwait will both take steps to bring private investment to their beleaguered national airlines, while several of the region's low-cost carriers are also considering IPOs.

Airline dominance

But the UAE's Emirates Airline is set to dominate the headlines. After a flurry of speculation towards the end of 2007, all eyes will be on Emirates to see if the region's dominant airline will go to the market - a deal that is certain to arouse frenzied investor interest if it eventually transpires.

The Middle East will also have its first Airbus A380 in service when the Dubai-based carrier receives the first of its 58 superjumbos in the summer.

In North Africa, the dredging of the Suez Canal will deepen the waterway to 66 feet, enabling almost all container vessels to navigate through. The Suez Canal Authority will also decide whether to deepen the channel still further to permit greater access to oil tankers, or to begin widening stretches of the canal to increase the volume of traffic. Already contributing 4 per cent of Egypt's GDP, the waterway could increase this contribution if traffic volumes are maximised.

Perhaps the greatest cross-border progress will be made with the completion of the feasibility study for the GCC rail network.

The economic potential of the project is widely accepted. However, questions over whether the six nations can accelerate the decision-making process to deliver such a vast project, and who will foot the bill, remain unanswered.

Transport in numbers

  • $5bn - The cost of Saudi Arabia's east-west Landbridge rail link

Source: MEED

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