Saudi under pressure to improve transport sector
Manama, January 21, 2013
M R Raghu
With economic growth forecast to have reached 5.3 per cent in 2012 and a population having grown at a CAGR of about three per cent between 2000 and 2011 Saudi Arabia is under unprecedented pressure to improve its transport infrastructure.
Road development to connect population centres and economic hubs is one priority. Massive increases in traffic volumes have resulted from population growth as well as industrial and agricultural expansion. Four new integrated economic cities, currently being developed in the kingdom as part of a broader economic diversification programme, are eventually expected to be home to millions.
Saudi Arabia currently has more than 97,000 km of road, of which 55 per cent connects the main urban centres. More than $1.5 billion-worth of major road projects are currently being executed in the country, with plans for a further $3 billion investment on new roads in the next few years to meet growing demand.
The kingdom also has ambitious plans to develop and enhance its railway network. Between 2011 and 2021 more than $20 billion is expected to be spent on railway projects, approximately a quarter of total planned GCC expenditure on rail. Among major projects now being planned and executed are the Saudi Land Bridge project, the Haramain High Speed Rail Project, and the North–South Railway.
The kingdom seems to be well ahead of its GCC peers in terms of integrating its railway projects with its port facilities. Upon completion, these projects are set to alter the economics of logistics in the kingdom and greatly reduce transit times.
The seaports themselves are integral to the kingdom’s economic growth and vitality, their prime function being to export oil and gas across the world and as gateways to the consumer markets of Asia and Africa. The Saudi Port Authority oversees the operation of eight major seaports located on the East and West coasts – the six commercial and two industrial ports have a combined 183 berths in total. Saudi Arabia’s container traffic had grown to six million TEUs [twenty foot equivalent units] by 2011 at an annual rate of nine per cent since 2004.
Container traffic is largely dependent upon trade and Saudi Arabia’s trade is forecasted to increase from $472 billion in value in 2011 to $579 billion by 2015. Leveraging on this, Saudi ports are being rapidly expanded to improve turnaround times for cargo traffic.
In addition to the existing ports, three new ports are also currently being set up – with two being established in conjunction with the economic cities of King Abdullah Economic City (KAEC) and Jizan Economic City (JEC). The Millennium Port, being built as part of KAEC by DP World, will upon completion be able to handle a volume of more than 20 million TEUs, placing it among the top 10 largest ports in the world.
The Saudi aviation sector is also opening up to market forces. The General Authority of Civil Aviation (GACA) currently operates four international airports and twenty three domestic airports. Airports at Riyadh and Jeddah cater to approximately 75 per cent of the total traffic. Meanwhile, passenger traffic at Dammam’s King Fahd International Airport grew at a CAGR of 8.11 per cent from 2.74 million passengers in 2002 to 5.53 million passengers in 2011, while passenger traffic at Jizan Regional Airport in the kingdom’s southwest corner grew at a CAGR of 3.35 per cent, from 780,000 in 2006 to 920,000 in 2011.
The country’s first private airport is being developed in the economic city of Prince Abdulaziz bin Musaed, in the northern city of Hail. The aviation landscape changed with the introduction of private low cost carriers, even though they have been facing headwinds – they do not enjoy cheap fuel supplies like the national carrier, Saudi Arabian Airlines (Saudia). There are also plans to privatise Saudia. Investments to the tune of $53.33 billion are planned in the sector in the next five years and rapidly growing religious tourism which contributes to continued passenger traffic will provide further impetus to the Saudi aviation sector.
On all transport fronts – roads, railways, ports, and aviation – Saudi Arabia is on a rapid expansion and growth trajectory. Against a backdrop of a growing population, increasing tourism and a more diversified economy, the kingdom will need to do all it can to ensure it meets growing demand. – TradeArabia News Service
This article appeared in the January 2013 issue of The Gulf.
M R Raghu is head of research at Kuwait Financial Center (Markaz).