GCC Roads & Railways: Seeking alternative transportation


Kuwait Financial Centre “Markaz” recently published the executive summary of an updated version of their GCC infrastructure series covering: Power, Airports, Seaports, Roads & Railways, ICT and Water. In this installment, Markaz tackles GCC Roads & Railways in terms of highlighting investments made, planned and growth drivers for the sector.

The GCC has historically focused its transportation investments in building roadways, thus ensuring high quality roads across most of the region. Almost 100% of the roads in the GCC are paved; compared to the average in other emerging countries, which is below 75%.

Though the quality of roads is significantly better than other emerging markets, there is concern over the current capacity. The increase in both population and propensity to purchase an automobile has led to clogged roads across most of the major GCC cities. Currently, the majority of the GCC rank high in terms of traffic density as indicated by the number of automobiles per kilometer of road in addition to fatalities. Conversely, the region ranks low on a comparative scale in road density as indicated by the aggregate kilometers of road to the total area of the country.

This has led to a boom in the number of road projects currently being planned across the region. However, most of the countries are also looking at alternative forms of transportation to ease the strain on roads. Rail is more energy-efficient than cars, buses, or trucks. It also saves on manpower and would help to enhance safety. Though requiring high investment initially, it has relatively low operations cost compared to other modes of transport.

Dubai has spearheaded the GCC in unveiling phase I of its metro. Other countries are now planning or discussing their versions of the metro. They are also planning for a pan-GCC rail network. The updated value of this project is considered to be around US$30 billion and will consist of a first rail line connecting all the GCC countries and Qatar via a bridge. The second line will stretch through Kuwait, Saudi Arabia, the UAE, and end in Oman. Rail will be an interesting option for travelers because the current preferred form of transportation in GCC is by road or by air.

The total value of railway projects (rail, metro, tram, and stations) is estimated to be US$79 billion between 2011 and 2020. This includes the US$30 billion GCC rail network, to be shared among the member countries. For the roads sector, the total value of “ongoing” projects amount to almost US$18 billion.

GCC Roadways Sector

The aggregate length of roads available in the GCC is 291,313 km. Of this, 75% is in Saudi Arabia, and 16% is in Oman. These two countries are the two largest countries of the GCC as per area. The rest of the countries have a combined “road share” of approximately 7%.

Expenditure on the transportation sector has primarily been focused on road networks. This can be mainly attributed to the significantly higher density of motor vehicles per kilometer of road in some of the GCC countries as compared to the BRIC peers. Among the six GCC countries, four—UAE, Kuwait, Bahrain, and Qatar—have significantly higher traffic density in comparison with the rest of the countries.

Also, the higher density of vehicles per kilometer of road is because of the low road density. Except Bahrain, the rest of the countries in the GCC have significantly low levels of road density. The majority of countries in the GCC fare poorly when compared to developed nations. The USA and UK have road densities of 0.68 and 1.72 respectively. The fact that GCC countries are much less populated contributes to these figures.

The lower road density, a higher proportion of motor vehicles, and the driving culture when compared with the rest of the countries are the reasons behind higher instances of road accidents. The fatality rates in the majority of the GCC countries are significantly high. In the US and the UK, the number of fatalities per 1,000 people is 13.7 and 19.1 respectively. It is 30.7 in Oman and 26.3 in Saudi Arabia. Even compared to the BRIC countries, three of the GCC countries (Oman, Saudi Arabia, and UAE) have higher fatality rates.

Major Projects Being Undertaken in the GCC Road Sector

The total value of projects, using a bottom-up approach, shows that by the  end of June 2011, the GCC had around US$18 billion worth of “ongoing” road projects.

Only US$200 million (1%) of the above total has a “delayed” status. The UAE is by far the most dynamic country with a share of close to 42%. Qatar is all set to catch up with a share of 22%.

Investments in the GCC Road Sector (2011–2015)

The future strategy for the road sector in the GCC is very ambitious. When the estimated value of projects announced for the period 2011–2015 is taken into account, the total GCC spending amounts to US$58 billion.

According to Meed, Saudi Arabia is the second smallest market for road projects, with only US$2.9 billion of investments—planned or ongoing. The schemes include the redevelopment of King Abdullah Street in Riyadh and the expansion of several highways and road schemes in Jeddah and Riyadh. From this base, Saudi Arabia’s spending on roads and infrastructure is likely to increase due to the sheer number of projects and real estate developments planned in the Kingdom; hence, it is the market to watch in future.

Bahrain has a relatively small budget for its road infrastructure when compared with the rest of the GCC because of its much smaller land area (in the above data, the value for Bahrain is its 50% participation for the planned Bahrain–Qatar Causeway).

For the coming five-year period, Qatar will overtake the UAE in terms of planned investments.

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About Kuwait Financial Centre “Markaz”

Kuwait Financial Centre S.A.K. 'Markaz', established in 1974 with total assets under management of over KD 872 million as of September 30th, 2011, is the leading and award winning asset management and investment banking institution in the Arabian Gulf Region. Markaz is listed on the Kuwait Stock Exchange (KSE) since 1997 under ticker Markaz.