Transport and communications infrastructure: a measure of development
Railways and light trains, airports and deep water sea ports, industrial cities and financial districts, hospitals and universities - no matter where you look, the whole of Saudi Arabia currently seems to be a construction site. The government has announced it will spend over $100 billion on nineteen priority investments in transportation systems alone over the next 10 years. The objective is to capitalise on the kingdom’s naturally strategic location as a transport and export hub between the Mediterranean and Europe, the Red Sea and Africa, the Indian Ocean and greater Asia. Faster transport systems linking the western and eastern coasts of the Arabian peninsula and more capacity in the sea ports are obviously required to enhance this function.
From a domestic point of view too, new and expanded industrial cities, development of tourist attractions, real estate developments and a fast growing population keep increasing the pressing demand for a better and faster transportation system within the country. Transportation and cargo flow, next to housing, are currently the most pressing issues in the Saudi economy. Roads around the existing industrial centres – Riyadh, Jeddah and Dammam – are already clogging up and the four new economic cities alone - developed at a cost of over $60 billion- are expected to contribute another 30% jump in cargo flow.
If infrastructural efficiency is indeed a measure for the development of a nation, Saudi Arabia has some way to go, but also the means to get there. The harsh climate and geographical challenges of rough mountains and large deserts present obvious challenges for roads and railroads as well as long haul cables and pipelines, but a decade of high oil prices has delivered the funds with which to create a sophisticated transportation network to leverage KSA’s competitive advantages. A new multi-modal transportation system - combined with the low local cost of fuel and labour – has been designed to position the country as one of the world’s leading transport and logistics hubs.
$400 billion to build the transport hub of the East
The 9th Development Plan of Saudi Arabia, released by the government in August 2010, states its intention to invest SR 1,444 billion (almost $400 billion) in the period up to 2014 to build the new infrastructure necessary to house, transport, cure and educate the people of Saudi Arabia. Public-private partnerships will be the favoured formula to vastly increase the number of universities and vocational and training centres. Princess Noorah University, currently under construction, will be one of the largest women's universities in the world. Nearly 200 new hospitals and thousands more primary care units will cater for the increasing population and a million housing units are scheduled to offset the acute shortage of housing in the kingdom. Much of the investment will be directed to satisfy the increasing demand for power and water and an overhaul and expansion of the transportation infrastructure. In all these fields, investors will benefit from the drop in prices of construction materials caused by the global financial crunch, which could amount to a reduction of some 30% on costs.
An important aspect of this project is the boost it will give to efforts to diversify the still largely oil-based Saudi economy and to the creation of much needed employment for a large young population.
The Saudi Arabia Infrastructure Report released by Research and Markets in Q1 2011 forecasts a 6.1% growth of the construction industry to a nominal value of SR79 billion ($21 billion) in 2011, with a robustly positive outlook through 2020.
It is raining investment opportunities in the desert
The sheer numbers - and total value - of construction contracts awarded in 2010, as well as the number of contracts currently in the tendering phase has attracted high interest in the country from the part of investors presented with few opportunities in the aftermath of the global financial downturn.
Projects slated for 2009 which did suffer setbacks are now back on track - some of them mega projects such as the new Riyadh power plant, the Red Sea Gateway terminal at the Jeddah Port, the privately-owned Prince Mohammed bin Abdul-Aziz Airport in Medina, the expansion of the Rabigh Power Plant, the Ras Al Zur power plant, the Al Haramain high-speed railway linking Jeddah, Mecca and Medina and finally the expansion of King Khaled and King Abdul-Aziz International Airports, in Riyadh and Jeddah respectively. The unparalleled 1,000 km Landbridge railway project will allow goods to travel from the Arabian Gulf to the Red Sea in less than 48 hours. Two light train tracks are scheduled to ease traffic problems Riyadh and Mecca. The state-run Public Investment Fund (PIF) recently signed a deal with Singapore’s Port Authority to expand capacity at the King Abdul-Aziz Port in Dammam, the second largest in the country after Jeddah.The SR2 billion ($539 million) project is the largest port expansion in the history of the kingdom.
In 2009, Saudi Arabia spent $33.83 billion on infrastructure projects, 37% more than in 2008, to finance upgrading and expansion of the road, rail, and port infrastructure. In 2010, more than double that amount was budgeted ($69 billion - SR 258,75 billion). Still, some 10% more than the budgeted amount was spent. Just in the first half of 2010, the government handed out $16 billion in construction contracts, including $2.8 billion on roads and telecoms, $1.6 billion on water desalination and $1.5 billion on rural and urban development and $2.8 billion on education. Since the approval of a 10-year investment plan in 2008, there has been significant growth in the infrastructure for desalination and power generation, with a total proposed budget of $80 billion.
FACTS ON INFRASTRUCTURE
1951 – Work was completed on the first 570 km railway line connecting Dammam in the Eastern Province with Riyadh.
1952 – The Ministry of Communications was established to regulate the postal system, telegraph, telephone, roads, railways and ports. The kingdom had a grand total of 237km of asphalted roads.
1970 – The first 5-year development plan was approved with a budget of SR134 billion to construct and expand the road network connecting the various regions as well as neighbouring countries.
1975 – The Ministry of Post, Telegraph and Telephone was established to alleviate the burden of the Ministry of Communications.
1976 – The General Organisation for Railways and the General Organisation for ports were founded. The kingdom has 8 main ports on the Read Sea and the Gulf. In 1998 the ports counted 183 quays.
1986 – The 25 km bridge that connects Saudi Arabia with Bahrain is inaugurated. Its construction cost SR 2,769 billion ($740 billion).
1998 – The road network now consists of 45,200 km of highways and other asphalted roads and over 100,000 km of agricultural roads, as opposed to 8,000 km of single-lane asphalted roads and 3,500 km of agricultural roads in 1970.
Our latest investment report on Kuwait was recently published in one of the leading Spanish dailies, ABC. FindMe in Kuwait explores the economic perspectives of Kuwait and the country´s future plans to compete with its fast developing neighbours. Once the leading country of the Gulf, Kuwait has remained silent for the past decade. And although many would like to see faster changes, Kuwait is moving, at its pace, to them. Inexorably. Learn about who is who in Kuwait and read what the leaders say about their own future in our upcoming release: FindMe in Kuwait Mobile app.
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Global Gulf Consulting has concluded its latest production on Bahrain, FindMe in Bahrain giving the country a fresh approach after a couple of difficult years of local demonstrations that matched the global recession. Bahrain is a small island in the Arabian Gulf with an incredible potential for logistics, industries and tourism. FindMe in Bahrain was supported by both the public and private sector of Bahrain. Banagas, Nass Corporation, BBK and DHL were GGC strategic partners in the development of the series among others.
FindMe in Bahrain is available at the local bookstores Jashamal and online as well as in the Apple Store. It is a full business leisure and business guide for any investor or visitor interested in traveling to Bahrain or for those that already live there.
FindMe in Saudi offers a multi-faceted overview combining business and leisure, economy and heritage. The book aims to capture the current development of Saudi Arabia in the words of the people who live and work there. It is an authoritative source of information for investors, businessmen and travellers produced to firmly position KSA as an attractive investment destination.
In contains general information about the country´ economic performance and who is who as a sectorial overview and a leisure guide.
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