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Analysis

The billion dollar transport boom

Transport infrastructure development is worth billions in every country of the GCC

Transport infrastructure is at the heart of any urban development, with mobility of goods, services and people essential to oil the wheels of the economy. It’s no surprise then that the last decade has seen the nations that make up the GCC invest billions in building a transport network that rivals any in the world.

Figures for the combined value of investment still to come are hard to pin down, but regardless of their variety they all have size in common. A report released late last year by Timetric, a research analyst, suggested the GCC is likely to invest $121.3 billion in boosting its land transport infrastructure alone.

Those with a head for numbers can add to this figures for airport developments around the Middle East –something research firm Ventures estimates at $300 billion worth of spending over the next five years –all aimed at accommodating GCC passenger numbers which are expected to reach almost 4 billion by 2017.

With this money set to go into transport infrastructure, opportunities for construction contractors and those in the project management and consultancy areas are likely to continue. Investing in projects of this scale is not without risk, but in some local markets this risk shows signs of declining. In its most recent update to its Construction Risk Index, a global ranking of 50 key construction markets, Timetric noted that the United Arab Emirates had improved in its overall risk profile, despite the decline in oil prices, thanks to what the analysts described as ‘fiscal buffers’ supporting non-oil growth, while efforts at economic diversification in the country continue.

When Dubai published its 2015 budget the figures showed that while infrastructure spending would slow compared to 2014, it still counted for some 13% of the emirate’s total expected outlay. Across the UAE public transport programmes have continued to attract investment. This shift has developed, not least because it had to. Abu Dhabi’s Department of Transport (DoT) estimated that by 2015, the annual cost of time spent in congested traffic would be about $680m, rising to $1.6 billion by 2030.

While major roadwork programmes had eased access into and out of the capital, the relief would be temporary if other solutions weren’t put in place, and population and vehicle numbers just kept growing. DoT has a stated target of getting 33% of all trips taken in the city to be conducted via public transport.

The development of multimodal transportation is a pattern repeated around the region, where road and bridge building is combining with primarily rail options to ease congestion in increasingly crowded cities.

“We saw some positive momentum towards the launching of the rail network creation activities in our region in 2014,” says Khaldoun Al Tabari, CEO and vice-chairman of Drake & Scull International, speaking on the sidelines of the Middle East Rail Summit.

“Regional governments have recognised that rising populations have exerted pressure on existing road infrastructure, and only a dedicated rail and metro network can ensure swift and efficient transport of people and goods.

“According to an Ashurst study in November 2014, the GCC Rail alone is expected to span 2100km in length, with the UAE and KSA constituting the bulk of the rail network. However, the recent uncertainty regarding the 2018 launch target for the ambitious GCC rail has tempered the regional industry’s expectations to realistic levels.”

Tabari points to examples of potential development around the region such as Saudi Arabia, where the Saudi Railways Commission is developing the $5.3 Billion Saudi Railway Company Line, the Landbridge project, the $7 Billion Haramain High Speed Rail and the $15 Billion Makkah Mass Rail Transit project, among others. In Qatar estimates of the spend on the Qatar Integrated Rail programme are in region of $40 billion, with the Doha Metro being a crucial component in the country’s hosting of the 2022 FIFA World Cup.

Massive programmes such as this could develop into a peak for regional construction between now and 2019, according to consultants EC Harris. In it’s Middle East Major Construction Programmes report, it estimated that 1.2 million additional labourers will be needed to deliver the 117 major programmes it identified from 2014 to 2019. These major programmes – anything worth more than $1 billion – will also need 135,000 professional staff at peak. Some 22% of these programmes fall into the transport sector and again, metro and rail programmes are the leading area identified.

With these pressures come risks. For instance, EC Harris suggests that securing a suitably skilled workforce to build and then test the rail network in Qatar is seen as a major challenge to delivering on the country’s $36 billion rail plans. Other risks around the region include the return of inflation as procurement for the projects starts to heat up.

This may translate into some welcome news for the region’s construction suppliers, who are starting to see some of these major programmes reach mobilisation stage.

“At the moment Qatar is very active in the transport sector, in terms of bridge works and freeway construction, with the added opportunities rising out of the Doha Metro project coming on stream as well, in terms of mobilisation,” says Paul Williams, divisional operations director, for RMD Kwikform, a formwork company.

“Equally Saudi Arabia we have a lot of involvement in bridge and airport projects there, but the bigger prospect looking forward and including recently secured work is on the Riyadh Metro. That’s a massive project and we’re hopeful for much more work on it yet.”

The company also has formwork in place on the Abu Dhabi’s Midfield terminal building project as well as a number of recently secured bridge work contracts in Dubai, which Williams describes as an ‘improving market’ for RMD Kwikform. With nearly half of the company’s revenues in the region coming from transport-related work, the business works hard to deliver on its projects.

“The Riyadh Metro is such a huge development we established an independent team to track the work, so that an extra resource added to run a project of that size,” explains Williams.

Williams says that this is something the company does on the larger projects it services, which also bring with them a need for ideas and innovation.

“They require innovation in the design process and the equipment we use and supply to these jobs,” he says. “This is both for efficiency and getting the right end result in terms of concrete finish, programme times and safety.”

It will take many providers throughout the construction supply chain, who can deploy similar levels of skill and resource, to complete the region’s transport projects to schedule. Those that can manage it, may find it a lucrative line of business.

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