In a push to diversify its economy, Saudi Arabia is determined to increase the role of the private sector in the development of its transport infrastructure, as well as in the operation of seaports, airports and related supply chains. Public-private partnerships (PPP) are being pursued to fund several key schemes, while a number of the country’s publicly operated facilities, such as airports, are being readied for full privatisation.
However, there are a series of challenges ahead in the Kingdom’s pursuit to meet its Saudi Vision 2030 objective of leveraging its location at the crossroads of three continents. Faced with a decline in the country’s ranking among global indices of competitiveness and logistics since 2016, when the national development plan was unveiled, the budget for 2018 – introduced in December 2017 – includes an 86% increase in planned government expenditure on infrastructure and transportation, from SR29bn ($7.7bn) to SR54bn ($14.4bn).
Transport, storage and communication is a significant sector of the economy, with a contribution that has been valued at more than SR100bn ($26.7bn) since 2010, according to data from the General Authority for Statistics (GaStat). According to GaStat preliminary data, at current prices, the sector generated SR165.1bn ($44bn) in 2017, up by 2.8% from SR160.6bn ($42.8bn) in 2016. These receipts constituted 6.4% of GDP, compared to 6.6% in 2016. At 2010 constant prices, the sector’s contribution reflected SR151.3bn ($40.4bn) in 2017, up 1.9% from the year before and worth 5.9% of total national output.
Although growth between 2016 and 2017 may appear modest compared to pre-2015 figures, transport, storage and communication scored relatively well against other sectors of the Saudi economy and grew faster than overall GDP in those years. At constant prices, only manufacturing and mining and quarrying (which include oil and gas extraction) grew faster than transport’s 2.7% growth in 2015, with rates of 3.2% and 2.8%, respectively. Following a marked 3.4% contraction in the mining and quarrying sector, in 2017 transport, storage and communication was the fastest growing economic activity (1.9%) after finance, insurance, real estate and business services, which grew by 2.2%.
Although the 2016 and 2017 growth rates of 2.7% and 1.9% represent a slowdown from the 2014 and 2015 growth of 6.2% and 5.8%, the transport and communications sector has nevertheless expanded at a relatively faster rate than the entire economy, which grew by 1.7% in 2016 and contracted by 0.7% in 2017, according to GaStat estimates.
Budgeting For Growth
The 2018 budget statement from the Ministry of Finance recognises the significance the transport sector can play in enabling growth, and a number of new investments were penned in addition to retaining commitments to ongoing projects. The 2018 allocation for infrastructure and transport is SR54bn ($14.4bn), SR25bn ($6.7bn) more than for the previous year. Of that budget, SR21bn ($5.6bn) is earmarked for projects and initiatives that include developing roads, ports, rail services, airports, the infrastructure at Jubail and Yanbu industrial cities, and for services offered to Ras Al Khair Industrial Mining and Jazan City industries. The 2018 budget noted progress on the road scheme, saying that 2225 km were laid during 2016 and 2017, 45% of the 5000 km goal for 2016-20.
Although GDP figures reflect the performance of both public and private entities, the latter’s financial results give some indication of trends in the sector. There are four transportation businesses listed on the Saudi Stock Exchange (Tadawul), each representing different areas of the sector. The first is Batic Investments and Logistics. While traditionally focused on land transportation and refrigeration through its Mubarrad Company, in 2015 the firm acquired a 95% stake in AMNCO – which provides secure transport for cash and assets, automatic teller machines, security guards and integrated security systems – for SR180m ($48m). Overall, Batic saw a 71.5% fall in annual net profit in 2016, from SR51m ($13.6m) to SR14.5m ($3.9m), and a 14.9% fall in gross profit from SR87m ($23.2m) to SR74m ($19.7m). Although there were a number of contributing factors, the impact on operational costs caused by the increase in diesel prices was cited in statements to the Tadawul.
The impact stemmed from the December 2015 decision by the government to increase the retail price of fuel as it sought to reduce its large energy subsidy bills, with 91-octane prices increasing from SR0.45 ($0.12) per litre to SR0.75 ($0.20), and 95-octane rising from SR0.60 ($0.16) per litre to SR0.90 ($0.24). The revision of subsidies and the impact on fuel costs proved to have a continuing effect on the 2017 financials of transport companies. The result is either that firms will try to absorb the additional costs or businesses will begin to pass the extra cost on to customers.
The Saudi Public Transport Company, another listed firm, also cited the impact of fuel price increases on its annual performance. The business, which operates a fleet of buses and limousines and employs more 6500 staff, saw its net profit fall by 39.1% in 2016 – from SR210m ($56m) to SR128m ($34.1m) – and said fuel prices had contributed to a SR30.4m ($8.1m) increase in operating costs over the year. In contrast, Saudi Ground Services Company, the third listed firm that provides ground handling at the Kingdom’s 27 airports, was largely unaffected by fuel cost increases and saw its annual net profit increase by more than 10%.
The fourth transportation business listed on the Tadawul is United International Transportation Company (UITC), a firm founded in 1978 that is the franchisee for Budget, the global car rental company. UITC’s results for 2016 provide a number of insights into changes in customer behaviour, and the company is set to be affected by a new ruling on the employment of nationals in the car hire industry. The regular revenues of Budget come from a combination of long-term vehicle leasing and short-term car hire. The increase in fuel duty, coupled with the reduction in government employee allowances imposed in September 2016, resulted in a more economically cautious approach to selection habits, with many clients choosing cheaper, more fuel-efficient small vehicles instead of medium-priced or high-end models that year.
The firm also noted a fall in the volume of rental transactions. In 2016 Budget’s net profit fell by 7.4% – from SR189m ($50.4m) to SR175m ($46.7m). In the fourth quarter, net profits fell by 29.1% year-on-year and by 18.9% quarter-on-quarter. As a result, the company sold some of its short-term rental stock and saw an increase in the number of long-term lease customers negotiating extensions for their existing vehicles rather than ordering a replacement.
By the end of the third quarter of 2017, the company’s performance had declined again against the first nine months of 2016, recording SR127.9m ($34.1m) in net profits versus SR137.9m ($36.8m). In late April 2017 the government announced that allowances and expenses were being restored to civil servants, a move that had the potential to prompt greater spending by consumers, including those who hire cars. However, this was not reflected in the second and third quarter financial statements.
It was also at the end of April 2017 that the Ministry of Labour and Social Development, along with the Public Transport Authority, signed a memorandum of understanding to localise jobs in car hire and transportation by March 2018. The two government agencies estimate that there are 10,000 point-of-sale jobs in the car hire industry, with Budget reporting it employs 1200 people. As part of the localisation drive, additional training for Saudis will be provided by the government in cooperation with companies in the transport sector.
Beyond the car hire business, the government estimates that as many as 200,000 Saudis could find work in the transport sector over the next three years. The announcement in April 2017 followed a Ministry of Transport (MoT) decision in November 2016 regarding e-hailing services such as Uber, Careem and Easy Taxi. The ministry effectively prohibited expatriates from working as drivers for the companies unless they were already employed by a licensed Saudi taxi business. Saudi citizens were then given permission to drive for Uber, Careem and Easy Taxi using their own private vehicles.
The e-hailing services have faced bans or restrictions in other GCC countries, such as Kuwait and Oman, but they have been largely embraced in Saudi Arabia. The Public Investment Fund invested $3.5bn in Uber in June 2016, for instance, and the Saudi Telecom Company bought a 10% stake in Careem for $100m in December 2016. Saudi men have grasped the opportunity to work flexible hours and earn additional money by driving for the services, while for women, who have just been granted permission to drive, the apps have made travel easier. “More than 70% of our passengers are women, and we have seen double-digit growth in the use of our service in the last year,” Eugen Brikcius, managing director for Easy Taxi Middle East, told OBG.
The use of employment regulations to promote the interests of Saudis in the transport industry is part of the country’s wider push to promote job opportunities in the private sector for its citizens. The telecommunications industry, for example, was ordered to adopt full Saudiisation in September 2016, and in April 2017 shopping malls were told they, too, could only employ Saudi staff.
In the National Transformation Programme (NTP), which has set key performance indicators (KPI) and strategic objectives for all government ministries in the near term, there is an overarching goal of ensuring that an additional 450,000 Saudis find jobs in the private sector by 2020. The long-term economic strategy for 2030 reflects this initiative as well, stemming from the acknowledgment that diversification is needed. “Vision 2030 will play a pivotal role in transforming the economy – the reality being that Saudi Arabia has no other alternative but to diversify into a modern and balanced economy with a labour market to match,” Pieter Spaarwater, CEO of logistics company Hala Group, told OBG.
The MoT has been tasked with nine strategic objectives under the NTP, each with its own KPIs, and the document has outlined 16 initiatives for the ministry to complete by 2020. A budget of SR5.6bn ($1.5bn) has been allocated to the MoT for the period of the plan, but the sector will also benefit from investment in transport and logistics initiatives falling under the remit of the Ministry of Economy and Planning (MEP), the Royal Commission for Jubail and Yanbu industrial cities, and the King Abdulaziz City for Science and Technology (KACST). The budgets allocated to each initiative only reflect government spending and do not take into account private sector contributions. This extra funding will be needed, as the allocations detailed in the NTP need to be seen in the context of government austerity measures. According to the Statistical Yearbook for 2016 published by GaStat, the MoT has seen its budget cut from SR13.6bn ($3.6bn) in 2014 to SR11.6bn ($3.1bn) in 2015, and then reduced further to SR4.7bn ($1.3bn) in 2016.
Over the same three years, the Saudi Railway Organisation was also subjected to successive budget cuts, from SR1.87bn ($498.5m) to SR1.66bn ($442.6m) to SR839m ($223.7m). The allocation to the Saudi Port Authority (SPA) increased slightly from SR1.75bn ($466.6m) to SR1.8bn ($479.9m) between 2014 and 2015, but was cut back to SR1.09bn ($290.6m) in 2016 as government austerity measures took hold.
The first of the MoT strategic initiatives is to minimise the rate of transportation accidents (see Insurance chapter). The KPI for roads is to cut the annual mortality rate from 27 per 100,000 residents to 20, with the NTP pointing out that the regional benchmark is eight deaths and the global benchmark is two. The safety KPI for rail is to reduce the number of rail cargo and passenger accidents per year from 215 to 40.
Of the MoT’s NTP budget, some 57% – or SR3.2bn ($853.1m) – is devoted to minimising the number of deaths in road accidents, and SR360m ($96m) is allocated to improving rail safety.
The NTP calls for reforms in both the governance and funding of the sector, with four strategic objectives outlined: improvements to the legislative environment of the transportation sector; an increased reliance on self-funding; an increase in the percentage of private sector participation in the financing and operating of sector projects; and improvements to port management that include the completion of a commercialisation programme for the SPA.
Also under the NTP, SR50m ($13.3m) has been allocated to the preparation of a national integrated transport strategy; SR390m ($104m) is budgeted for initiatives to generate revenues from entities operating roads and railways; SR880m ($234.6m) has been put aside to improve the cost structure for the construction and maintenance of roads; and SR50m ($13.3m) is for administrative reform of the Saudi port system. The 2020 target is for private sector companies to be involved in the development and operation of at least 5% of roads, 50% of the rail network and 70% of the Kingdom’s ports.
Between 2016 and 2020, SR200m ($53.3m) is to be spent on improving railway cargo capacity and a further SR30m ($8m) on upgrading the rail network. The MoT has been tasked with easing freight capacity bottlenecks on the Dammam-Riyadh route, and seeing that the number of containers not using the rail route from the port due to congestion is reduced from 40 to 10 per day. The number of daily scheduled services for freight and passengers must increase from 31 to 50, and the number of trains leaving and arriving on time should increase from 80% to 90%.
The MoT has been given SR174m ($46.4m) to improve the efficiency of ports, with a target of reducing from 14 days to five days the amount of time that containers stay in port. The current high dock time compares to a regional benchmark of two days and a global benchmark of one day.
The ministry has also been allocated SR50m ($13.3m) to encourage greater use of public transport, with a target to raise the number of cities with an integrated public transport plan from 11 to 16.
Across The Board
Indeed, a broad range of measures and investments are outlined in the NTP, giving a number of ministries targets and funds to improve logistics. The MoT has been given SR20.1m ($5.4m) to professionalise the logistics sector and SR23.4m ($6.2m) to remove trade restrictions on air and truck transportation. The MEP has SR67m ($17.9m) to enhance import and export processes, SR41.4m ($11m) to improve logistics regulations, SR20m ($5.3m) to establish a Global Logistics Centre, and SR85m ($22.7m) to conduct a study on launching new Riyadh and Jeddah airports, and developing investment areas around them.
For its part, the Royal Commission for Jubail and Yanbu has been given allocations of SR272m ($72.5m) to complete the commercial operation of Jubail Industrial Airport, SR2.03bn ($541.2m) to develop a multi-modal logistics hub in Yanbu Industrial City and SR560m ($149.3m) to develop an equivalent hub in Jubail Industrial City. The KACST in Riyadh has a budget of SR160m ($42.7m), as well, to develop the localisation and transfer of transport and logistics technology.
The targets, budgets and indicators detailed in the NTP give ministers a clear picture of the reforms they are expected to deliver in the short term, but each goal is mapped against longer-term objectives described in Saudi Vision 2030. By the fourth decade of the 21st century, Saudi Arabia aims to be a “thriving economy leveraging its unique position”. The Kingdom aims to achieve this by building on international partnerships and enabling its domestic enterprises to grow by exporting more of their products and services. Working with the private sector, the government plans to unlock internal and cross-border infrastructure by promoting rigorous governance, leaner processes and a more efficient Customs system to turn Saudi Arabia into a logistical gateway to the three continents of Asia, Africa and Europe.
Saudi Vision 2030 emphasises the importance of working closely with GCC neighbours to create a common market, a Customs union with shared laws and economic policies, as well as shared road and rail networks. Beyond the GCC, the vision includes a commitment to completing land infrastructure projects such as the Red Sea bridge to Egypt – announced in April 2016 – that would see the construction of an overland route to Africa.
Although Saudi Arabia, its neighbours and allies have more than a decade to deliver on these integrations and improvements, previous attempts at pan-regional reforms have been beset by delays. For example, the GCC Customs Union – agreed upon in January 2015 – was first proposed in 2003. The original deadline for completion of the GCC railway network was 2018, but in 2016 it was pushed back to 2021. Some rail industry experts predict that completion is more likely by 2025 or even 2030.
Saudi Vision 2030 also recognises that if the nation and its businesses are to play an increasingly significant role in global trade, it must make improvements to its commercial environment and logistics systems. One strategic objective of the document is to increase the country’s position in the World Bank’s 2016 Logistics Performance Index (LPI). “The LPI is composed of three inputs: Customs, infrastructure and service quality. In line with Saudi Vision 2030, Saudi Arabia is aiming to improve its current position of 52nd to 25th,” Mohammed Al Bayati, CEO of NAQEL Express, told OBG.
Each of the 160 nations is ranked within six criteria, and Saudi Arabia performed as follows: Customs, 68; infrastructure, 40; international shipments, 48; logistics quality and competence, 54; tracking and tracing, 49; and timeliness, 53. The LPI also surveyed businesses about the time and cost of importing and exporting in Saudi Arabia, the number of associated forms that have to be completed and the time it takes to receive clearance.
The Kingdom’s cross-border trade systems also feed into the country’s performance in another World Bank survey, “Doing Business 2018”. In the ease of doing business index, an overview of 190 countries’ business environments, Saudi Arabia climbed from 94th place to 92nd. Of the 10 factors considered, trading across borders – including the time, cost and level of bureaucracy involved in importing and exporting – saw Saudi Arabia ranked 161st out of the 190 countries. One area of focus to improve Customs efficiency could be to develop a system that safely reduces the number of compliance check requirements at domestic ports. According to the LPI, Saudi Arabia conducts physical inspections on nearly 62% of goods, compared to 14% at ports in the UAE and 10.6% at Omani ports.
The World Economic Forum’s “Global Competitiveness Report” compares over 130 countries, assessing strengths and weaknesses in the economy, as well as systems and processes in each nation. Saudi Arabia was ranked 29th out of 138 in the 2016-17 index, but slipped one place to 30th out of 137 countries in the 2017-18 version. In terms of transport infrastructure, the Kingdom is ranked 53rd for railways, 46th for air transport and 42nd for the quality of its ports, while its roads were ranked 34th – this reflects improving or stable scores in each category. The reforms outlined in Saudi Vision 2030 and the objectives detailed in the NTP should help Saudi Arabia improve its ranking in all of these international indices and comparisons.
One Belt, One Road
Saudi Arabia is not the only country with a long-term economic strategy. In May 2017 President Xi Jinping of China addressed almost 30 heads of state and delegates from the IMF and the World Bank in Beijing to promote the One Belt, One Road initiative. A northern Silk Road is proposed as a channel for economic development and trade, complemented by a southern maritime Silk Road.
The ancient silk and spice routes once helped Jeddah prosper as a port and as a city, but the 21st century routes proposed by China bypass the Arabian Peninsula altogether. The land route connects Kazakhstan, Uzbekistan, Kyrgyzstan, Pakistan and Iran, and then moves westwards to Europe through Turkey. The southern maritime route links Malaysia, Indonesia, Vietnam and Sri Lanka to Mombasa in Kenya, and loops around the horn of Africa to Djibouti as a staging post for the passage of goods through the Red Sea channel.
Despite this, China remains the leading destination for Saudi Arabian goods, accounting for 11.6% of the country’s exports in 2016. Furthermore, according to Reuters, an additional $65bn worth of trade deals were signed during King Salman bin Abdulaziz Al Saud’s visit to Beijing in March 2017.
Investments to improve Saudi Arabia’s capacity to handle foreign trade are also being driven by the government’s long-term vision. The Annual Report of Foreign Trade Statistics 2016, published by GaStat, includes multiple indicators that the Kingdom recently experienced a downturn in overseas commerce. Total merchandise exports amounted to SR688.4bn ($183.5bn) in 2016, the lowest level in a decade, and were down 9.8% on 2015, a year when exports tumbled by 40.6%.
Oil exports fell by 10.9% to SR510.7bn ($2.9bn) and accounted for 74.2% of all exports – the lowest percentage since 2007. Non-oil exports amounted to SR177.7bn ($47.4bn), down 6.4% on the previous year and its lowest level since 2011. The biggest drop in percentage terms was recorded in the export of chemicals and associated products, down 14.3%.
Imports also suffered their sharpest decline in more than a decade, down 19.8% from SR655bn ($174.6bn) in 2015 to SR525.6bn ($140.1bn) in 2016. Three categories relevant to industry and construction suffered particularly sharp declines: machinery and electrical equipment, base metals and metal articles, and vehicles were down 27.5%, 26.5% and 22.1%, respectively. This represented a SR93bn ($24.8bn) decrease in imports of these products. The decline in trade also resulted in a downturn in the volume of cargo handled at Saudi borders, with its ports, airports and land crossings seeing decreases in the value of imports of 18.9%, 23% and 18.9%, respectively, compared to 2015.
In 2016 the share of imports arriving by sea increased slightly: 63.5% compared to 62.8% the previous year. Jeddah Islamic Port (JIP) on the Red Sea handled the lion’s share of all imports – 35.3% – while King Abdulaziz Port on the Gulf coast at Dammam saw its share of imports rise marginally from 20.4% to 20.8%. Jubail port handled 1.8% of imports, down from 2.3% the previous year.
Nine of the country’s ports are supervised by the SPA but managed and operated by private companies. According to SPA data, its ports handled 6.5m twenty-foot equivalent units (TEUs) of container traffic in 2016. Of these, JIP moved 4.1m TEUs while 1.8m TEUs were processed by King Abdulaziz Port.
The SPA is investing in a digital platform that will connect all stakeholders in the transport sector, and it has been conducting a pilot project of the system at JIP’s Red Sea Gateway Terminal to speed up the processing of cargo. “We are working to ensure 24-hour clearance of containers through a number of initiatives, including placing all government entities in one system so that all the necessary documents can be dealt with at once. We will be adopting these practices at other ports,” Mussad Binshanar, director of planning at the SPA, told OBG.
JIP has 58 deep water quays with a total length of 11.2 km and a draught of up to 16 metres. Its specialised terminals include 11 for containers, 22 for general cargo, 10 for roll-on/roll-off and passenger vessels, and seven for grain ships. In the Eastern Province, King Abdulaziz Port has 39 berths and is served by both road and rail connections. Some 30% of the containers handled by the port transfer to the Riyadh dry dock terminal by rail. “We have plans to invest SR1.5bn ($399.9m) to upgrade our facilities, including dredging berths to 18 metres to accommodate the new generation of vessels and expanding our capacity to 4m TEUs,” Naeem Ibrahim Al Naeem, director-general at King Abdulaziz Port, told OBG. On the western sea board, near Rabigh, a new port is operating adjacent to King Abdullah Economic City. King Abdullah Port has an 11, 070-metre container berth with a draught of 18 metres and capacity of 1.4m TEUs in 2016. The port, which is run by the Ports Development Company, received 729 vessels in 2016 compared to 637 in 2015.
While the Kingdom’s ports are becoming more efficient and welcoming a greater number of imports, they still operate far under maximum capacity; crafting a plan for the effective use of the facilities will have broad-reaching positive impacts. Removing bureaucratic and logistical hurdles identified by industry players and global indices will increase capacity utilisation and ultimately lead to a better service being provided to clients.
Some 17% of all imports into Saudi Arabia in 2016 were handled by air. King Khalid International Airport in Riyadh, King Abdulaziz International Airport (KAIA) in Jeddah and King Fahad International Airport in Dammam received 9.2%, 6.4% and 3.9% of all imports, respectively. All three airports saw the value of imports fall from 2015 to 2016, with Riyadh down 19.7%, Jeddah slumping by 34.9% and Dammam lower by 2%.
Air freight is vital for global logistics player DHL, which flies into Riyadh from its Bahrain hub. The company started flying a daily route from Bahrain International Airport to KAIA in April 2017. DHL sees significant room for growth in Saudi Arabia, particularly as a result of more online shopping. “We are seeing a large increase in business-to-customer traffic in Saudi Arabia, albeit from a low base. We are very optimistic because it is a technologically savvy country with high social media penetration where young people are comfortable shopping online – which is a great way for consumers to access goods that might not otherwise be available in the country,” Alvin Ding, CFO of DHL Saudi Arabia, told OBG.
Saudi Arabia’s four international airports serving Riyadh, Jeddah, Dammam and Medina collectively saw passenger arrivals increase by 6% between 2015 and 2016, from 33.3m to 35.3m. Departures were up by 7.6% from 32.7m to 35.2m over the same period.
In addition to accommodating more visitors and flights via airport expansion programmes (see analysis), increases in passenger numbers are stimulating more competition among airlines in the Kingdom. State-owned Saudi Arabian Airlines Group (Saudia) appointed Jaan Albrecht as its new CEO in January 2017, and he has revealed plans to increase Saudia’s passenger fleet from 130 aircraft to 200 in the coming years. The company also launched a low-cost service called flyadeal in September 2017 by operating leased Airbus A320s. This new service flies domestically to Riyadh, Jeddah, Damman, Qassim and Gizan.
For 10 years the budget airline flynas has been operating from Saudi Arabia. At the end of 2016 – a year in which it carried 6.3m passengers, up 14% on the previous year – the airline announced it had signed an order with Airbus for 120 aircraft. The SR32bn ($8.5bn) deal includes 80 orders for A320s to be delivered between 2018 and 2026, as well as 40 purchase rights. In January 2017 flynas sought regulatory approval from the Capital Market Authority for an initial public offering (IPO), a move it had previously considered in 2013. Flynas, which is partly owned by Kingdom Holdings, will be the only airline listed on the Tadawul if the offering materialises. In September 2017, the company chose Morgan Stanley to lead the IPO.
The move comes at a time when a number of other budget airlines are looking to grow in Saudi Arabia. SaudiGulf Airlines and Nesma were awarded domestic operating licences in 2016, but plans for the long-anticipated arrival of Qatar Airways-owned Al Maha Airways has been abandoned due to the political setting in the region. Nesma flies to 10 domestic destinations from a base in Hail in the north of the country and its fleet includes one A320-200, two A321-200s and four ATR72-600s. SaudiGulf Airlines began its services in October 2016, offering services to Riyadh, Jeddah, Dammam and Abha. The airline is owned by Abdel Hadi A Al Qahtani & Sons, a family-owned holding group. The chairman, Sheikh Tariq Abdel Hadi Al Qahtani, formed the airline in 2013 after identifying a need for a new airline to meet Saudi Arabia’s growing travel demands.
Prince Mohammed bin Abdulrahman bin Abdulaziz, the deputy governor of Riyadh, announced in August 2017 that the flagship $22.5bn King Abdulaziz Project for Riyadh Public Transport (KAPRPT) was 57% complete; as of January 2018 that figure was 66%. Planners from Arriyadh Development Authority hope to see the first metro trains running by the end of 2019, and 16 km of rail track above ground is being laid. A rapid transit bus network is being created to enable speedy travel along main arterial roads, connecting the city’s busiest central districts, while enabling commuters to travel in from the city’s sprawling suburbs. In May 2017 a SR1.9bn ($506.5m) contract was awarded to the Turkish construction company Yuksel for the rapid transit bus project. The company will build 34 stations, 1353 bus stops and six pedestrian bridges.
One of the objectives of Saudi Vision 2030 is to increase the liveability of Saudi Arabia’s main cities, and the KAPRPT is expected to help lead the way. It is hoped that Saudi commuters will follow the example of people in Dubai, where 1.5m travellers use public transport daily, according to UAE media. In June 2017 Rumaih al Rumaih, president of the Public Transport Authority (PTA), told local media that the Makkah Metro project, as well as some of the country’s inter-city rail schemes, may be completed using the PPP financing scheme.
Other state transport bodies are looking to develop with the method as well, highlighting priority projects for both passenger and freight movement. “Since the second quarter of 2016 all railway assets have been moved to Saudi Railway Company [SAR], including the North-South railway, the Riyadh-Dammam line and associated dry port in Riyadh, and the Haramain Express high-speed railway,” Bashar Malik, CEO of SAR, told OBG. “The PTA and SAR are now working to engage the private sector in implementing and operating railway projects using different types of PPP arrangements.”
At the end of its annual Article IV visit to Saudi Arabia in May 2017, the IMF welcomed the initiatives implemented to boost private sector involvement through PPP programmes or full privatisation. Tim Callen, head of the IMF team, highlighted the Kingdom’s efforts to improve trade and logistics. “The authorities are beginning to make good progress in identifying and reducing obstacles to private sector growth, including reducing Customs clearance times,” he said in a statement. By increasing the efficiency and capacity of its transport and logistics centres, the Kingdom is ensuring a smoother flow of goods and people around the country, helping to diversify Saudi Arabia into a vibrant economy.
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