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Saudi Arabia Freight Transport Report Q4 2009Product Type: Market Research ReportPublished by: Business Monitor International Published: October 2009 Product Code: R302-8598 Description According to reports in September, a consortium formed of Chinese and Saudi Arabian companies wasawarded a SAR2.7bn (US$720mn) contract for the construction of a section of the North South Railwayin Saudi Arabia. The railway project is one of three new rail projects currently under way in the countrythat together will transform the country's transport infrastructure, creating a national rail network. Theconsortium is formed of China Civil Engineering Construction Corp and Saudi Arabian companies, AlAyuni Trading and Contracting Co and Al Abdulaziz Al Omer Establishment for Trading andContracting. The contract pertains to a 500km section of track that links the capital city, Riyadh, with theprovince of Al Qassim, where the railway goes through Buraidah. According to Gulf News, the contract isfor civil works on the line, and China Civil Engineering will install the track on this section. The 1,300kmNorth South Railway will link the northern mineral belt with Riyadh. It will have offshoots to themineral-rich Hazm and Zubariya, as well as to the industrial zones of Ras Al Zour and Jubail (where thelargest combined industrial and commercial port is located). The project is estimated to cost SAR20bn(US$5.3bn) in total, and is sponsored by the Public Investment Fund.Since our last report, we have again adjusted our macroeconomic forecasts for Saudi Arabia. Thesefigures constitute our latest update and may supersede those in the preceding section. For 2009, we aremaintaining our gross domestic product (GDP) growth projection of 0.5%, and are now a little morepessimistic about the rebound in 2010. We predict a weakfish recovery with 1.6% growth (down from2.7%). We have also trimmed the outlook for 2011 to 2.8% (it was 4.6%). As a result, we now think thatSaudi Arabian GDP growth over the 2009-2013 period will reach an annual average of 2.7%. Thiscompares with an annual average of 4.3% in the preceding five-year period. So the total ‘GDP effect’ onour freight projections, comparing the next five-year period to the previous one, is negative. With some slight changes, we maintain earlier adjustments to our forecasts of freight volume by transportmode (looking at what might be termed ‘non-GDP factors’). Briefly, we had raised our road and airfreightprojections (relative to GDP) to reflect greater highway construction and the beginnings of a low-costcarrier boom. However, we are now pulling that back in the light of the global economic downturn. Wehave reduced our maritime freight projections on the strength of a quieter oil market and lower demand,and are now linking those projections more explicitly to foreign trade movements. Pipeline throughput,mainly of crude oil, can be expected to grow at a slightly slower rate than the economy - as thegovernment continues its role as the Organisation of Petroleum Exporting Countries’ (OPEC’s) swingproducer. The net effect of all these movements is that we now expect total freight tonnage volume acrossthe main modes to increase by an annual average of 1.1% over the 2009-2013 forecast period. This willbe behind the growth of GDP. According to our latest estimates, transport and communications GDP rose by 5.7% in 2008, ahead ofoverall GDP, which we estimate to have increased by 4.2%. For the 2009-2013 forecast period, we expectthe transport and communications sector to continue outpacing the economy as a whole, but by a smallermargin. It will achieve average annual growth of 3.2%, versus 2.7% for overall GDP. The total value oftransport and communications GDP will rise to US$31.6bn in nominal terms by 2013, representing 5.7%of Saudi Arabia’s GDP. In terms of transport modes, we expect the fastest-growing one to be rail at an annual average of 3.7%airfreight (3.5%), road haulage (2.9%), pipeline throughput (1.9%), and sea cargo (0.3%). The slowergrowth of oil and gas pipeline throughput will reflect the cooling of the current oil price boom towardsthe end of the forecast period. Table of Contents
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