Saudi metro projects to shift economy beyond oil

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A $22.5 billion plan to build Riyadh’s first metro rail system aims to achieve more than improving the quality of life in the congested Saudi capital: It is part of an ambitious effort to shift the country’s economy beyond oil.
The government awarded contracts for the system to three foreign-led consortia on Sunday. Six rail lines carrying electric, driverless trains and extending 176 km are to be completed by 2019.
Similar projects are underway in other top Saudi cities; last August the government approved a $16.5 billion plan to modernize the transport system in Makkah, including construction of a metro, and Jeddah is preparing plans to build a metro that would cost around $9.3 billion.
In the longer term, the world’s top oil exporter is trying to diversify its economy away from oil, to reduce its vulnerability to the next big drop in global energy prices.
The metro systems could aid that drive by changing the way Saudi cities operate, helping them develop easily accessible commercial and light industrial districts. “I think the metro will transform Riyadh. With 170 km of rail, people will always be close to the metro. It’ll not just solve the traffic problem but also connect the financial hub, airport, malls and other parts of the city,” said Miguel Jurado, head of Spanish firm FCC Construction, which will help to build the project.
Ibrahim Al-Sultan, head of the government body which supervises the project, estimated that each riyal spent on it would generate an indirect economic return of 3 riyals.
The metro systems may also help Saudi Arabia manage its oil resources more efficiently; only about 2 percent of Riyadh’s 6 million population currently use public transport, leaving most of the rest dependent on gasoline-guzzling cars.
“The metro will drive down energy requirements for the transport sector, if the metro is incentivized by the government as a replacement to motor vehicles, and reduce environmental pollution,” said John Sfakianakis, chief strategist at investment firm MASIC.

The Riyadh metro is projected to carry 1.16 million passengers daily when launched, increasing to nearly 3.6 million within 10 years – a significant fraction of all trips in the country, which currently has a population of about 28 million.
Saudi Arabia now consumes about 500,000 barrels per day of oil in the form of gasoline, and exports under 8 million bpd.
While the metros are unlikely to persuade some Saudis to abandon their love for the automobile, others may welcome the chance to escape severe traffic congestion in the big cities.
But assembling the labor force to complete the project on time may be a challenge, because the country has been tightening controls on its large population of foreign workers in an effort to reduce unemployment among Saudi citizens.
A crackdown on illegal foreign workers caused tens of thousands of people to be deported or decide to leave the country this year. Fees designed to encourage companies to limit their use of foreigners, who are cheaper to hire than Saudis, have hurt profits at some Saudi construction firms.
“The work force will be a challenge…We will need about 15,000 people during the whole period of work,” FCC’s Jurado said. “We have a period of eight to ten months to arrange for all these workers.”

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