Concord Corporation

 

 

 

 

 

RAILWAYS have not made much news in the Middle East since Lawrence of Arabia blew up the Hijaz line in 1918. But bosses in the $165 billion global rail industry have been flocking to the Gulf lately, lured by the prospect of an investment boom. Every country in the region has drawn up plans for ambitious rail projects. Qatar and Kuwait are spending around $10 billion each, and the United Arab Emirates is shelling out twice that. On their shopping lists are monorails, bullet-trains and local metros, the first of which will open in Dubai in September.

 

Not to be outdone, Saudi Arabia plans to spend $15 billion to increase the size of its rail network nearly five-fold. Pilgrims could be riding the rails to Mecca and Medina at 360kph (225mph) as early as next year, rather than plodding along the kingdom’s notoriously crash-prone roads. And this is just the beginning. All these planned national lines will eventually be connected into a regional network, at a further cost of at least $14 billion. Leaders of the Gulf Co-operation Council agreed on plans for a great railway bazaar from Jordan to Oman earlier this month, though it may be two decades before their ambitious scheme is fully realized.

 

The main beneficiaries will be Europe’s rail giants, many of which are keen to move beyond their mature home markets. American manufacturers have little experience with metros and high-speed trains, and most Asian rivals lack the necessary foreign-sales know-how. Europe is the industry’s hub, accounting for 70% of sales and much of the innovation. Now the Gulf beckons as a lucrative export market.

 

Steaming ahead of the pack is France’s Alstom, closely followed by Siemens of Germany and Bombardier of Canada. “The intake is phenomenal,” says Michael Clausecker, director-general of Unife, Europe’s railway-industry association, which predicts 25% growth between 2006 and 2016. Not all of the new demand is coming from the Middle East, however. In recent months countries including China, France and Britain have pledged stimulus money for trains, and on April 16th Barack Obama outlined plans for an extra $13 billion to fund rail infrastructure to unclog America’s airports and highways.

 

But the richest pickings are undoubtedly to be found in the Gulf. Its cities are choking with traffic, as anyone who has driven to or from Dubai’s airport will know. Even sheikhs get stuck in their limousines. “They have realised that public transport is not just for poor people,” says Chris Antonopoulos, head of sales at Bombardier’s rail division. But congestion is not the only motivation. Gulf states are preparing for a post-oil future, built around services, and that requires infrastructure. Giant train sets, like skyscrapers, also appeal as status symbols. “There is an element of showing off,” says Philippe Mellier, president of Alstom Transport.

 

The Middle East is an almost ideal market for European manufacturers. It has no state-owned competitors to demand the transfer of expensively developed technology, as is often the case in Asia, where European trainmakers are reluctant to offer their best products for fear of breeding new rivals. The Middle East also has short replacement cycles, thanks to heat and sand, which means bigger follow-on contracts. And of course, there is plenty of money. Or is there?

 

When oil prices fell in 2008 and the Gulf’s fortunes tumbled, the industry worried. Were the gleaming tracks in the Arab desert a mirage? On April 7th an industry-wide sigh of relief could be heard when Saudi Arabia awarded the first contract for a line connecting the country from north to south. This is not the British “railway mania” of the 1840s, but the boom is on. “We’ve seen no evidence of projects being cancelled,” says Chris Jackson, editor of Railway Gazette International. On the contrary: manufacturers are struggling to satisfy Gulf demand. The last thing a sheikh is willing to give up, it appears, is his 4,000-horsepower diesel-electric locomotive.