Saudi transport projects on track - minister

NO DELAYS: The Saudi transport minister has assured that all road and rail projects will go ahead. (Getty Images)

Saudi Arabia's transport minister said all transport projects in the kingdom were on track and it was using state funds to push them forward given the high cost private sector borrowing.

Jebarah bin Eid Al Suraisry said on Wednesday the kingdom allocated SR12bn riyals ($3.2bn) in its budget for some road and ports, underpinning the state's plan to keep public funds flowing into key infrastructure projects.

The largest Arab economy, which expects to post a budget deficit this year, said on Tuesday it had more than doubled spending on development projects in the first quarter to SR40.6bn to support the non-oil sector.

"The government will not postpone any of the projects in any government sector," Suraisry said at a conference.

"The crisis affected they way that we fund these projects."

Suraisry said Saudi Arabia had not noticed less interest from the private sector in its road, port and railway projects.

But tight credit conditions globally had raised the cost of funding for private sector partners, increasing overall project costs.

"After studying the options, it was clear that government funding for the projects is less costly during these times," Suraisry said.

His comments highlighted a trend in the world's top oil exporter to rely more on domestic funding sources for a dramatic expansion plan that includes $400 billion in state spending on development projects in the coming five years.

Saudi Arabian Mining Co (Maaden) said on Tuesday it would press ahead with a planned aluminium smelter even without a new partner to replace Rio Tinto Alcan, which abandoned the project due to difficulties getting funding.

Maaden said project costs had fallen 20 percent as commodity prices and building materials fell during the recession.

The Saudi government accumulated huge surplusses during a six-year oil price boom, giving it leeway to keep spending high even if it means posting a fiscal deficit and tapping into the $411bn its central bank holds in foreign assets.

A north-south railway was on track for completion next year while another highspeed railway designed to link the Red Sea port city of Jeddah to Mecca and Medina - Islam's two holiest sites - would be finished in 2012, Suraisry said.

Saudi Arabia, meanwhile, would look at how to finance a new bridge connecting the east and west of the country "very soon", and a plan to expand the capacity of the Jeddah port by 45 percent would be concluded in the fourth quarter, the minister said.

The kingdom, which derives 88 percent of state revenues from exports of crude, has tried to reduce its reliance on volatile oil prices which swung as high as $147 a barrel in 2008 before slumping to the mid-$30 range earlier this year. (Reuters)

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