Huge Saudi metro projects aim to shift economy beyond oil

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 kilometres (110 miles) 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 modernise the transport system in Mecca, including construction of a metro, and Jeddah is preparing plans to build a metro that would cost around $9.3 billion.

The projects are part of an effort to improve social welfare for millions of poorer Saudis in the wake of the 2011 Arab Spring uprisings in the region. Saudi Arabia escaped serious unrest, but it aims to ensure social peace by ramping up spending on hospitals, schools and other infrastructure.

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 which house companies outside the oil sector, while stimulating real estate projects and other investment along the rail lines.

"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.

Concern about the country's extreme dependence on oil was underlined this week when Saudi billionaire Prince Alwaleed bin Talal, in an open letter to the government, called for immediate steps to diversify the economy.

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.

Growth in domestic oil consumption, as the country's young population expands, has been outpacing rises in oil production capacity. So over the next decade or two, Saudi Arabia could be forced to cut back its oil exports; the metro systems buy it time before it faces such a crunch.

"The metro will drive down energy requirements for the transport sector, if the metro is incentivised 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.

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Posted by: Toodles

If only the nationals would consider that these jobs are "worthy" of them... I live here and I know that there are many nationals who would rather be unemployed, than work as a labourer. Sad, but true.

Posted by: jonjon

it would be better if they had the people working on the construction of the metro be nationals, even if the government will demand the contract winners to offer apprenticeships to citizens. not only will they get a metro but hundreds if not thousands of nationals will be red sealed certified tradespeople.

Posted by: Mark X

Are the Local Youth willing to learn to do these jobs? Most of the Saudi's want to be Bosses without any skill or trade.

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