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Kingdom's transport sector ‘driver of economic growth'
By Querubin J. Minas Saudi Gazette
Published in The Saudi Gazette on 24 - 01 - 2009

Saudi Arabia's transport sector is expected to grow tremendously in the next five years, an industry report said on Friday.
Saudi Arabia Freight Transport Report for the first quarter of 2009 forecast that oil and gas exports will spearhead foreign trade during the 2009-2013. Although the pace of trade growth will ease, tanker exports will remain dynamic. Big infrastructure projects will also help expand transport capacity and boost demand for cargo.
The report said the Kingdom's GDP growth in 2009-2013 will reach an annual average of 3.4 percent, lower than the 3.8 percent achieved over the preceding five years.
Nonetheless, by transport mode, “we expect the fastest growing area to be sea cargo with an average growth rate of 5.8 percent per annum, followed by rail at an annual average of 4.7 percent, airfreight at 4.2 percent, road haulage at 3.7 percent, and pipeline throughput at 2.3 percent.”
The slower growth of oil and gas pipeline throughput will reflect the cooling of the price boom, which peaked in 2008, it added.
Saudi Arabia scored in a moderate range in terms of its growth forecast for freight transport across all modes through to 2013, with an annual average of 3.7 percent, the report noted.
The report underscored that the Kingdom has demonstrated commitment to reform and improve its transport sector and the current policy agenda, which includes greater private sector involvement, will bring results further forward.
Saudi Arabia's overall freight rating at 53.0 out of 100 is a little below the average for the Middle East and Africa (MEA) region, it pointed out.
The Kingdom scored well in terms of its economic outlook because of its abundant natural resources, principally oil and gas.
For the 2009-2013 forecast period, “we expect the transport and communications sector to continue outpacing the economy as a whole in GDP growth terms.” The sector will achieve average annual growth of 3.9 percent, versus 3.4 percent for overall GDP.
The total value of transport and communications GDP will rise to $25.2 billion in nominal terms by 2013, representing 5.7 percent of Saudi Arabia's GDP, the report revealed.
Earlier, SPA news agency said that total investment in Jizan Economic City (JEC) in 2008 would be SR25 billion ($6.7 billion). Feizal Ali, MMC's CEO, said that companies committing to the project included China Merchants Holdings, which would be involved in the construction of a deep water port for the city. The port will seek to maximize traffic from the Red Sea and Suez Canal routes, will cost an estimated $1.4 billion to develop.
Other plans included the construction of a shipbuilding yard, a steel mill, an aluminum smelter, and a refinery. In 2007 JEC said it expected to raise 30 percent of the cost of developing the city through an initial public offering on the stock market.
However in November the average price of shares on the Saudi stock exchange was around 50 percent down on levels at the beginning of the year, and the company had made no further announcements about the IPO.
The Kingdom's new ‘”economic cities” currently under way, would require a major expansion of both passenger and freight transport infrastructure.
JEC, a joint venture between Malaysian construction group MMC and the Saudi Binladin Group, said that the $26 billion worth of commitments had been achieved over only to years, even though the original plan was to raise that amount of capital over 25 years.
Even though oil prices are set to ease over the next couple of years, BMI believes that Saudi Arabia's status, together with capacity increases, positions the local freight industry for continued growth. The latest Saudi Freight Transport Report said the Kingdom's freight tonnage traffic, across all modes, is likely to grow by an annual average of 3.7 percent over the next five years.
Oil prices closed higher Friday on expectations that stockpiles will ease as OPEC members adhere strictly to production cutbacks.
New York's main futures contract, light sweet crude for delivery in March, rose $2.80 from its closing price on Thursday to $46.47. Brent North Sea crude for March rose $2.98 to $48.37 on London's InterContinental Exchange. __


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