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New directions: Riyadh metro to move Saudi’s economy beyond oil

New directions: Riyadh metro to move Saudi’s economy beyond oil

A $22.5 billion plan to build Riyadh's first metro rail system aims to do more than just improve the quality of life in the congested Saudi capital: it is part of an ambitious effort to shift the country's economy beyond oil.

On Sunday, 28 July, Saudi Arabia’s government awarded contracts for the system to three foreign-led consortia. Six rail lines carrying electric, driverless trains and extending 176 kilometres (110 miles) are to be completed by 2019.

The Riyadh metro is projected to carry 1.16 million passengers a day when launched, increasing to nearly 3.6 million by 2023 - a significant fraction of all trips in the country, which currently has a population of about 28 million.

The project is part of an effort to improve social welfare for millions of poorer Saudis in the wake of the Arab Spring. While the Kingdom escaped serious unrest in 2011, the government is working to ensure social stability by ramping up spending on hospitals, schools and other infrastructure.

Importantly, the world's top oil exporter is also trying to diversify its economy away from natural resources, to reduce its exposure to volatile global energy markets.

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

Riyadh’s metro system and similar projects underway in Mecca and Jeddah could change the way Saudi cities operate, helping them develop easily accessible commercial and light industrial districts to house non-oil sector companies, and stimulating real estate projects and other investment along the rail lines.

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 petrol-guzzling cars.

As the Kingdom's young population expands, growth in domestic oil consumption 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.

 

 

About Cynthia Dearin

Cynthia Dearin is an international business expert, business author and keynote speaker on the topic of leadership. She owns Dearin & Associates, an international business consulting firm specialising in fast-growing emerging markets, which provides companies with the commercial intelligence and strategies, cultural skills and trusted contacts that they need to succeed in new countries.

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