A new project connecting the Gulf Arab states via national freight and passenger railways, inspired by a vision to enhance Gulf unity, will exclude Qatar when it is launched sometime between 2021 and 2023. As a member of the Gulf Cooperation Council (GCC) along with Saudi Arabia, the United Arab Emirates (UAE), Kuwait, Bahrain, and Oman, Qatar’s exclusion raises doubts over prospects of better economic integration in the Gulf region amidst the current financial crisis.
Conceived in 2009, the GCC Railway plan recognized the need to reduce Gulf reliance on oil, and create efficient public transport and freight systems to support Gulf nations’ plans for growth and development over the next decade. The project was originally expected to be completed in 2018.
To reach the initial goal, Qatar’s participation in the railway venture was reconfirmed at the 37th GCC Summit held in Bahrain in 2016. Designed to connect Saudi Arabia to Qatar, the project prompted Qatar Rail to enhance interconnectedness with railways at its Abu Samra border with Saudi Arabia and in Bahrain. Qatar earmarked an additional investment of US$ 74 billion to develop cargo transportation at its Hamad Port – the country’s main seaport.
GCC financial challenges, including US$ 260 billion in loss resulting from an oil price collapse between 2014 and 2015, delayed infrastructure spending on the Gulf Railway Project.
But GCC financial challenges, including US$ 260 billion in loss resulting from an oil price collapse between 2014 and 2015, and the subsequent failure of the market to recover, delayed infrastructure spending on the Gulf Railway project. Besides Qatar, Saudi Arabia was the only other GCC state that completed major parts of the project’s 663 km railroad track in 2016.
The government-backed rail developer Etihad Rail – which manages the UAE’s US$ 11 billion rail network – suspended tenders for a critical 628 km extension in the second stage of the project that would have linked Al Ain on the border with Oman to Ghweifat on the Saudi border in 2016. A year later, the UAE cautiously resumed bids to invite international investors to build its portion of the GCC railway.
Similar investment challenges pushed Oman to halt construction of its railroads in 2016. Oman earmarked funding for a 375 km national rail network to transport minerals from Dhofar on the border with Saudi Arabia to Port Dugm on the Arabian Sea, that would have been interoperable with the GCC railway by 2018.
A second major rift in the GCC Railway project came when Saudi Arabia, the UAE, and Bahrain imposed a blockade on Qatar for taking independent foreign policy stances in 2017. The blockade against Qatar changed the GCC railway designs to link Kuwait City to Dammam in eastern Saudi Arabia, and Dammam to Qatar through the Salwa Canal. The railway would then link Qatar to Bahrain via a bridge, and Bahrain to Saudi Arabia through the King Fahd Causeway.
New design plans for the GCC railway will link Saudi Arabia, the UAE, and Oman in the first phase, which is expected to be finalized between 2021 and 2023. The second phase will connect Kuwait and Bahrain to other GCC states in 2025. Bahrain will develop the King Hamad Causeway, to build two tracks extending between Bahrain and Saudi Arabia, and as a causeway over the Persian Gulf—both of which will bypass Qatar. The Kuwait National Railroad will link Kuwaiti sea ports to other GCC states, one connecting to Nuwaiseb on the Saudi border.
The updated US$ 15 billion railway project will facilitate trade through a 2,117 km rail network and generate 80,000 jobs.
The updated US$ 15 billion railway project, which is estimated to really cost US$ 250 billion including the integrated national railways, will facilitate trade through a 2,117 km rail network and generate 80,000 jobs.
But appealing to lenders and the public to invest in the railway system requires stability and steady rates of economic growth for the Gulf states. Foreign Direct Investment (FDI) flows to the GCC states have weakened over time, as their economies could face recession and shrink by 7.6 percent this year due to the recent oil crash and global pandemic, according to the International Monetary Fund (IMF). Saudi Arabia’s economy will face a 6.8 percent contraction this year alone.
This puts the future of the planned high-speed railway at risk. The GCC will continue to serve as a trade hub to meet the needs of the region’s rapidly growing population, and as an emerging market in which the potential for railways is strong. However, its efforts to integrate Gulf economies through the railway could falter given the lack of internal unity.
Like all other GCC states, Qatar suffers from low oil prices. But the country exports gas from its giant Dome Field and has created a more diversified economy since the blockade was imposed. According to the IMF, Qatar’s economy remains robust which means that its exclusion from the GCC Railway project could be a loss for the rest of the region.
Still, there is substantial potential to boost exports in the GCC, given large export gaps in Kuwait, Oman, and Saudi Arabia followed by Qatar, with only the UAE not showing a negative export gap, according to an IMF report published in 2018.
Qatar, Oman, and Kuwait are discussing a free-trade zone independent of the GCC, which could compromise the railway project if Qatar is excluded.
As a result, Qatar, Oman, and Kuwait are discussing a free-trade zone independent of the GCC, which could compromise the railway project if Qatar is excluded. Qatar has conducted trade with Kuwait at an annual trade exchange growth rate of 27 percent since 2016, which reached a peak of US$ 534 million a year after the blockade in 2018. It provides 40 percent of foreign investments in Kuwait, and exports gas to the country. Qatar trades with Oman as well, a country whose railway network will span 2,144 km to connect three deep sea ports in Oman with other industrial areas in GCC countries. Qatar-Oman trade volume increased by 240 percent in 2018.
These realities show that there is a great deal of room to enhance intra-GCC trade. The GCC depends on imports to meet consumption and investment needs, far exceeding its non-oil exports which show a balance in constant deficit. But intra-GCC trade remains modest, despite low regional trade barriers, accounting for only 10 percent of total non-oil trade in 2016, suggesting weak regional economic relations—a consequence of relying on similar economic structures.
Qatar has proven to be able to absorb economic shocks better than other GCC states by diversifying its economy in the face of the oil price plunges and blockade and given that it is not a major oil exporter. While it is not yet clear what Qatar’s exclusion from the railway venture entails in terms of actual numbers, the country has already developed alternative intra-Gulf trade routes that bypass the GCC Railway Project and weaken prospects for a full Gulf regional economic integration.