DUBAI: A century after Lawrence of Arabia cut the Damascus-Madinah railway, governments are embarking on plans to restore long-distance rail transport in the region and extend it across the Arabian Peninsula.
Official figures suggest around $ 100 billion may be spent by the end of this decade laying over 6,000 km of track for both national lines and a route linking all the states in the Gulf Cooperation Council: Saudi Arabia, the UAE, Kuwait, Qatar, Oman and Bahrain.
The governments face big technical challenges, such as making six national rail systems compatible and building on the shifting sands of remote deserts.
But success could have far-reaching effects on economies in the region, cutting their dependence on expensive road and air travel, boosting trade and even bringing the GCC closer together politically.
“It will undoubtedly transform the economies as any major piece of railway does,” said Keith Hampson, director of global rail transit at Aecom, a US-based transport planning firm.
“It opens up all sorts of trading relationships that probably otherwise would not have existed.”
The Turkish-built Hejaz Railway to the Saudi city of Medina was never rebuilt in Saudi Arabia after Lawrence of Arabia’s raiding parties destroyed parts of it during World War I.
Rail transport has been neglected in the Gulf since then; trade depends heavily on columns of smog-spewing trucks running along desert highways.
Currently, the only major rail systems operating in the GCC are a 60-year old freight and passenger link between Riyadh and the port of Dammam in Saudi Arabia, and Dubai’s metro.
But that is set to change dramatically as growing populations and countries’ desire to diversify their economies away from oil exports cause them to pour money into railway construction.
Saudi Arabia is building a 2,750 km line from Riyadh to its northern border with Jordan, aiming to complete it in 2014. About 2,260 km of additional lines are planned in Saudi Arabia, including metro systems and high-speed train projects.
In the UAE, Etihad Rail has started building a link that is to transport granulated sulphur from desert gas fields to the southern port of Ruwais after it is finished in 2014.
The national networks are to be connected to a joint GCC line that would run from Kuwait along the Gulf coast to Muscat in Oman. The Gulf states are expected to prepare a detailed engineering design for the $ 15 billion joint line by end-2013 or mid-2014, an official at the GCC’s Secretariat General said.
“Hopefully by the beginning of 2018, the railway will start operating,” said Ibrahim Al-Sabti, director of the transportation department at the Riyadh-based secretariat.
The network could help develop remote desert and mountain areas of the GCC which have not fully benefitted from the region’s petrodollar wealth.
“You put a railroad station and before long you have got some shawarma (sandwich) shops, and then you get outlets for aspirin and water and pretty soon you get a bank. It just grows,” said John Lesniewski, director of sales and commercial agreements at the UAE’s Etihad Rail.
Trade within the GCC and its re-exports to other countries are expected to get a boost. Intra-GCC trade rose from $ 19.8 billion in 2003 to $ 65.4 billion in 2010, still only a tiny fraction of last year’s total GCC trade value of $ 1.3 trillion.
Ports in the GCC are making plans to expand partly on the assumption that they will be connected to the railway. One of them is the port of Salalah in the far south of Oman, near the border with Yemen.
In May this year, Oman revealed plans to more than double port cargo handling capacity at Salalah by 2014, when it also aims to finish building a cargo terminal at the city’s airport.
The rail network “is probably good news in particular for those established trade hubs like Dubai, and for Oman and its plan of beefing up the port of Salalah,” said Farouk Soussa, Citigroup’s chief economist for the region. “Other trade hubs will find it very difficult to compete.”
In 2009, a GCC feasibility study forecast the joint GCC rail line would open in 2016, carrying 29 million tons of freight out of 61 million transported by all means in the region. Annual passenger traffic was projected at 4 million people in 2016-2020, with passenger revenue of $ 240 million in 2016 rising to $ 600 million in 2045.
A rise in trade and passenger traffic among GCC countries could strengthen political ties between them, adding pressure to move further ahead with joint projects such as a full customs union, which would involve revenue-sharing between states.
There could be other geopolitical effects. Yemen has expressed interest in joining the rail network; if it can overcome security problems and eventually does join, perhaps with Saudi aid, that could help to stabilize the impoverished, violence-torn country by integrating it with the prosperous GCC.
Also, Salalah will become a major link between the GCC and the rest of the world. Because the port lies outside the Strait of Hormuz, it will reduce the GCC’s vulnerability to threats by Iran to close that key shipping route.
Despite the huge cost of the rail network, high oil prices and large state budget surpluses in the Gulf mean financial considerations look unlikely to block the project, at least in wealthy Saudi Arabia, the UAE and Qatar.
Politics and national pride may prove bigger obstacles in a region where governments have failed to agree on other areas of cooperation, such as creating a single currency and building a regional natural gas grid.
“A key challenge is ensuring that the railways being built do actually connect,” said David Lupton, transport economist and a former project manager of the GCC rail feasibility study. “I get the impression that national priorities may dominate.”
An Omani transport ministry official said recently that electricity would be the preferred energy source for its trains, while other GCC states plan to use diesel locomotives, creating a potential compatibility problem.
“It’s not one project, it’s not one country,” said Bashar Almalik, projects director at Saudi Railway Co. “Unless you have the whole network completed and connected, it’s useless to have one link connected to the borders.”
Another issue that GCC countries will need to resolve to make the rail system economically effective is customs procedures. Inefficient procedures have caused massive traffic jams of trucks at the Saudi-UAE border.
“We are trying to put together a regime with customs authorities so the train does not stop at the border,” Etihad Rail’s Lesniewski said.
Acquiring the necessary land in countries including Saudi Arabia may become a major obstacle. A big technical challenge is the unstable dunes of some of the region’s deserts, where sand builds up on tracks, increasing the wear and tear on them.
“We did everything you can imagine, there is no solution. All you can do is continuously clear the line of sand,” said Almalik. “Trust me, no matter what you do, you can’t mess with the sand. You can move sand dunes, but they will come back.”
Lesniewski said Etihad Rail had adjusted the route of its tracks after consulting local tribespeople on which locations had the most stable sands.
Such obstacles are not deterring scores of international firms, from US engineering giant Bechtel to South Korea’s SK Engineering & Construction, from hunting aggressively for railway business in Saudi Arabia, the UAE and Qatar. The weakness of government finances in many other parts of the world makes the Gulf rail contracts particularly alluring.
“Everybody is jumping in from across the planet. American, Brazilian companies are here. It’s terrible,” SK’s regional general manager Mike Cho said of the stiff competition.
GCC rail boom to widen trade routes
GCC rail boom to widen trade routes
Saudi Arabia’s economic growth to outstrip US, UK, France in 2026: OECD
RIYADH: Saudi Arabia’s real gross domestic product is projected to grow by 2.5 percent in 2026, a rate that surpasses forecasts for the US, Germany, the UK, and France, according to an analysis.
In its latest report, the Organization for Economic Cooperation and Development said that the Kingdom’s economy is projected to grow by 1.8 percent this year, also higher than several of its G20 peers.
In April, the International Monetary Fund projected that the Kingdom’s economy would witness a growth of 3 percent in 2025 and would further accelerate to 3.7 percent the following year.
In its latest report, the OECD also downgraded its global economic growth prospects from 3 percent to 2.9 percent for both 2025 and 2026.
“The global outlook is becoming increasingly challenging. Substantial increases in trade barriers, tighter financial conditions, weakened business and consumer confidence, and elevated policy uncertainty all pose significant risks to growth,” said the OECD.
It added: “Global GDP growth is projected to slow from 3.3 percent in 2024 to 2.9 percent this year and next year based on the assumption that tariff rates as of mid-May are sustained.”
Collectively, G20 nations are expected to witness an economic growth of 2.9 percent in both 2025 and 2026, with India bucking the trend amid economic volatility.
According to the report, India’s GDP is expected to expand by 6.3 percent in 2025 and 6.4 percent in 2026.
The OECD added that China’s economy will grow by 4.7 percent and 4.3 percent in 2025 and 2026, respectively, while the US is expected to witness an economic growth of 1.6 percent in 2025 and 1.5 percent in 2026.
The French economy is forecast to expand by 0.6 percent in 2025 before slightly accelerating to 0.9 percent in 2026, and the OECD projects the UK’s economy will advance by 1.3 percent in 2025, while it will decelerate to 1 percent growth next year.
According to the report, Germany’s GDP is set to grow by 1.2 percent during the same period.
The OECD further stated that Saudi Arabia is expected to maintain a healthy inflation rate of 1.9 percent in 2025 and 1.8 percent in 2026, respectively.
In April, the IMF also predicted that inflation in the Kingdom would remain contained, with the average annual rate holding steady at 2.1 percent in 2025 and easing slightly to 2 percent the following year.
Collectively, among G20 nations, inflation is expected to average 3.6 percent in 2025 and 3.2 percent in 2026, according to OECD.
“Rising trade costs — particularly in countries implementing new tariffs — are likely to fuel inflation, although this may be partly offset by softer commodity prices. Risks to the outlook remain substantial,” said OECD.
It added: “Inflation may also stay elevated for longer than anticipated, especially if inflation expectations continue to rise. On the upside, an early reversal of recent trade barriers could boost economic growth and help ease inflationary pressures.”
The OECD emphasized that governments should work together to resolve their concerns about the global trading system rather than escalating tensions through more retaliatory trade barriers.
The analysis urged governments to implement reforms that would reduce trade fragmentation, along with strengthening the supply chain by diversifying both suppliers and buyers.
The OECD also highlighted the importance of implementing effective monetary policies, noting that central banks should remain vigilant to prevent disinflation in times of heightened uncertainty and increased trade costs.
“Provided trade tensions do not intensify further and inflation expectations remain anchored, policy rate reductions can continue in economies where inflation is projected to moderate,” added the report.
The study also emphasized the need to increase investments to ensure resilient growth among nations, suggesting that governments should implement structural policy reforms to revitalize the business environment.
According to the OECD, governments should foster business dynamism by promoting competition, reducing entry barriers, and supporting entrepreneurship.
“Reducing policy uncertainty is particularly important, as it would lower the risk premia businesses build into their hurdle rates, thereby encouraging capital spending,” added the OECD.
Saudi banks’ new-home lending jumps 24% to $9bn despite higher rates
RIYADH: Saudi banks extended SR34.1 billion ($9.1 billion) worth of fresh residential mortgages to individuals in the first four months of 2025, up 24.14 percent from the same period last year.
Latest data from the Saudi Central Bank, also known as SAMA, shows that January led the surge with SR10.5 billion in new loans, followed by February at SR8.9 billion, March at SR8.4 billion and April at SR6.3 billion.
The brisk start to the year pushed total outstanding retail real-estate lending to a record SR698.8 billion at the end of the first quarter, surpassing the SR223.4 billion on corporate property books and underscoring the dominance of households in the market.
The momentum is tied to a range of Vision 2030 housing initiatives aimed at lifting Saudi home ownership to 70 percent by the end of the decade.
Flagship programs such as Sakani, low-cost mortgage guarantees and the Saudi Real Estate Refinance Co.’s liquidity windows continue to funnel buyers into the market.
Digital procurement partnerships are also speeding up delivery times. In February, Riyadh-based Penny Software teamed up with the National Housing Co. to automate sourcing for thousands of new units, a move expected to shave costs across the supply chain.
The platform will function as a centralized procurement hub, directly connecting NHC contractors with vetted suppliers to streamline purchasing and enhance supply-chain oversight, tackling the bottlenecks that traditional procurement creates in housing projects.
The acceleration has come in the face of the highest interest rate environment in nearly two decades.
Knight Frank’s February household survey showed demand is cooling. Only 29 percent of Saudi tenants now plan to buy a home in 2025, down from 40 percent a year earlier, with “house prices being too high” ranking among the top three deterrents after already owning a property and having no reason to move.
The consultancy pins the softer appetite on “a high-interest-rate environment and rampant price growth, particularly in Riyadh,” which is nudging younger Saudis toward renting instead of owning.
Official figures confirm that tight supply is still feeding through to valuations. The General Authority for Statistics said Saudi real estate prices rose 4.3 percent year on year in the first quarter, with residential values up 5.1 percent.
Villa prices jumped 10.3 percent nationwide, while residential land — which carries the heaviest weight in the index — gained 5.3 percent.
Knight Frank’s survey also showed private buyers still eyeing flagship giga-projects such as NEOM and the Red Sea, although interest in the former has moderated as alternative master-planned communities come on stream.
With oil receipts fueling fiscal space, policymakers are expected to keep subsidising mortgages and unlocking land banks, even as central-bank rates remain high through mid-2025.
Kuwait non-oil sector maintains solid expansion while Egypt edges closer to recovery: S&P
RIYADH: Business conditions in Kuwait’s non-oil private sector continued to expand in May, while Egypt experienced a slower pace of contraction, offering tentative signs of stabilization.
According to the latest Purchasing Managers’ Index surveys released by S&P Global, Kuwait’s PMI stood at 53.9, down slightly from 54.2 in April but remaining comfortably above the 50 no change mark.
Meanwhile, Egypt’s PMI rose from 48.5 in April to 49.5 in May, its highest level in three months, but still below the neutral 50.0 threshold that separates growth from contraction.
In Kuwait, non-oil firms reported strong growth in both output and new orders, extending a streak of expansion to 28 consecutive months.
Respondents attributed the uptick to competitive pricing strategies and enhanced marketing efforts.
Kuwait’s expansion aligns with broader economic projections by the International Monetary Fund and the World Bank, with real gross domestic product growth forecasts of 1.9 percent and 3.3 percent, respectively, in 2025.
These projections reflect a recovery from two consecutive years of contraction, supported by rising oil production as OPEC+ cuts ease, and expanding non-oil activity led by infrastructure development and credit growth.
“The strong growth seen in April was largely maintained in May, with companies in Kuwait again reporting sharp increases in output and new orders,” said Andrew Harker, economics director at S&P Global Market Intelligence.
“This sustained expansion is putting pressure on firms to build capacity, and extra staff were hired accordingly in May,” he added.
Employment rose for the third consecutive month, and the rate of job creation was the joint-fastest recorded since the PMI series began in 2018.
However, staffing growth remained modest overall and did not fully alleviate rising backlogs of work.
“The pace of job creation was still only modest, however, and backlogs of work continued to rise, so we may see even greater employment growth in the months ahead,” Harker added.
Purchasing activity also increased for the second month running, and firms reported a solid build-up in input inventories. Supplier performance improved, with delivery times shortening for the third consecutive month.
Cost pressures intensified midway through the second quarter, driven by rising prices for advertising, transport, staffing, food, and stationery.
Input price inflation accelerated to its highest level since March 2024, prompting firms to raise output prices at the sharpest rate in nearly a year.
Despite these challenges, business confidence reached a 12-month high in May, with 36 percent of respondents expecting output to grow over the next year.
Optimism was supported by stronger demand, competitive pricing, and ongoing marketing activity.
Egypt en route to stabilization
In Egypt, although the non-oil private sector remained under pressure, the pace of deterioration in business conditions slowed.
The headline PMI of 49.5, up from 48.5 in April, indicated the mildest contraction since February.
The improvement came amid softer declines in both output and new business, aided by a rebound in the manufacturing sector.
Egypt’s softer PMI contraction in May aligns with the IMF’s upward revision of the country’s growth forecast to 3.8 percent for 2025, signaling emerging signs of resilience in the non-oil economy.
“Output and new orders fell at the slowest rates for three months,” said David Owen, senior economist at S&P Global Market Intelligence.
“Nevertheless, a number of surveyed firms continued to report softness in market demand, leading them to cut back on purchases and staffing,” he added.
Companies in Egypt reduced purchasing activity at the fastest rate since October, citing efforts to streamline inventories in response to subdued demand.
Stock levels of inputs rose only marginally. Employment fell for the fourth consecutive month, though the decline remained mild, driven primarily by a policy of not replacing staff who voluntarily left their positions.
Egyptian businesses faced the steepest rate of input cost inflation so far in 2025, with price increases reported for fuel, cement, and paper.
Volatile exchange rates, particularly the weakening of the Egyptian pound against the US dollar, further contributed to supplier price hikes.
Wage inflation, by contrast, remained modest. After flatlining in April, output prices rose at the fastest pace in seven months as firms passed on part of their rising costs to customers.
Sentiment in Egypt improved slightly from April, though optimism remained below historical norms.
“Although many of the key PMI metrics continued to indicate a deterioration in business conditions in May, the overall pace of decline was not as sharp as in April and softer than the survey’s historical trend,” Owen added.
Persistent cost pressures and weak domestic demand continued to weigh on expectations for future activity.
Some businesses voiced concern over external headwinds, including global trade uncertainty and the impact of US tariffs.
Saudi airline flynas’ IPO oversubscribed by nearly 350%
RIYADH: Saudi low-cost carrier flynas finalized its initial public offering share allocation at SR80 ($21) per share, the top of its indicated range, following robust demand from institutional and retail investors.
The pricing values the airline at an estimated market capitalization of SR13.6 billion at listing.
The offering comes after flynas announced plans last month to float 30 percent of its share capital on the Saudi Exchange, becoming the first airline in the Kingdom to go public and the Gulf’s first in nearly two decades.
Between May 28 and June 1, 666,069 retail investors oversubscribed the offering by nearly 350 percent, receiving 10.25 million shares, or 20 percent of the total. Institutional investors showed even stronger appetite, oversubscribing their tranche by roughly 100 times, with orders totaling SR409 billion from both local and international buyers.
In a press release, flynas stated: “Each retail investor was allocated a minimum of 10 shares, with the remaining shares allocated on a pro-rata basis in proportion to the size of demand, resulting in an average allocation factor of 12.3 percent.”
It added: “Any surplus subscription funds will be refunded to retail investors no later than Thursday, 5 June 2025.”
The company’s shares are expected to list and begin trading on the Main Market of the Saudi Exchange once regulatory requirements are met with the Capital Market Authority and the exchange. The exact listing date will be announced in due course.
The IPO marks a key milestone for the company as it seeks to strengthen its market position and expand its operational footprint.
“This strategic move will propel us toward becoming the leading low-cost carrier in the MENA region for short and medium-haul markets by 2030,” Bander Al-Mohanna, CEO and managing director of flynas, said last month.
He added: “Through this IPO, we are offering investors access to a unique and valuable asset in the rapidly growing KSA and GCC aviation sector.”
The strong interest from both retail and institutional investors reflects rising confidence in the Kingdom’s aviation sector and its broader economic diversification efforts.
Launched in 2007, the airline holds a 23 percent share of Saudi Arabia’s domestic aviation market and operates one of the youngest fleets in the region, with an average aircraft age of 3.2 years. The airline reported an 88 percent on-time performance rate in 2024.
Proceeds from the IPO will be used to expand its fleet — including a major order for 225 Airbus aircraft — enhance services for Hajj and Umrah travelers, and invest in cargo operations.
The strong capacity growth of flynas aligns with Saudi Arabia’s national goal to establish itself as a global tourist and business destination. The Kingdom aims to attract over 150 million visitors by the end of this decade.
PIF-backed D360 bank eyes global investors for Series A round
RIYADH: Saudi Arabia’s Public Investment Fund-backed digital bank D360 is in early talks with potential global investors as it prepares for a Series A funding round planned for the second half of 2025.
The Shariah-compliant lender, which began operations in December, is targeting the first quarter of 2026 to complete the raise, CEO Eze Szafir said in an interview with Bloomberg.
This development follows the bank’s successful securing of around $500 million from existing shareholders, including PIF and Derayah Financial Co.
While Szafir did not disclose the size of the upcoming round, he told Bloomberg the funding will support the bank’s efforts to expand services to small and medium enterprises, aligning with the Kingdom’s broader economic diversification strategy under Vision 2030.
“We’re looking for new investors in the international landscape, most probably from Europe or the US, with the same quality we have here with the PIF and Derayah,” Szafir was quoted as saying.
D360 also plans to roll out full lending services for individuals and SMEs later this year.
In preparation for the raise, the company has appointed former JPMorgan Chase & Co. banker Mohammed Nazer as chief financial officer to lead the process. Nazer said the bank expects to appoint advisers to manage the Series A round by the end of July.
One of the first institutions to be granted a digital banking license in Saudi Arabia, D360 currently serves over 1 million users. It is targeting 4 million account holders ahead of a potential public listing within the next four years.
By adopting data-driven strategies and modern technologies, D360 aims to contribute to the development of the Kingdom’s digital financial infrastructure and align with the goals of Vision 2030.
The move comes as the Saudi Central Bank continues to advance regulatory frameworks that support digital transformation in the financial sector. The institution, also known as SAMA, has prioritized fostering innovation and financial inclusion through digital banking, granting licenses to new digital players in a bid to modernize the Kingdom’s banking landscape and strengthen financial resilience.
This push has helped Saudi electronic payments account for 79 percent of all retail transactions in the Kingdom in 2024, up from 70 percent the previous year, according to SAMA.
The central bank also reported that the total number of non-cash retail transactions reached 12.6 billion in 2024, compared to 10.8 billion in 2023, reflecting the continued growth and widespread adoption of digital payment systems nationwide.
