Freight will help rise of country’s industrial sector, says UAE NBD Research
Etihad Rail now connects all seven emirates since its completion was announced on March 2. – KT file
The UAE economy is set to get a major boost with the commissioning of Etihad Rail, says a new report.
According to Emirates NBD Research, the rail network will boost the country’s freight sector, supporting the continued growth of a key component of the local economy.
Trade and freight services have been historically important in the development of the UAE, especially Dubai, which has long been a major entrepot for regional trade flows. Daniel Richards, Middle East and North Africa economist at Emirates NBD Research, wrote in a report: “In recent decades, a series of major infrastructure projects have further strengthened this position and established Dubai as a major global logistics center. , which is reinforced.”
Rail’s improved freight mix will support the UAE’s ambitious industrial development plans over the coming decades, including the AED 300 billion initiative, which aims to increase the contribution of the industrial sector to the economy from AED 133 billion to AED 300 billion by 2031 m. The phase one report says the railway has been effectively utilized by Abu Dhabi and has contributed to the expansion of Adnoc’s operations at the Shah sour gas field and doubled the emirate’s global sulfur production market share. “An efficient rail network, well-connected to the country’s bulk shipping facilities and coastal processing plants, will support the continued growth of heavy industry. Intermodal links can also support the planned development of domestic manufacturing,” Richards noted in the report.
Etihad Rail now connects all seven emirates since its completion was announced on March 2. The initial phase of the project was to run freight trains between the Shah gas field and the Ruwais industrial zone, which was completed in 2016 and is now producing up to 22,000 tonnes of sulfur per day for Adnoc. With this month’s announcement, the line now spans 900 kilometers, stretching from the UAE’s southern border with Saudi Arabia to Fujairah, connecting all major ports along the way, including Khalifa and Jebel Ali. Not only will this increase rail freight traffic in the short term, but eventual links to the rail networks of other GCC countries should support regional trade growth and economic integration.
Rail network will support industrial development plans
Continued investment in the infrastructure sector should also help maintain the UAE’s attractiveness as a place to invest and do business. Even before the new rail network was added, the UAE’s transport sector was ranked eighth in the Global Competitiveness Index, which will encourage more private and foreign investment into the country. It also increases the attractiveness of existing storage facilities and transshipment ports such as Jebel Ali. As the industry develops at a faster pace, the emerging rail network will also help to strengthen the UAE’s position relative to its regional peers, as regional competition intensifies in some areas – the UAE currently ranks in almost all countries ranked by the World Economic Forum. Both rank higher on transport indicators than its GCC neighbours.
The transport and warehousing sector accounts for around 4.5% of the UAE’s GDP, down from a peak of 6.8% in 2015. The sector makes more sense for Dubai as it generates 9.2% of GDP in 2021, although this is also down from 11.6% in 2014-2016. While the share of output has fallen in recent years, this is likely a product of global air travel not having fully recovered since the pandemic, rather than anything related to the cargo sector. Transportation and warehousing GDP shrank by about 30% in 2020 due to the suspension of global travel, but has since recovered steadily, with the freight segment likely underpinning this.
Looking ahead, a slowdown in global trade threatens growth this year after the industry showed remarkable resilience during the pandemic: DP World Chairman and CEO Sultan Ahmed bin Sulayem warned in March that global trade flows in 2023 will Faced with multiple challenges. Nonetheless, the UAE’s investment in the freight network will put the country in a comparative advantage compared to other countries.
Passenger rail will support population growth
Looking ahead, the eventual launch of passenger rail services on the network will support the UAE’s planned population growth – Dubai alone plans to increase its population from about 3.5 million currently to 5.8 million by 2040. Growth of this magnitude could mean that communities develop further from the emirate’s current commercial and social hubs, meaning workers will have longer commutes than they do now.
An efficient passenger rail network, connected at its various terminals to expanded public bus services, would help shorten journeys for commuters and help ease congestion on the existing road network as population grows. A widely used mass transit system also presents a revenue opportunity for the government, helping to diversify away from dependence on oil sales to drive government activity. The development of the railway will also help the UAE achieve its ambitious net-zero emission targets in the coming decades by limiting the growth of trucks and passenger cars on the roads. The German government estimates that rail freight produces six times less CO2 compared to road freight, and there are similarly significant savings by reducing the number of individual car trips.