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Developing KSA’s railway sector: Saudi Arabia Railways

The transport infrastructure across Gulf Co-operation Council (GCC) countries is rapidly evolving.

Summary

Saudi Arabia’s ambitious National Transport and Logistics Strategy reveals how important a robust transportation network is to achieve the goals of the National Vision. A safe, reliable, and efficient transport system will improve citizens’ quality of life, bolstering domestic and foreign trade growth as well as diversification.

Saudi Arabia Railways (SAR) is a key contributor to the development of Saudi Arabia’s transportation network. As a developer and operator of railways, SAR comes with a series of important responsibilities. These include enhancing the system’s capacity and efficiency, delivering major expansion projects, and ensuring its services run safely and on time.

Over the past five years, Deloitte has been offering a wide range of financial advisory support to SAR, assisting in its efforts to promote railway infrastructure and demonstrate the sustainable advantages that this mode of transportation can offer.

Projects at scale

SAR is responsible for critical infrastructure projects of considerable scale and high interdependence. Even a minor error in the assessment and planning of these projects could lead to significant ramifications for both subsequent and parallel projects.

By leveraging its extensive expertise in the global and regional transport sectors, along with strategic planning and financial assessment capabilities, Deloitte has provided robust financial advisory support to SAR. This support has decreased the cycle time during major capital project planning and funding phases. Given the magnitude and complexity of projects under consideration, saving even one month of time can reduce costs significantly and deliver increased capacity and efficiency that much sooner.

 

Commercialisation

Like many organisations in KSA, SAR’s historical constituent organisations (the Saudi Railway Company and Saudi Railways Organisation) were established to develop and operate specific projects; commercial expansion and diversification were not priorities.

With national strategies driving state-owned organisations to transition into commercial entities, SAR has focused on prioritising the diversification and expansion of its offerings. Deloitte has collaborated with SAR to pinpoint new and under-served market segments, positioning themselves as the go-to advisor for the evaluation, recommendation, and ultimately, negotiation of the deals that follow.

Well-considered and balanced agreements are key to the long-term financial sustainability of KSA’s transport sector. Railway services will be significantly more appealing to both passengers and freight users, consequently reducing the volume of cars and trucks on the road.

Private sector involvement

Alongside its emphasis on commercialisation, SAR is also interested in meaningfully engaging the private sector. The technology, expertise, and investment that private participants can contribute have the potential to decrease the level of state funding required, and importantly, increase the pace of development of the sector. Passengers and freight customers will benefit from more competitive prices and a direct impact on the quality of life will be imparted.

Deloitte has played a pivotal role in SAR’s engagement with a vast array of private sector participants looking to invest in the sector. Timely and well-balanced commercial advice has enabled SAR to establish a number of meaningful major public-private partnerships, while ensuring that its interests, and those of the KSA in general, are protected.

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