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Qatar Signs Massive $25 Billion Deal with Germany’s DB to Develop Rail Network

» Rapidly growing Middle Eastern state will invest massively to expand already booming economy.

If Dubai and Abu Dhabi have grabbed most of the headlines recently, neighboring Qatar has been quietly building up from an out-of-the-way desert country to a center of world trade. Despite the country’s overall small 1.5 million-person population, the capital city Doha has been the site of increasing government-sponsored development thanks to huge oil and gas revenues and the country is now arguably the richest on the planet per capita. Next year, its economy is set to expand by 16%, the largest increase in the world, further solidifying its position as a regional powerhouse.

Government officials see infrastructure investment as a crucial element to economic viability, so last week Qatar signed a $25 billion deal with Germany’s Deutsche Bahn to develop local and high-speed rail links over the next fifteen years. The project will incorporate 180 miles of local light and metro rail for Doha city center, rapidly expanding public transportation offerings for what is now a car-centric place. In addition, more than 200 miles of new passenger and freight rail links would be capable of supporting fast trains traveling at up to 200 mph. Current plans suggest that the railway will be mostly complete by 2022, when Qatar hopes to host the World Cup, and fully done by 2026.

Qatar’s plans for high-speed rail would include a high-speed line between downtown Doha and its airport. In addition, the project would link the country directly to Saudi Arabia over a 25 mile-long causeway and connect the country’s most populous cities along its east coast, fronting the Persian Gulf. The network may also cross into Bahrain over the Qatar-Bahrain causeway, currently under construction and to be the world’s longest bridge when completed. Future interconnections between high-speed trains planned for the United Arab Emirates and Saudi Arabia are likely. These projects were proposed previously in the Qatar transport master plan.

Deutsche Bahn is laying its reputation — and its money — on the line for this project, which will be its largest-ever foreign investment. The German company will own 49% of the new Qatar Railway Development Company, 51% of which would be controlled by the existing Qatar Railways. The two groups would share investment costs and share profits. DB’s existing relationship with Siemens will likely mean the supply of Velaro trainsets for Qatar’s high-speed lines.

While the recent development exploits of oil-rich Middle Eastern countries never cease to amaze, Qatar’s investments are particularly surprising simply because of the country’s relatively tiny population. If the United States, 200 times as large in population, were to invest at similar levels per capita over the next fifteen years, it would spend $5 trillion in rail infrastructure only; as current government policy stands, it is likely to spend only about $1.5 trillion… on all transportation, including on roads and air travel, despite the fast that the U.S. has huge unmet infrastructure needs. If a country is defined by the spending it commits to its future, the U.S. is falling behind rapidly.

4 Comments | Leave a Reply »
  • Qatar’s economic structure isn’t the same as the USA’s. The USA can count on continued real per capita growth averaging 2-3% per year, due to its large industrial and service sectors. Qatar can’t; its economy is based on oil, which means that its GDP per capita will plummet when the oil runs out. Already, peak oil and population growth are straining the country: its GDP per capita in real terms is actually lower than what it was in 1980. This means that for Qatar, it’s rational to spend money now so that it won’t need to spend it later. Norway and the UAE have sovereign wealth funds, i.e. negative national debt; Qatar has disproportionate infrastructure investment.

  • There was a book called Twlight in the Dersert and it was about the world’s biggest oil field in Saudi Arabia and it did mention that the oil will start to run out in a few years. But it also mentioned something else about the oil in the middle east that most of the money goes to a very few rich people while the rest of the place rarely gets anything such as good roads and railroads long with good housing. By this county investing money in roads, rails and housing it is dealing with something that if not fixed could ruin it. This great railroad system is a very good thing in that it will make jobs and help the county’s population feel the effects of the oil money.

    Now in response to that great railroad bridge we in the US should consder building a new railroad link across the Chesapeak Bay from the easten shore to Virginia Beach to keep us as players in the building race.

  • Ocean Railroader, some of what Matt Simmons says in Twilight in the Desert is true. Some isn’t. The oil in most Middle Eastern countries goes to all citizens. Where there is great inequality, such as Kuwait and the UAE, is where there are so many migrant workers on the oil rigs and the associated service industry, that citizens are a minority in their own country. All of those countries abuse non-citizens with low pay, long working hours, and few labor protections.

  • Wad

    Alon, from what it sounds like in your description, Qatar is a supply region that is trying to transition away from oil, but using momentum growth to get there.

    It’s trading one bad economic situation for another.

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