Etihad Rail network set to boost regional trade growth and increase investment

Transport system will help maintain Emirates' attractiveness as a preferred investment destination, Emirates NBD says

The Etihad Rail bridge on Dubai's Al Qudra Road. Freight services on the transport system were launched on February 23. Photo: Etihad Rail

Etihad Rail is set to boost growth in regional trade and promote economic integration while attracting more investment into the UAE's key industries, Emirates NBD has said.

The D50 billion ($14 billion) unified rail network, which was completed earlier this month, will help to maintain the country's attractiveness as a destination for investment and business, according to a study released on Friday by the research arm of Dubai's largest bank by assets.

“Trade and freight transport services have been historically important in the development of the UAE and Dubai, in particular, with the city having long been a key entrepot for regional trade flows,” Daniel Richards, Mena economist at Emirates NBD Research, wrote in the report.

“This has been bolstered over recent decades with a series of major infrastructure projects that have further cemented this role and made Dubai a key global logistics centre.”

Over the decades, the UAE has built strong transport and logistics infrastructure, connecting trade centres and communities across the seven emirates and propelling economic and social development.

The transport sector — one of the key components of the UAE economy — was already ranked eighth in the world on the Global Competitiveness Index even before Etihad Rail was completed.

The Emirates is also currently ranked higher than its GCC neighbours on about every transport metric of the World Economic Forum.

The transport and storage sector accounts for about 4.5 per cent of the UAE’s gross domestic product, down from a peak of 6.8 per cent in 2015, data from Emirates NBD Research showed.

The most notable rail project in the UAE had been the Dubai Metro, the first urban train network in the Arabian peninsula that began operations in 2009.

It has since expanded its network to connect most of the emirate.

With the addition of Etihad Rail, the UAE has addressed the missing link of a comprehensive rail freight network that connects all seven emirates and further diversifies the country’s transport mix.

Etihad Rail is expected to support the UAE’s industrial development plans over the coming decades, including Operation 300bn, which was launched in March 2021.

The 10-year strategy seeks to increase the industrial sector's contribution to the country's gross domestic product to Dh300 billion ($81.7 billion) by 2031.

Etihad Rail's freight services were launched on February 23, connecting four major ports and seven logistics centres across the UAE.

The network consists of a fleet of 38 locomotives and more than 1,000 wagons capable of transporting all types of goods.

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The network also includes a number of charging stations located in Ruwais, the Industrial City of Abu Dhabi, Khalifa Port, Dubai Industrial City, Jebel Ali Port, Al Ghail and Fujairah Port.

Construction of the railway line between Abu Dhabi and Dubai was completed on March 1. The 256km line includes 29 bridges, 60 crossings and 137 drainage channels.

Etihad Rail’s transport solutions mean “significant benefits for businesses, allowing for more productive use of time and resources, reduced costs and more efficient asset management”, it said on its website.

This will boost rail freight volumes in the near term, Emirates NBD said.

Already, the rail network has had a big impact. Phase one has contributed to the expansion of Adnoc's operations at the Shah sour gasfields and the doubling of Abu Dhabi's global market share in the production of sulphur.

With March's announcement, the line now stretches across 900km — from the UAE’s southern border with Saudi Arabia to Fujairah — and connects all major ports, including Khalifa Port and Jebel Ali.

A widely utilised public transport system also offers the government an opportunity for revenue, helping the diversification efforts and the move away from a reliance on oil sales to drive government activity

Daniel Richards,
Mena economist at Emirates NBD Research

Also, the UAE and Oman in September signed an agreement to link their rail networks, allowing for freight and passengers services.

“Not only will this boost rail freight volumes in the near term, but the eventual linkage with the rail networks of the rest of the GCC should support regional trade growth and economic integration,” Mr Richards said.

“As the sector develops at a faster rate, the nascent rail network will also help bolster the UAE’s position relative to its regional peers as regional competition in some areas intensifies.”

The eventual launch of passenger services on Etihad Rail will also provide a revenue opportunity for the government and support the planned population growth of the UAE.

Dubai alone plans to increase the number of its residents from 3.5 million to about 5.8 million by 2040.

“Growth of this scale will likely mean that communities are developed further from the current business and social centres of the emirate, meaning that workers’ commutes will be longer than [at present],” Mr Richards said.

“A widely utilised public transport system also offers the government an opportunity for revenue, helping the diversification efforts and the move away from a reliance on oil sales to drive government activity.”