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Railroads in Saudi Arabia Essay


Statement of the Problem

Saudi Arabia has already developed transportation and communication networks to experience long-term economic growth, expand business, connect national citizen with foreigners, decrease congestion, and ensure more facilities for the people of KSA and tourists.

However, Library of congress (2006, p.17) reported that the existing railroads remain relatively undeveloped, though demand of rail service is too high in terms of passenger traveling service and cargo handling. In addition, this segment of transportation service remains undeveloped due to lack of long-term initiatives from the private sector and foreign investors.

Background

The concept of the development of railway transportation networks is a large project in terms of required financial investment, but it is not impossible to implement this project successfully for the private entrepreneurs.

This is because Saudi Arabia is the member of World Trade Organization (WTO), which gives the opportunity to the foreign companies to invest and provide technological support for the development of transportation networks; in addition, the policy makers and local investors will be interested in it considering competitive advantage and importance of railway networks.

Need

Hajj is the fifth pillar of Islam and the biggest pilgrimage (religious gatherings) in the world; moreover, all Muslims who are physically able and can afford must make this journey once in a lifetime; therefore, it is the most important priority of the Saudi Arabian Government to ensure flexible, safe, and low cost transportation system for the Muslim World.

In addition, the purchasing power of the international customers have reduced due to adverse impact of global economic downturn; therefore, millions of Muslims of the GCC Countries and rest of the world fail to come in KSA to perform the hajj and many pilgrims need to work hard to arrange fund for Airline tickets.

At the same time, many old people would like safe journey at low costs, and some of them are not able to find out exact route; as a result, it is essential to develop railroads.

On the other hand, Library of congress (2006, p.17) reported that more than 790,000 passengers traveled and carried 1.50 million tons of cargo on Saudi trains in 2001; however, the importance of train service is raising due to development of the future economic position and improvement of urban lifestyle.

Benefits

This project will help millions of Muslims to undertake Hajj with their limited budget, help government ensure safe journey, and increase number of pilgrims and tourists because this project has capacity to serve $1 million passengers and the price of train ticket is lower than airline ticket.

On the other hand, this railway transportation network will serve the oil exporter and importer, which will save more than $50 million of local companies like SABIC.

Qualifications of Personnel

Three entrepreneurs Sara Aldossari, Hind alessia, and Reem are the student of Prince Mohammad Bin Fahad University and major is Finance. However, same educational background helps them coordinate the activities of the project particularly convince investors and other parties of the several contracts.

In addition, they will assess financial risks of the projects at the very beginning of the projects, which will reduce hazard in the future to implement their projects.

At the same time, Prince Mohammad Bin Fahad University has strong reputation in Saudi Arabia to maintain quality education for all students, and three entrepreneurs are the student of the finance department; therefore, bank and other investors will trust in their proposed plan to develop the Train in Saudi Arabia, as they will design their plan considering Dubai railway service.

Sara, Hind, and Reem will research on the entire project-plan and visit location to gather experience about the railway transportation and then they will prepare financial plan, annual report of the project, audit report, remuneration plan, annual budget for different departments and functions.

On the other hand, they will be responsible for monitoring the activities of the employees, communicating with the partners, coordinating the works of several segments, meeting conditions of the banks and other investors, ensuring safe workplace and using capital properly.

However, all of them have leadership quality and managerial skills; thus, they will lead the company efficiently, motivate the employees, ensure equal opportunity, arrange training program, and improve diversity management, and so on.

Data Sources

The main inspiration for this project came from the best railway services in certain European and American countries, as well as in Dubai and Iran. However, this report has used secondary data sources, for instance, Library of Congress (2006) and Reuters (2010), which provided information about the current situation of railway and importance of the future development.

At the same time, Carey (2011) described about new project of oil exporter and AME Info (2008) emphasized the activities of Ministry of finance and other related authority. For the primary data sources, a survey was conducted amongst regular train travelers and PMU students to gather information to assess the suitability of this project.

About 80% respondent answered “yes” while they were asked if they would prefer to have separated areas for both men and women for performing Salat while doing a train journey (especially for Hajj pilgrims). Conversely, 75% respondent answered “yes” against the question that if it is necessary to expand railway services in the country for long-term economic growth.

About 82% thought that it is viable to spend a bit more for a service that is extremely speedy, and 89% said that they would spend more for scientifically sophisticated, fuel efficient, comfortable, and elegant rail service. Moreover, 78% said that oil exporters need more railway roads to reduce costs.

Limitations and Contingencies

The implementation of this project involves a number of legal issues, which may have direct impact on the project, such as it needs to take permission from the Saudi Railways Organization along with the other related authority.

In addition, it is a potential business plan, which would require heavy investment, but foreign investors, banks and other local companies may not rely on the junior entrepreneurs because of lack of experience to execute such a large project.

Scope

This project-plan provides detailed information along with clarification about the duration to execute the plan, project costs, background, key benefits and significant of the projects, facilities for the human resources, budget of the project, implementation process, methods, services, raw materials, compensation plan, feasibility and description of the anticipated outcomes.

Proposed Plan: – Objectives and Methods

This project has an objective to develop the railway network of the Kingdom of Saudi Arabia with other GCC nations. This mainly focuses on the fact that as the Muslims living in the neighboring Islamic nations face great troubles to come to Saudi Arabia to do Hajj, through this highly advanced rail network, it will be far easier and convenient for them to travel to this holy country for doing hajj.

However, apart from pilgrims, this rail network will also serve regular travelers or holidaymakers of KSA and the other GCC nations throughout the year.

Moreover, this advanced rail network will also be used for business purposes, for example to transport oil between GCC nations or for transportation of other bulky raw materials. Therefore, the entire rail network will have a number of different routes along with numerous trains.

It is quite natural that the feature of the passenger trains and the trains for the cargo and bulk materials will have to be quite different. However, all trains will have to be extremely fast, technologically advanced, fuel efficient, luxurious, aesthetically pleasing, and swift.

The high- speed passenger trains, for example, will have superb facilities like discussion chambers (which will have facility to hold sixty visitors at a time), satellite communication, internet, laptops, laser printer, fax, etc.

There will also be divine -library of Islamic books, places for having Salat (it is notable that the places for having Salat will be different for men and women), television for broadcasting national channels of Saudi Arabia, consolation –centre, steam- bathe / shower, exercise rooms, exceptional compartment for bodily handicap people, encumbered small cupboard in every coach, numerous phones, and plasma-TV.

The passengers will be able to experience the premium and the greatest train journeys of the world; it is noteworthy that all the passenger trains will be Double Decker with electric stairways; moreover, these trains will have numerous restaurants with high and halal foods.

However, setting this railway network will require an approval from the governmental authorities supervising rail sector; afterwards, it will be wise to plan the locations and routes and start the construction works; later on, it will be time to recruit workers and train them.

In addition to this, the company will follow certain methods and objectives to carry out the operations after establishment; these are formulated in the chart below. It shows that the business has objectives to constantly improve its customer service, safety, and asset management besides of establishing a high performance culture and better planning; a framework (methods) for managing the business is also shown.

Methods and objectives for carrying out the operations.

Figure 1: Methods and objectives for carrying out the operations. Source: Self generated

Conversely, it is important to state that when it will be time to launch the rail service, strong and varied advertising programs will be undertaken for acknowledging people. Apart from of integrated marketing campaigns, programs like special promotional packages and discounts will be available for the passengers for the first six months.

Timetable

This is relatively a large and complicated project, which needs a long-time to finish initial paper works, get permission, and start business in new routes. At the same time, it should require a long-time for the communication and create agreement with the key investors and suppliers; therefore, the entrepreneurs need to perform many functions simultaneously.

However, the business-plan of railway transportation project need place to the board of directors in board meeting for approval of this project and then it would be possible for the initiators to move for getting permission of government authorities, contracting with foreign investors and local oil exporters and arranging bank loan.

However, it can assume that bank will take loan-time to scrutinize the documents and approve the project, but we hope bank will give loan considering the benefits of the railway service for long-term economic growth.

At the same time, the entrepreneurs have to spend a long-time to get from the kingdom’s government along with other authorities and recruit efficient employees, purchase lands from the owners, and sign agreement to collect raw materials from the suppliers.

In addition, it is difficult task for the junior entrepreneurs to arrange large fund for the business; therefore, they need to impress large companies like Saudi Basic Industries Corporation (SABIC), Saudi Arabian Oil Company (Saudi Aramco), Mass Transit Railway (MTR), Bombardier Transportation Inc, or other local and foreign companies to invest for their projects.

Functions Year First week Second week Third week Fourth week
The project-plan need approval January 2011 Submitting proposal in board meeting Waiting for the approval Calling last meeting Getting the approval
Contact Communicate with local companies and large oil exporter like SABIC or Saudi ARAMCO February Send official offer Send representative for negotiating Waiting to get reply They give feedback
Joint venture agreement March Trying to sign joint venture agreement with any large companies within this month
April
Submit the business-plan to the local Bank to get loan May Bank will review the prospect of the business, ask additional documents and take their decision accordingly
June
Getting Loan July Bank will provide loan for this project
Contact with suppliers to sign contract August Contact with raw material suppliers and third party logistics in order to sign agreement
Sep
Appointing key personnel for different segments October At first, the managers will advertise to recruit suitable staff for the project and they select considering merit of the applicants
Nov
Completion of recruitment process Dec Appoint the employees and arrange training program to coordinate project tasks
Planning 2012

January

In order to start construct, engineers will start designing the entire project
Purchasing land for the project February Most of the portion of land need to purchase from the government and rest from public
March
Starting construction projects April Continue construction and infrastructure development to start operation
Implementation of information technology April The entrepreneurs also incorporate latest software to develop communication system and coordinate the tasks
Finishing construction 2013 Dec It would take about 1 year and 8 months to finish the construction
Start service for the customers 2014

January

From the first week of January 2014, it will provide service for the customer

Table 1: Timetable. Source: Self generated.

Materials and Equipment

As it is a large project, it will require a huge amount of different materials and equipment for construction, like steel rails, cast and forged, steel wire mesh, steel wire, barbed wire, iron wire mesh, stainless steel wire mesh, and steel sheets.

In addition, the project building also requires anchors, geotextiles, bolts, other electrical equipment, other heat insulation materials, multifunctional materials, fencing, trellis and gates, spade and shovel, truck accessories, and so on.

However, the high- speed trains will not be made at Saudi Arabia, as the train manufacturers here are not so modern scientifically; therefore, all trains are better to buy from Bombardier Transportation, a rail equipment division of Canadian firm Bombardier Inc, which has headquarters in Berlin – this company produces extremely fast, technologically advanced, fuel efficient, luxurious, and aesthetically pleasing trains. It is notable that Bombardier Inc is the best train producer internationally

Personnel

Once the business has established, many workers will be recruited; this includes engineers, ICT specialists, company bureaucrats, HR manager, accounts and finance manager, research and development team, manager for marketing department, customer service team, individual freelance contractors, day laborers (for regular repair works), brake operators, conductors, yardmasters, drivers, sentries, sweeping laborers, and so on.

Available Facilities

Both the passenger and the cargo trains will be very speedy, scientifically sophisticated, energy efficient, well- organized, and visually elegant.

The passenger trains will have a range of facilities; for example, it will have a separate area where the pilgrims will be able to enlighten themselves with religious books during their leisure.

In addition, it will be having facilities like conference rooms, broadband with high bandwidth, computers, telephones, area for Namaz, deluxe washrooms, TVs, separate place for physically disabled people who are not able to travel like normal people, electric staircases, detached lockers, and halal food courts serving traditional and delicious Saudi Arabian dishes.

Needed Facilities

This large and complex project requires vast range of facilities, like machineries, equipment, explosives (like dynamite), designation, steel supplies, copper ore supplies, iron in bulk, coal, stone in bulk, as well as supply of hi-tech trains.

Most importantly, other necessary facilities that are required in a massive amount includes hard work not just from the entrepreneurs, but also from the engineers, government, workers, designers, collaborative companies, several contractors, day labors, explosive expert team, supplier of high- speed transports, and so on.

It is important to state that different facilities are needed from different service providers, that is, the engineers of the rail track, government, collaborative companies, contractors, explosive expert team, and supplier of trains, as shown in the table below:

Service providers Facilities needed Description of facilities
Engineers of the rail track Construct rail tracks Construct rail tracks in the chosen directions; this should involve huge amount of research and discussion with the entrepreneurs, and with the train suppliers.
Supplier of trains (Canadian firm Bombardier Inc) Automated, Double Decker, scientifically modern, and high- speed train This would be one of the major attractions of the rail service; the travelers will be able to experience superior standards.
Explosive expert team dealing with dynamites Clear railway routes, in cases where those are uneven or stony It is better to clear stony paths with bombs, as this requires less time.
Contractors Construct railroad stations Building stations is compulsory for any rail service; in this case, the facilities of the stations must be of high standard.
Government (governmental authorities supervising railway) Give approval Without getting approval from the concerned authorities, it is not possible to start the business.
Contractors Create indicator Indicators must be technologically advanced and elegant in terms of visibility and design.
Engineers and Contractors Construct railway bridges where necessary These are necessary where building rail tracks along the road is virtually impossible, for example, where rivers or lakes exist.
Engineers of the rail track and collaborators Construct subway where necessary These subways will be as competent as it is in case of any foreign countries, like Dubai.

Table 2: Needed Facilities from different service providers of the railway. Source: Self generated.

Land Subtotal = 1 billion
Purchase office 10 million
Design Project-Plan 5 million
Licensing & other contract 30 million
Maintenance 25 million
Legal cost 5 million
Other 25 million
Materials and Equipment Subtotal = 4.7 billion
Steel related products

Wire

Iron Ore

Geotextile

Bolts

Electric equipment

Train

Other

70 million
13 million
1 billion
12 million
10 million
15 million
1.5 billion
1 billion
Personnel

Signaling staff

Expert Staff

Fulltime financial Staff

Human resource department

Research

Other employees

Subtotal = 1 billion
5 million
50 million
20 million
6 million
4 million
15 million
Total Funding Request = $ 6.7 billion

Table 3: Cost and Budget. Source: Self generated.

Expected Results

The pilgrims and other foreign travelers from all the neighboring countries as well as the local residents will discover that it is much useful and wise to take a trip in such a rail service, which is pleasant, protected, very rapid, relaxing, and pleasing to the eye.

This means that this rail service will be having countless customers on a regular basis. As a result, the profits will be highly impressive on a regular basis.

In addition, as the numbers of foreign pilgrims are increasing gradually, this means that year on year, the amount of revenues of the company will keep on increasing steadily giving the business a chance to grow more rapidly, and open up services on new routes as a part of the business expansion strategy.

With the retained profit, the company would also try to invest more on its cargo facilities in order to transport crude oil from the other prospective- countries, which will help it to increase the profits further.

It is essential to note that besides of helping the business to boost profits, the activities of the company would also keep significant contributions over the economy of the country. Such huge amount of revenues would mean that Saudi Arabia would be having a further raise in the gross domestic product.

As a result, the index of per capita income will rise further; this will show that the other economic indicators, like standards of living, for example, are developing. Such positive economic indicators would in turn improve the reputation of the country in front of the world’s superpower nations, showing a strengthening economic position.

This business will also keep a positive contribution to the society by providing a great number of job opportunities locally; therefore, the rate of unemployment would lower down as well.

Feasibility

The rail network will be serving regular travelers both nationally and internationally. As discussed earlier, this project has an objective to develop the railway network of Saudi Arabia with other GCC nations mainly focusing on the fact that as the Muslims living in the neighboring Islamic nations face great troubles to come to Saudi Arabia to do Hajj, this highly advanced rail network will make everything easier for them.

Considering the fact that most of the foreign travelers will find it more convenient to travel in a train that is nice, safe, high- speed, and comfortable, it seems quite natural that there would be a huge number of customers annually; the following table shows that how the numbers of foreign pilgrims are increasing gradually:

Year Number of Pilgrims
1920 – – – > 58584 people
1921 – – – > 57255 people
1922 – – – > 56319 people
1994 – – – > 1080465 people
1996 – – – > 1168591 people
1997 – – – > 1132344 people
1998 – – – > 1363992 people
2001 – – – > 1534759 people
2005 – – – > 1654407 people
2006 – – – > 1707814 people
2007 – – – > 172984 people
2008 – – – > 1613000 people
2009 – – – > 1799601 people
2010 – – – > 1828195 people

Table 4: Numbers of foreign pilgrims annually. Source: Self generated.

Conclusion

If this railway project remains successful, it would be a great achievement as students of Prince Mohammad Bin Fahd University.

This plan is beneficial because it is not just profitable for the entrepreneurs of the business, but the huge revenues will mean a great contribution for the further development of economic indicators like gross domestic product, per capita income, and living standards.

In addition, it would assist the society by creating many employment opportunities for the residents of Saudi Arabia, lowering down the rate of unemployment.

Reference List

AME Info. (2008). Saudi rail projects begin to move ahead. Web.

Carey, G. (2011). . Web.

Library of Congress. (2006). Country Profile of Saudi Arabia. Web.

Reuters. (2010). . Web.

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