Literature Review on Rail Logistics in the UAE

Summary

This research provides the analysis of the profitability of the Etihad Rail project and the benefits, which this project provides to the national economy of the UAE. Though the effectiveness of the infrastructure projects realization for the national economy is provided by the developed countries experience, the risks for the UAE economy still leave this question open. The main method of the research is the literature review based on the resources that cover the issue of infrastructure improvements effect on the country’s economy. The diversity of the literature resources allows the researcher to consider the research issue from different points of view. Another method is expert analysis considering the experts’ opinions on the issue. Results of the research show that there are plenty of positive effects for the UAE economy caused by the Etihad Rail project realization. Though the cost of Etihad Rail system creation is significant, the profitability of the advantages of logistics changes makes the project topical.

The main conclusion of the article is the superiority of the advantages over the disadvantages of the new infrastructure changes process. Though the project is still underway, the profits are rather clear to ignore. The Etihad Rail idea realization will surely improve the quality and volume of economic ties between all the GCC countries providing the conditions for more effective cooperation between these countries on the issue of economic and social development.

Introduction

The main idea of the research paper is the consideration of the issue of the Etihad Rail project realization for the UAE economy, in particular, whether this project causes economic growth in the country or not. The situation in the UAE economy implies that infrastructure changes are needed to meet the demand of domestic and foreign business for qualified logistical services. The research method used in this paper is the literature review practice. A literature review (LR) is an evaluative report of information found in the literature related to your selected area of study. The review should describe, summarize, evaluate and clarify this literature. It should give a theoretical base for the research and help the author and the reader to determine the nature of research. This LR will cover the areas of Etihad Rail logistics in the UAE, the literature, used in this research, has been covered from 2011 to 2015 years. This chronological period is adequate because the Etihad Rail project creation and development by Gulf Cooperation Countries (GCC) was started only at the end of 2009 year.

“Dubai Economy: UAE Rail to Lift Economic Outlook” by Hefferman, S. (2014, October)

This article is devoted to the consideration of UAE GCC Rail Project features and the benefits, which the UAE economy will achieve from this infrastructure campaign. According to the author of the article Shayne Heffernan (2014), “analysis shows that the economic benefits that Etihad Rail will bring are shared across all seven Emirates. It will support exports as well as increase inward investment. It will also provide employment opportunities and increase incomes of business and property owners, as well as their employees.”

This article corresponds to the actual state of affairs because having examined the arguments in favor of railway development it can be noted that they are quite feasible and, what is even more important, strictly required for the economic development of the UAE. This project provides the reduction of transportation costs for business, which affects the domestic and foreign business attitude to the economy of the UAE and increases the country’s attractiveness for foreign investors.

“Catalyst For Growth” (2013, July 26)

This article discusses the role of the Etihad Rail system in the economic growth and social changes process in the UAE. Here, the authors consider the passenger and freight services as the catalyst to economic and social improvements in the country. The article emphasizes that “more specifically direct economic benefits will include freight cost savings and business travel time savings, amongst others. The railway will also contribute to the further development of tourism and the wider UAE economy” (“Catalyst for Growth”, 2013).

Considering the advantages of Etihad Rail establishment provided in this article a user can recognize their validity and relevance. Taking into account the level of industrial production and mining industry evolution, a well-developed rail network is a prerequisite for sustainable improvements in the UAE economic system. Without railway system improvement, the economy will soon reach the limits of its development. Even if the production level does not change noticeably, the transportation costs will affect the demand level negatively: reduce the companies’ profits and their interest in the continuation of business activity on the territory of the UAE.

“Etihad Rail: A Life-Changing Landmark Project” (2013, October 12)

This article describes the Etihad Rail establishment process and the main advantages of this infrastructure project for the national economy of the UAE. Considering the differences between the content of this and earlier presented publications, the article focuses more on the ecological benefits and the presentation of the main partners of this project whose intention is to become the customer of the new railway after its construction.

Evaluating the information presented in this article the reader can make a decision about the expediency of the new railway system establishment. The researcher used to discuss the abstract companies, without mentioning the real players in the UAE market. The article informs that “Additionally, a number of other organizations have signed a Memorandum of Understanding; thee include: Al Dahra, Arkan, DHL, Du, Emirates Steel, …Aramex and DP World – all of which underlines the obvious demand for a rail system” (“Etihad Rail: A Life-Changing Landmark Project”, 2013). This fact allows classifying the effectiveness of Etihad Rail for the UAE economy.

“Abu Dhabi Invests in Logistics” (2014, November 24)

The main theme of this article is the importance of logistical improvements for the UAE economy. The expert, Faris Al Mazrouei characterized the situation in the national economy as requiring rapid development of infrastructure, which provides the stimulus for economic growth and international status of the UAE economy improvement. The article also provides information about the presence of huge domestic demand for infrastructure development, the variety of logistical projects available for realization, and the availability of partners, ready to help in this project’s realization.

Nevertheless, the main logistical project that is discussed in this publication is the port-ability increase; the role of railway projects is also considered. The expert Al Mazrouei believes that

Etihad Rail’s connection to logistics infrastructure hubs – such as Khalifa Industrial Zone Abu Dhabi and Jebel Ali Industrial Area in Dubai – will play an essential role in the overall connectivity of the railway with key centers of economic importance to the UAE and the region, enabling a stronger and more efficient supply chain. (“Abu Dhabi Invests in Logistics”, 2014).

“Analysis: Impact of the GCC Rail Network” by Arabian Supply Chain (2014, December 15)

In this article, the authors consider the main aspects of forecasted economic growth caused by the Etihad Rail project realization. Thus, Faris Saif Al Mazrouei determines the development of the railway network as the main, vital factor of economic changes in the UAE. He said (“Analysis: Impact of the GCC Rail Network”, 2014) that “it will promote growth in various business sectors, provide jobs for the local workforce, expand the UAE’s logistics capabilities and ultimately contribute to the national vision of diversifying the economy away from reliance on oil and petrochemicals”.

It is noticeable that most of the arguments confirming the profitability of the Etihad Rail project reaffirm their viability. Discussing the benefits of the logistical conversion in the UAE, the article provides a reader with the example of the positive effect caused by railway development for the economy of China and India. Thus, there is strong evidence of the profitability of this project for those who are uncertain in the final result. The prospects of this idea are evident due to the profits of the new railway establishment, with the increase of work power mobility among them.

“Etihad Rail to Boost UAE GDP by Dh3.5b by 2030” by Kamel, Y.D. (2013, February 6)

This publication represents the review of the interview with the business development director at Etihad Rail, Graeme Overall. He told the reporters about the approximate quantitative estimates of railway project profitability. Graeme Overall thinks that “the UAE’s national railway system is expected to bring an increase of Dh3.5 billion to the country’s gross domestic product (GDP) by 2030 and the project has an economic return rate of 15.5 percent” (Kamel, 2013), The major part of the article was dedicated to the consideration of railway building stages, particularly the importance of railway safeness for the customers.

Considering all the profits of railway system development presented earlier and the experience of different countries in logistical improvements of the railway, t the realistic estimates submitted by the authors can be recognized. Taking into account the interest of the variety of foreign and domestic companies, the success of this project is difficult to question. The researcher must also evaluate the Etihad Rail management approach to the issue of quality, which also affects the results of logistical improvements in the UAE.

“GCC Rail Network Project Edges Forward” (2015, July 18)

The main idea of this article is to show a significant contribution of a rail network to the economy of countries, which are the members of Gulf Cooperation Countries (GCC). The article proves the idea that the dramatic economic growth of the countries of the Arabian Peninsula caused the increase of demand for a supportive infrastructure that would ease the goods and services exchange process. Julian Hill believes that “the network is a must for developing economies such as the GCC’s … successful, prosperous and growing countries and cities need high-quality modes of mass public transportation … rail, as a mode of transport, is cost-effective and environmentally sustainable” (“GCC Rail Network Project Edges Forward”, 2015),

Based on the findings of this publication, the solvency of the new rail network project in the GCC countries can be reasserted. The researcher can signalize the great interest in such conversion among all the developed economies of the Arabian Peninsula. Therefore, the Etihad Rail idea realization will surely improve the quality and volume of economic ties between all the GCC countries providing the conditions for more effective cooperation between these countries on the issue of economic and social development.

“Aramex to Use UAE’s Developing Rail Network” (2013, March 18)

This article’s aim is to provide information about one of the global logistic companies’ interests in the UAE rail network project. It sheds light on the level of cooperation between the Etihad Rail Company and international business, which allows assessing the attractiveness of this logistical project for foreign capital. This publication also gives the opportunity to determine the score of new railway system future effectiveness and the level of changes in the UAE economy that will come with the end of railway establishment.

As can be seen from this article, although the rail network establishment is far from its ending, the international business interest to the infrastructure changes in the UAE is great. The authors state, “The Company has signed a memorandum of understanding with the national railway developer Etihad Rail to use its network for deliveries across the country and cross-border to other Gulf nations” (“Aramex to Use UAE’s Developing Rail Network”, 2013). Such an active interest of foreign capital to this logistical project shows that such changes in the UAE’s infrastructure were already relevant for the long period of time and the international business was just waiting for the beginning of this project.

The Report: Oman 2013 by Oxford Business Group (2013)

This report is devoted to the consideration of the achievements of the Oman economy in different sectors. One of the main themes is the development of the country’s infrastructure. Authors prove the necessity of infrastructure improvements citing all the modern economic and social issues of Oman, which can be decided, particularly, in the way of Etihad Rail project realization. Among these problems, there are cities traffic levels, industrialization level that requires an efficient transit system to improve the transportation of goods and work power across the country, and limitations of the existing transit system.

Though the main object of this report is the economy of Oman, it can be used during the examination of Etihad Rail effect on the UAE economy because of the similarity of the economic and social situation in both countries. This similarity is based on the similar historical, economic and social development of the countries. This means that both of them expect similar results in this process. According to the report (2013), “the GCC is looking to weld disparate regional economies into one larger economy, where businesses can benefit from a bigger market that enables economies of scale and specialization.”

The Report: Ras al Khaimah 2013 by Oxford Business Group (2014)

This report provides information about the economic and social growth of one of the UAE’s emirates – Ras al Khaimah (RAK). Here, the main positive economic and social effects for RAK are considered, the list of companies-partners is presented, and the new rail network laying process is described. Though the weakness of this report is the discussion of only one emirate, the presented profits from new railway idea are easily adapted for all the seven emirates of the UAE.

The relevance of using this report for the examination of Etihad Rail project profitability can be explained by the fact that most of the Emirates (five of seven) will be involved into this infrastructure project, so the benefits will be available for all of them. According to the report, “when completed, the 1200 km of the railroad will link five of seven emirates of the UAE, according to maps from the company, and terminate at the UAE’s borders to the south-east” (The Report: Ras al Khaimah 2013, 2014). Considering the profits of the rail network for RAK, the authors secrete such factors as the labor mobility improvement between RAK and big megapolis Dubai, the increase of economic connections between domestic capital of the UAE and foreign business, and the actual attraction of foreign capital during the railway establishment.

New Mega Trends: Implications for Our Future Lives by Singh, S. (2012)

The main idea of this book is the presentation of high-speed rail (HSR) effectiveness based on the international experience on this issue. According to this text, the main positive effects of infrastructure improvements are the increase of economic cooperation between countries connected by the new rail network and the occurrence of the pulse for the industries whose products of activity are involved in the railway creation process. In this book, the topicality of HSR development is proved by the increased demand for services of HSR in the developed countries.

Although the article in this book considers the world experience in railway infrastructure improvement projects, this information’s adaptation for the UAE’s economy is actual and can provide the basis for the UAE economy development prediction. Singh Sarwant (2012) states, “high-speed rail is cutting-edge technology, and its vast ecosystem and infrastructure needs provide diverse business growth opportunities.” It will also create the demand for the goods needed during the rail establishment process affecting the domestic productive companies’ profits.

A Strategic Analysis of the Construction Industry in the United Arab Emirates by Gorgenlinder, V. (2011)

The main theme of this book is the consideration of the history of the economic and political development of the UAE. The improvement of infrastructure system is considered as one of the main ways to economic growth. The positive economic effect is achieved by the appearance of capabilities provided by the improved logistic system. Among them, there is the activation of the domestic and foreign trade process, labor mobility improvement, and the country’s economic diversity.

Though the discussed object in the book is the infrastructure in general, the assessment of rail network project importance for the UAE economy is possible. In general, the presented arguments express the same ideas discussed in earlier reviews. One important thing that has to be said is the necessity of infrastructure projects for the economy openness increase. In the modern world, countries’ economy effectiveness and competitiveness are determined by the level of foreign capital, which the country can attract and use in the development process.

Conclusion

The issue of the Etihad Rail project contribution to the UAE economy is rather complicated because it is not resolved yet, and there is still a question about the amount of money needed during the establishment period. Nevertheless, based on the results of this research, it can be said that the effectiveness and necessity of this infrastructure project are doubtless. It provides new possibilities for business, domestic and foreign labor resources, economic and social development of the UAE, and the increase of country’s budget funds.

Among the hypotheses developed during the research process, the most important is the hypothesis about the longtime relevance of infrastructure changes in the UAE based on the immediate interest of foreign business to this project. Another significant hypothesis is the investment multiplier hypothesis, which allows forecasting the increase of tax income due to companies’ profits increase.