DUBAI (Reuters) - United Arab Emirates boasts the world's tallest building, a man-made island in the shape of a palm and is about to take its next ambitious step - linking cities by rail over the desert.
Already investing heavily in airlines and airports, as well as roads and public infrastructure, to attract and support growing commerce, the seven emirates are leaving nothing to chance as they bet on a freight and passenger network to help drive growth.
At stake for European and Chinese companies is a total $11 billion to be spent on the project, as UAE's Union Railway pushes to complete the rail system by 2017.
Even as the country struggles to regain its footing after the 2009 Dubai debt crisis and an exodus of investors, it is
betting that there will be enough economic activity to justify the rail system. To that end, it is starting with freight and adding passenger services.
Dubai is still building out a metro network launched in 2009 linking the emirates malls and business areas, but passenger volume is still sparse, bringing into question whether a national railway system will work in a country dominated by cars fueled with cheap gas.
China, which sees the Gulf as a key strategic region, appears to be in a good position to win contracts.
"If the decisions are made on price and basic quality of value for money criteria, I don't see how any foreign company could compete unless you get one of the European export-import banks to go in and try to match Chinese financing," said Bill McCahill, Vice Chairman for Pacific Epoch in Shanghai.
"What they do, it may not be the most cutting edge technology, the sort of Gucci leather in first class sort of thing, but it is good enough and is reliable for the most part."
Union Railway is hoping that the 1,500 kilometer freight and passenger network across the seven-member emirates will start its first complete service in 2017.
The first project is due for completion by 2014, linking the Shah sour gas field of state-run Abu Dhabi National Oil Company (ADNOC) to Ruwais and to the Shah sour gas field, which in early 2013 will begin carrying granulated sulphur from Habshan to Ruwais for export.
Eventually the system will connect the UAE to Saudi Arabia via Ghweifat city in the West and Oman via Al Ain in the East.
Richard Bowker, Union Railway Chief Executive, said interest in bidding for the initial work, such as moving earth and laying track, has been high.
"There have been companies from China, Korea, Australia, Europe," Bowker said.
Union Railway has already awarded a project management contract to a joint venture of U.S. firm Parsons, and France's Systra, and a preliminary engineering contract to Parsons Brinckerhoff for the first two phases.
Europe's top logistics and engineering firms such as French Alstom, German Siemens and Canadian group Bombardier are also expected to submit bids.
"Many projects are under detailed planning or even tender and will become reality in the very near future," said Vincent Prou, Alstom's business development director in Dubai.
Freight trains, for heavy goods such as cement, aluminum, or steel, will reach speeds of up to 120 kilometers per hour (kph) and passenger trains up to 200 kph.
Rail development is also being driven, in part, by the need to transport oil and gas in the UAE, the world's No. 3 oil exporter No. 5 in gas reserves.
Chinese companies are already building up their experience in laying down networks on the desert peninsula.
China Railway Construction Corp built the $1.8 billion Mecca Metro between Mecca and the holy sites of Mina, Arafat and Muzdalifah, Saudi Arabia's first dual-track light railway, which opened in November to ease congestion during the annual Haj pilgrimage.
"We get strong interest from Chinese companies," said Abdulaziz al-Hokail, president of the Saudi Railways Organization, adding the Chinese were also active as construction agents in phase one of the Haramain High-Speed Rail and in the North South railway project.
The biggest beneficiaries are likely to be Chinese companies such as China South Locomotive and Rolling Stock Corp.
"They have essentially current foreign technologies that they will manufacture for export at prices that are well below what any Siemens, Alstom or a Bombardier could offer," McCahill said. "They take the technology and then just replicate it massively."
DIVERSITY & GROWTH
Also behind the rail network initiative are hopes that it will further diversify the UAE economy, which is heavily dependent on hydro-carbon revenues and was badly hit by the global financial downturn and Dubai's 2009 debt crisis.
The economic case for the trans-Gulf rail network would strengthen if the GCC countries can agree on the specifics of the railway plan, and if political tensions which have hampered the construction of a causeway linking Qatar and Bahrain can be eased.
"Connecting the Landbridge to the Arabian Gulf will immensely add value to the GDP because it will transfer products either coming from the east side from India, China going to Europe through Saudi Arabia or vice versa coming from Europe going east," al-Hokail said.
"I compare the Landbridge to the Suez Canal, connecting the Mediterranean to the Red Sea. This is connecting the whole island of Saudi Arabia. Locally, it will definitely change the demography of Saudi Arabia."
($1=3.673 UAE Dirham)
Reporting by Martina Fuchs; Additional reporting by Farah Master in Shanghai