February 14, 2017

GCC countries need new technologies to improve transportation systems

GCC countries need to adopt a structured technology adoption framework to overcome current challenges facing their transportation systems, according to a recent study by management consultancy Strategy& (formerly Booz & Company).  

  • GCC suffers from emissions levels higher than the world average of 1.03 tons of carbon dioxide per capita, with the UAE coming in at 3.49
  • Dubai plans to convert 25% of the emirate’s total number of passenger trips to autonomous by 2030
  • Qatar Postal Services Company (QPost) plans to use autonomous drones for parcel delivery services
  • GCC citizens continue to prefer large SUVs and luxury cars, which generate more emissions than other vehicles. SUV sales in the GCC in 2015 totaled 9.3 for every 1,000 residents, compared to 3.0 for the rest of the world

GCC countries need to adopt a structured technology adoption framework to overcome current challenges facing their transportation systems, according to a recent study by management consultancy Strategy& (formerly Booz & Company).  

The GCC transportation system is currently facing three main challenges: 1) As oil prices continue to decline, GCC governments are cutting investments and can no longer justify spending freely on transportation infrastructure projects, 2) the region suffers from significantly higher rates of death from road accidents than international benchmark leading to economic losses equivalent to 2.5 percent to 4.5 percent of the GDP among GCC states including non-fatalities, and 3) transportation carries steep environmental costs with emissions levels far higher than the world average of 1.03 tons of carbon dioxide per capita (5.59 in Qatar, 4.12 in KSA, 3.58 in Kuwait, 3.49 in the UAE, 3.16 in Oman and 2.44 in Bahrain). 

Commenting on these challenges, Dr. Ulrich Kögler, Partner at Strategy& in Dubai, said: “Innovative new technologies including autonomous vehicles, electric cars, drones and traffic management systems develop at unprecedented speed and are already allowing for the possibility of a smarter, safer, less expensive and more accessible transportation system coveted by governments around the world.  As the GCC population grows and urbanization continues, governments have little choice but to upgrade their transportation systems. The wealth of existing and emerging new technologies can significantly help facilitate this process. Dubai is already taking measures to adopt more technologies into its transportation infrastructure,  having recently announced plans to convert 25% of the emirate’s total number of passenger trips to autonomous by 2030.” 

According to Strategy&, capitalizing on these technologies requires a four-part framework: 

1) Regulate: GCC governments need to build the correct regulatory foundation by reviewing their current operating model and setting clear policy objectives and priorities to promote and rapidly deploy these new technologies

2) Pilot: Evaluate the potential benefits by conducting pilot programs to test new technologies, potentially in conjunction with private-sector partners. For example, Dubai’s Road and Transport Authority recently partnered with Emaar properties to conduct trial runs of a 10-seat autonomous shuttle on a 700-meter track along Mohammed bin Rashid Boulevard. Another potential candidate for a pilot program is natural gas. The GCC is a major producer and when compared with standard fuel oil, LNG can reduce the greenhouse-gas emissions of ships by 20% and reduce other certain emissions by 85% to 100%.

3) Build: Put the underlying infrastructure in place, including physical infrastructure (such as roads that can support autonomous vehicles, charging stations for electric cars, and facilities for greener maritime fuels) along with an IT backbone capable of handling the increased flow of information, and analytics tools to derive insights from the data.

4) Incentivize: Use incentives to encourage both customers and service providers to adopt these technologies. In the realm of commercial logistics, GCC countries are investing to become major logistics hubs. Yet to be globally competitive, they need to become more efficient and cost-effective for traders.  

Stressing the importance of embracing more technologies, Fadi Majdalani, Partner at Strategy& in Beirut said: “It is important that governments stay flexible when adopting such a framework as it is almost impossible for governments to predict how well specific technologies will do. Governments should encourage experimentation by staying on top of developments in other markets, taking the best of what works elsewhere, and applying it to the unique needs of their markets. For example, Qatar’s Ministry of Transport and Communications recently signed an MoU with Qatar Postal Services Company (QPost) to develop an innovative pilot project for autonomous drone delivery services.”

Another key area that technology enabled transportation systems will support towards is substantially reducing the environmental costs and car emissions.  In a bid to reduce car emissions, automobile manufacturers are making huge strides in electric powertrains; such cars could comprise 25% to 50% of the overall market by 2040, according to Bloomberg. GCC governments should prepare the ground for the wide adoption of electric cars, incentivize their use, and potentially even build a local industry around electric vehicles. 

Commenting on the importance of adopting such a framework, Camil Tahan, Principal with Strategy& said: “Technology offers GCC governments a means to not only address some of the most pressing fiscal, safety, environmental and accessibility challenges they face, but also build a state of the art transportation and logistics sector that can propel regional economies into the future and create significant employment opportunities.”