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Railways Gather Steam in the Middle East

The Middle East and Northern Africa (MENA) region has experienced strong population growth in the past 20 years,from 240 million in the early 1990s to over 330 million today.1 This is expected to increase to well over 500 million in the next 20 years. Much of the projected population growth is likely to be concentrated in major cities. Already,over 60 percent of people in the MENA region live in urban areas. In countries where arid, inland areas are virtually uninhabitable, such as Qatar, well over 90 percent live in metropolitan areas. The increasing migration of people to urban areas will continue to put pressure on and create needs for public services, infrastructure, jobs, and housing.More people usually translates to more cars, and in MENA cities such as Riyadh in Saudi Arabia, this will worsen an already highly congested road network. As a result, new transport infrastructure and particularly rail transit modes have risen to the forefront of government infrastructure strategies.

The MENA region is now experiencing somewhat of a railway renaissance. For a region widely known to possess great oil and gas reserves, this seems paradoxical. But it serves to demonstrate the ambition of the region’s governments as they strive towards reform, increased infrastructure investment, more sustainable economic development, and political cooperation. Is it politics or economics that is driving the boom? And what challenges lie ahead for clients, consultants, and contractors tasked with delivering modern railways in a region where the car dominates? 

The region’s economies are heavily influenced by oil and gas prices. After the crude oil price fell sharply in 2008, substantially reducing revenues and critical cash flow, it forced a rethink of economic strategy in the region. This was aimed at diversification by attracting domestic, regional, and foreign private sector investment into non-oil and gas sectors such as power generation, telecommunications, tourism, and real estate. 

For Gulf Corporation Council (GCC) states (Box 1), the recent upturn in oil and gas revenues (circa US$710 billion2 in 2012 up from US$600 billion in 2011), combined with increased oil production, has somewhat bolstered government coffers; however, other MENA countries continue to struggle with debt, low productivity, and a lack of foreign investment. Nevertheless, while the global economic downturn slowed the pace of investment and development of infrastructure projects, there has remained a sustained impetus behind public infrastructure investment across the region.

Significant investment in rail will be made in the GCC states of Saudi Arabia, Qatar, United Arab Emirates (UAE), Kuwait, Oman, and Bahrain where over US$100 billion of new railways are planned, building further on recently completed metro and long distance rail lines.

Although rail networks have long been established in Egypt, Iraq, and Iran, Saudi Arabia has led the region in recent rail infrastructure development with the completion of the North- South Railway, a mixed freight and passenger line, and the opening of the Mashaaer Metro line, serving pilgrims in Mecca.

Hot on their heels has been the UAE, with the recent opening of two metro lines serving the high density coastal areas of Dubai, and the recent commencement of construction on the 1,200-kilometre Etihad (Arabic for “Union”) Rail, a trans- Emirate freight (and future passenger) line connecting the seven Emirates of the UAE. The main line of the Etihad Rail will eventually form the UAE’s contribution to the highly ambitious GCC railway, a proposed 2,000-plus-kilometre freight and passenger railway connecting Kuwait in the northern Arabian (i.e. Persian) Gulf to Oman in the south, and an important land bypass of the Strait of Hormuz, a strategic bottleneck for shipping trade at the head of the Gulf.

The GCC railway, which will connect the region’s principal centres of population and industry, will be an interesting test case for the success of rail freight and passenger transport in the wider region. Political cooperation, financial investment, and governance are key challenges, but the long term strategic and economic rewards of cooperation are obvious. There is much excitement within the industry, particularly amongst European-based suppliers who are keen to offset some lean years with a piece of almost unprecedented greenfield railway investment.

The recent railway renaissance can be attributed to three key factors: population growth (as discussed), economic and political reform, and increased recognition of rail as means for economic and environmental sustainability. 

 

Economic and Political Reform

The growing youth population (i.e. youth bulge) and high unemployment, particularly in North African and Levantine countries, that fuelled the Arab Spring demonstrations beginning in 2010 has had a widespread influence across the region, bringing about varying degrees of economic and political reform in Arab nations.

While the GCC, largely made up of wealthy sovereign states, has been less affected by political unrest, most GCC countries have chosen to be proactive by decreeing reform and increased public spending. Government investment in infrastructure together with a maturing financial services sector, are renewing global interest in MENA countries as investment destinations. Neighbours to the east in India and China, in particular, are also increasing and strengthening their trade links with the region, which is an encouraging sign.

Freight and passenger railways, if properly planned and implemented, help achieve the socioeconomic goals of improved equity, mobility, and access to employment and markets, which in turn improve liveability and economic performance. For MENA governments, this translates to more important social and political stability, as well as more stable revenues, by reducing economic dependence on commodity prices.

Economic and Environmental Sustainability

Metropolitan passenger railways are proven to create economic benefits in terms of access to employment, greater productivity and resource efficiency, and they stimulate land use development. Cities like Dubai are already benefiting from the implementation of major urban infrastructure projects, particularly highways and metro rail, as it marks a maturing of the city, improving the prospects of attracting vital foreign investment. This implementation of urban infrastructure projects also generates employment and supports the development of many secondary industries. 

A contiguous long distance rail network connecting key economies and markets in the MENA region offers similar potential economic benefits, provided the trade and customs barriers are resolved. Hence, there is renewed interest in introducing rail as a viable alternative to shipping and road transport, and as a tool to improve the long-term sustainability of MENA economies.

The GCC railway, if successfully implemented, will provide a stronger physical connection between member states but, more importantly, it will promote the GCC states as a global economic force and reduce their reliance on oil and gas revenue. Railways are also seen as a beacon for environmental sustainability. Governments in the region, particularly oil-exporting nations, are under increasing pressure to reduce their carbon emissions and are looking closely at rail-based transportation alternatives.

There has been a strong reaction by governments in the GCC to reduce their “real” contribution through emissions reduction programs, much of which has been targeted at reducing vehicular emissions and congestion in the transportation sector. Many transport agencies have set ambitious public transport mode share targets for the future. In Dubai, the Roads and Transport

Authority has set a target public transport mode share of 30 percent by 2030. This requires a significant expansion of the existing metro network3 and the addition of secondary transit modes. Investment in both freight and passenger railway projects, therefore, offers governments both the opportunity to secure their long term economic future and improve environmental sustainability.

Challenges

There are many obvious challenges affecting or likely to affect the development and success of rail-based transport in the MENA region. For passenger railways, the typically extreme climatic conditions (greater than 50 ⁰C summer weather), mostly experienced in the GCC nations, significantly curb people’s ability to walk and cycle to train stations. For freight railways, long distances between urban areas, and the physical terrain (shifting sands) create difficult conditions for both construction and operation. However, there are several other key factors affecting the market that can perhaps be more easily influenced and need to be addressed to enable the successful implementation of projects in the region.

 

Density and Car Dependency

In general, the low density, car-dependent nature of urban areas, particularly in the booming Gulf region, threatens to undermine the viability of many new passenger rail projects, even before the ground is broken. Recently, in places like Doha and Dubai, there has been a marked shift towards higher density, inner-city living, driven mainly by new real estate development, the influx of expatriates, and changing lifestyle expectations of modern Middle East citizens. However, more deliberate integration of land use and transport is still required to make public transport work in cities where the default mode of travel is still the car. Provided future urban planning eff orts do not compromise lifestyle choice, many of the physical changes required to support public transport use can be achieved over time. 

Funding, Procurement, and Regulatory Environment

To some extent, the financial challenges posed during the recent credit crunch have moved infrastructure project delivery toward shared investment models or public-private partnerships (P3s). However, the interest in such models from wealthier nations like the UAE and Kuwait appears to be on the sharing of project risk and the need to acquire intelligence from foreign sources, rather than pure dollars. In Jordan, an aiddependent nation, the government has a strong public sector, but it is almost totally reliant on the private sector to fund new infrastructure.

As a result, several of the proposed passenger railway schemes in the region are being procured through P3 or private finance initiative (PFI) models, including metro schemes in Kuwait City and Mecca. Consequently, there is currently a great demand for legal and financial services to support the development of effective procurement models and provide guidance to newly established rail authorities. It remains to be seen if the MENA region can achieve a greater strike rate for successful P3s than elsewhere in the world. A railway infrastructure boom also requires the support of a robust legislative and regulatory framework. Dubai, one of the pioneers of rail transport in the region with a 75-kilometre metro network, continues to create and develop its railway regulatory framework, well into its third year of operation (Box 2).5

Strong support is required to guide government authorities in the founding years of the regional rail industry. Helping them create a robust commercial and legal framework that covers the entire rail project lifecycle is imperative. Such a framework must allow for efficient and competitive tendering, encourage private investment, and protect rail authorities.

Access to Skilled Labour and Capacity Building

In the long term, knowledge and experience are required to help grow and sustain a local rail industry. In the short term, the sheer number of major rail projects currently under development in the Middle East demands a huge pool of specialised resources to plan, design, build, operate, and regulate railways. At present, these can generally only be drawn from outside the region. 

In Qatar, over 125 kilometres of new metro rail lines must be designed, procured, built, and commissioned in readiness for the 2022 FIFA World Cup. Several other regional projects are currently progressing to the latter stages of project development, attracting all the major consultants, contractors, and suppliers in the global rail industry. However, attracting talent to the region on any more than a short-term basis remains a challenge.

With proper training and development schemes at the project level, and investment in engineering and polytechnic-style education programs, Middle East states can build a substantial base of local skilled labour over time. Of course, the industry must attract and retain talent through incentives, as many government desk jobs in the region may still come with higher salaries, and higher status.  

Conclusion

The planned implementation of rail projects across the MENA region is ambitious. While some project timelines remain in flux, there is a real drive behind rail projects, particularly in the GCC, that should significantly increase the number of rail kilometres in the region over the next 10 to 20 years. Based on current plans, an estimated total of US$150 billion is likely to be invested for these projects through 2022 (Box 3). This will represent an average of US$15 billion annually for the next decade in MENA region. Around 75 percent of this expenditure will be in the Gulf. With better integration of land use and transport planning strategies by governments (“planning it right”), implementation of best practice project delivery models (“making it happen”), and capacity building for the long term (“handing it over”) these projects and the region’s rail industry have a great chance of success.

 

Notes:

  1. World Bank
  2. Institute of International Finance
  3. In 2012, the Dubai office of Parsons Brinckerhoff completed the Dubai Rail Master Plan for the RTA. It proposes over 250 kilometres of new metro rail lines forming the backbone of the future public transport network for 2030 and beyond.
  4. In 2011, Parsons Brinckerhoff assisted a private investor in developing a scheme for the Zarqa-Amman LRT in Jordan. The project, a Build-Operate-Transfer (BOT) to be wholly privately funded (including capital from the US-based Overseas Private Investment Corporation), was rejected by the government of Jordan, the third such scheme to be rejected.
  5. Parsons Brinckerhoff recently prepared the Dubair Rail Planning & Design Guidelines, a suite of documents aimed at ensuring quality, safety, and innovation in future planning and design of railway projects in the Emirate of Dubai.

 

Image Header Source: Paolo rRosa (Creative Commons)