Obstacles on the line for GCC rail projects

In recent years, the Gulf Cooperation Council countries were considered some of the most promising markets for the international rail industry.

Players from across the world flocked to the region in a bid to take part in metro and rail projects worth hundreds of billions of dollars.

But now, with state coffers hit by low oil prices, many of these plans are shuddering to a halt.

In January, the United Arab Emirates’ Etihad Rail announced a 30 per cent cut to its workforce followed by the suspension of the tendering process for the 628km second phase of its planned nationwide rail network.

The following month, Oman’s transport minister said Oman Rail would reconsider the first phase of its 2,135km rail network planned to link with the UAE border at Buraimi.

Then, a few days later, Qatar Rail announced it was launching pre-qualification tenders for civil work on its long-distance rail and passenger network again, terminating a process that began the year before and casting doubt on the project’s 2018 completion date, according to reports.

Now other regional projects, including a planned GCC-wide rail network, are also likely to be hit by delays.

“The large majority of these [regional] projects that have not yet been contracted are postponing at this time,” says French multinational Thales’ ground transportation systems vice president of sales and business development Denis Laroche.

“The market is there, but projects are being postponed to wait until the financial period is more prosperous.”

PPP steps up

Amid regional economic uncertainty and extra pressure on budgets, governments are being urged to turn to public private partnerships to fund their key projects.

“We’ve seen a noticeable downturn in investments in the region as a whole. Either funds are no longer available or they’ve been diverted to more priority sectors,” said infrastructure company AECOM’s head of rail for the Middle East Antony Di Rosa on stage at this year’s Middle East Rail event.

“We are going to need public and private sector champions to help promote and change this procurement system,” he told the audience. “The statutory environments in some parts of the Middle East still need to be developed.”

At the end of last year, Dubai announced the introduction of a new public private partnership law allowing it to tap private sector funding for key projects like an extension to the emirate’s red metro line.

Kuwait too has introduced a PPP law and recently said it was planning legislation to let private sector companies manage its ports and airports.

Eversheds’ head of projects for the UAE Gurmeet Kaur reveals that the company is helping Qatar put together its PPP framework. However, she suggests there is more work to be done to put together a solid regional system.

“Over time as they get a few more deals under their belt there will be more precedents set as to how it will work in reality,” she says,

“There is much to be said about having the overarching framework, but then learning from one or two of the early deals and putting together more detailed guidelines, and regulations, in order to have more uniformity across the sector.”

As this regulation is developed, transport authorities across the region are reviewing their short-term plans.

Oman Rail expects to go ahead with a new network plan for the transport of minerals and other materials to ports at Sohar, Duqm and Salalah. But it could take another four years until the country’s first line is operational, company chief commercial officer John Lesniewski confirmed at Middle East Rail.

Meanwhile, technical specifications and a legal framework for the $250bn, 1,200km regional rail network will be outlined this year, GCC Assistant Secretary General for Economic Affairs, Abdullah Bin Juma Al Shibli said at the event. Even if a 2018 deadline for the project, which involves the building of new causeways between Saudi Arabia and Bahrain and Bahrain and Qatar, now seems impossible.

“In Dubai there will be the extension of the Red Line which is necessary for the Expo in 2020, so this will happen, and in Saudi Arabia I understand that the large [metro] projects they have in Mecca and in Jeddah will be contracted and tendered but they are taking their time for that,” Thales’ Laroche says.

He expects an extension to the kingdom’s North-South line, a planned 3,900km freight and passenger network linking Riyadh and Al Haditha at the Jordanian border, to be contracted this year.

While the company is also eyeing signalling, supervision and communications contracts for metro projects across the region.

“It is obvious that the need is there. There is a mobility problem in all the cities of the region and people cannot depend only on the car,” he says.

However, for those seeking more ambitious projects, the pickings may be slim at present.

At Middle East Rail, Hyperloop Technologies chief executive Rob Lloyd said he hoped to make Dubai and the UAE one of the first places to put the high-speed transportation system using pressurised tubes into production.

“Our dream would be it happens here and we’re going to see if we can make that dream come true,” he said.

As even basic rail projects are cut back, it will surely be some time before it and other futuristic technologies become a part of the region’s transportation mix.