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GCC RAILWAY DEVELOPMENT: A VISION TO INTEGRATION

Ramiz Al Assar, Ph.D.World Bank Sr. Advisor to GCC-SG

GCC Transport and Railway ConferenceDoha- State of Qatar (February 1-3, 2011)

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Topics

GCC Key Indicators. Role of the World Bank. Transport in MNA: Issues & Recommendations. GCC Railway Development. PPP in Transport: Challenges / Opportunities. Lessons Learned - Recommendations. Future Outlook.

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The GCC – SG

Formed in May 25, 1981 Mandated with: Promoting closer economic, political and cultural

integration between MS. Developing a common approach to global and

regional integration.

A new Economic Agreement was adopted in 2001: Created a Common Market (2008), Monetary

Union (2009), Customs Union (2003) and development of Regional Integrated Transport Projects.

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GCC Key Indicators (Totals in 2009 Figures)

Area: 2.7 million km². Populations: 37.5 m.

Saudi: 24.8 m( 66%). UAE and Oman: 7.7 m (20.4%). Bahrain Qatar and Oman : 5.4 m (13.6%).

GCC Intra Trade: 70 billion. Transport Sector:

Paved Roads: 97,000 km. Registered Vehicles: 15.3 m. Passenger Travel: 121 m/year. Accidents: 73,400/year.

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World Bank Role:GCC Transport Sector

Provides RTA in Transport infrastructure development and service provisions: Strategy, Policy and Regulations. Know-How and Good Practices Benchmarking. Quality Assurance. Institutional Set Up - Capacity Building.

Key Projects: Saudi NSR Project, formation of SAR. GCC Transport and Railway Sector.

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Transport in MNA: WB Perspective - Key Issues Transport in MENA region is central to

accelerating economic development through export led growth, creating jobs, and reducing vulnerability and exclusion.

It is key to regional integration and vital to improving the quality of life and reducing poverty.

Transport in MENA region is well developed - extensive road networks, important facilities for air and sea transport, and a sizable rail network.

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Transport in MNA: WB Perspective - Key Issues However, quality of transport infrastructure

is often deficient unable to support growing, modern economies. Congestion is a growing hence, railway plays a significant role in passenger and freight transport.

Institutions in charge of sector are generally in place, but: policy formulation and management capacity

are often weak. Regulatory and financial systems need further

development, especially to encourage more private sector participation

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Transport in MNA: WB Perspective - Key Issues

Need to Further Facilitate Trade & Promote Growth and Regional Integration through Greater Transport Efficiency – Economic Growth and Employment Generation.

Upgrade and develop Urban Transport Services -60% of populations in Urban Areas.

Expanding Access to Rural Areas- Sustainable Development – Access to health, education, and Markets.

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Transport in MNA: WB Perspective - Key Issues

Meeting Growing Transport Needs by Increasing the Role of the Private Sector –US$5.7 billion in 1997 and been on steady decline ever since.

Climate Change – Transport Energy Use, Emission and EIA.

Enhancing the Transport Sector’s Contribution to Social Development –Accessibility and Mobility.

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Transport in MNA:WB Recommendations

Improve Expenditure Patterns in the Sector. Increase Performance and Capacity of the Public

Sector. Develop a Sustainable Framework for Efficient

Private Sector Participation in Transport Infrastructure Development and Services.

Reduce CO2 Emission and Adopt the Transport Sector Climate Change

Sustained Investment /Lending for the Transport Sector.

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The GCC Railway Project

GCC Railway Project: Regional Integrated railway Connecting GCC MS. Length of 2117 km and Cost about US$15.4 billion. Expected to be operational in 2017/2018. Economically and financially viable, GCC MS pay

capital infrastructure costs.Minimum Adverse EI. Integrates with National Railway, Metro Plans and

Transport Hubs in GCC MS.

GCC MS Currently Procuring for the DED (2012). Setting up a GCC Railway Authority. Seeking PPP (Construction to Commence 2014).

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The Endorsed GCC Railway Route

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GCC Railway Link to Yemen

Length: 1373 km.Cost: US$10 billion.Completion: 2019-2022.

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Government's Budget Shortfalls – Constraint but not an Obstacle:General Budget Can no Longer Support Needs to

Support Expansion of Transport Infrastructure and Provisions of Services.

Cannot Afford Business-as-Usual:Limit Competition and Improved Efficiency in

the Sector.Lost Opportunity for Balanced and Sustained

Transport Network.May Hamper the Country’s Economic Growth

and development.

PPP in GCC Transport Sector: Key Challenges

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PPP in GCC Transport Sector: Key Challenges Need a Shift in Paradigm:

Public Sector Role to develop a Policy and Strategy for the Sector, Private Sector to Provide “finance” for Transport Infrastructure and Service Provisions.

Develop a Transport Policy/Strategy with the Vision:GCC MS - A Regional, Integrated and Global

Transport Hub.

Encourage Private Sector Participation- A Partnership.

Build Up Institutional Capacity- Both Private and Public Sector.

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PPP in GCC Transport Sector: Opportunities

Robust Transport System is Foundation of Sustainable Economic Growth & Development for GCC: Provides Provision of Well Balanced Regional

Transport Network (Roads, Railways, PT, Ports and Aviations).

Improves Access to Services: Health, Education, Industries, Tourism- For both Urban and Rural Areas.

Spreads prosperity While Preserving Environment & Social & Cultural values.

Further Boosts Trade Facilitation amongst GCC: Improved Economic Integration- WTO.

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Lack of Robust Transport System Would Lead to an Under-Performing Transport Sector Causing: Serious National Economic stagnation- Lost

Opportunities. Unnecessarily Suppressed activities in nonurban

Areas- Lack of Balanced and Sustained Development.

Severe Traffic Congestion in Urban Areas-Damaging the Environment and Increasing Accidents.

Limited Access to an Integrated Transport Network- Poorer Service Provisions in nonurban Areas.

PPP in GCC Transport Sector: Opportunities

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PPP - International Experience: What Have We Learned?

Private Infrastructure Schemes when well designed can bring real benefits – hence PPP.

But- Projects & reforms based on unrealistic policies or expectations will bring disappointments.

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PPP - International Experience: What Have We Learned?

GCC Governments are addressing question of how infrastructure services are paid for?

When serving the poor-Government should allow for a range of service options when developing PPP Schemes.

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PPP - International Experience: Success Factors To substantially increase the role of

Private Sector in Transport, a number of factors contribute to success: Strong Government Policy Support. Supportive Laws and Institutions. Specialized Unites to Handle

Implementation SAR, SRO, UR,etc. A Specific Program of Targeted

Areas for Increasing PPP. Well Drafted Contracts and

Agreements. Willingness of the Public Sector to

Cede Management- as opposed to Policy Control.

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Economics of Transport – Is the Same All over the World?

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GCC Provides Enabling Environment for PPP

Removing Obstacles to Private Sector Participation: Significant Reforms in the Legal

Environment – Legislation & Enforcement. Administrative Inertia. Financial Distortions. Vested Interest. Government as Rule-Maker, Player and

Referee. Institutional Uncertainty and Unreliability.

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Enabling Environment for PPP: Steps to Make it Happen GCC MS are Currently:

Setting Up Transport Authorities – for Transport Policy, Strategy and Regulations.

Developing Sound Legal environment. Considering a Flexible but Competitive

Procurement System. Seeking Diverse Sources of revenues- to Support

Government Budget and Innovative Private Sector Financing.

Compact Vested Interests. Clearing the Definitions of Roles and

Responsibilities and allocations of risk to those best able to manage.

Building Up the Capacity of Both Private/Public Sectors.

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Scope of PPP in the GCC Transport Development

GCC MS are encouraging the Private sector to effectively finance transport Infrastructure and/or services Including: Management & Lease Contracts. Concessions for Existing Transport

Facilities. Concessions for ‘Greenfield’ Projects –

GCC Railway Project. Road haulage, bus companies, taxis,

shipping companies, airlines, train operating companies, freight forwarders.

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Scope of PPP in the GCC Transport Development

Roads: ITS in Traffic Management. Multi-year, performance-based road

maintenance contracts or concessions-yield better maintained roads at lower costs.

Tolling of Selected Roads- Additional Sources of Revenues.

Highways, rail tracks, waterways, airspace, navigation channels, basic port and airport infrastructure.

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Scope of PPP in the GCC Transport Developments

Saudi NSR (SAR): Traditional (Design, Build, Operate and Maintain).

Saudi Land-Bridge (Riyadh-Jeddah) (SRO): BOT - Traditional? Likely to Change to Traditional.

Haramain High Speed Train (Makkah-Jeddah-Madina): DB and Operate and Maintain.

GCC Railway – Various procurements between traditional (Oman), DB and BOT (Qatar – Al Rail; UAE – Union Rail; Kuwait – Rail Company).

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Scope of PPP in the GCC Transport Development Railways:

Saudi SAR – Publicly Owned Railway Company with Shares to be floated once railway positively operational (NSR Project).

UAE Union Rail Company to develop the National Railway Network.

Kuwait Railway Network will be developed by Government (24%), Public (50%) and Private Investors (26%).

Qatar National Railway and Metro Network will be developed by Government (51%) and Private (49%).

Proposed Causeway Linking Saudi with Bahrain proposed development by Private (100%).

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Lessons Learned: Recommendations Need to well Design the Private Infrastructure

Schemes to Bring Real Benefits to Transport Infrastructure Development.

Need to Develop Realistic Policies and Reforms to ensure Successful Transport Project Development and PPP Finance.

Need to Effectively Address How Infrastructure Development and Services Provisions Are Paid For?

Governments to Allow for a Range of Service Options when Developing Private Participation Schemes to Serve the Poor (PSO).

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Lessons Learned:Recommendations

GCC Governments to Develop Managed Competition for the Transport Sector to Help Reduce Prices and Expand Access.

GCC Governments to develop a Regulatory Framework that is Credible and Legitimate to Ensure Delivering Quality Transport Infrastructure and Services Provisions.

Endorse a Uniform Procurement of Goods and Services for the Regional Integrated Transport Development.

As GCC MS are focusing on Regional Integrated Transport Networks, Building Consensus is Utmost Important and will Remain Most Challenging!

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Plan to identify a few specific schemes for private approach: get runs on the board.

Scoping studies to determine feasibility, necessary conditions and regulatory framework (if any).

Frequent interaction/consultation between public and private sectors to develop and finance regional integrated transport infrastructure and services provision.

Future Outlook