Iraq rail: Wish list or a plan?

Iraq began using rail transport almost 100 years ago. Construction of the country’s first railway line began in 1912 and the first train was operated between Baghdad and Dijeyl two years later. Between 1978 and 1987 a high-speed rail line was constructed between Baghdad and Akashat.

But Iraq lost its early-mover advantage some time ago. Many years of neglect and damage as a result of conflict have resulted in Iraq’s rail sector being left behind. Iraq Republic Railways (IRR), under the Transport Ministry, wants to change this. However, it has made very little progress in recent years. Plans that were drawn up in the 1980s were shelved indefinitely and so need to be revised before the projects move ahead.

It is highly unlikely that Iraq will move forward with its plans in the short-term. According to IRR’s director of railways, it has been in discussions with France’s Alstom for more than a year and the parties are no closer to signing agreements. Some delegates at MEED’s Iraq Infrastructure Projects 2011 conference in Istanbul said they don’t expect any projects to be completed within the next 20-25 years. In many ways, this is not surprising. Iraq has massive infrastructure needs and very little experience of leveraging private finance and foreign direct investment (FDI) to build new projects. Other countries in this position have opted to develop regulated assets, such as power stations, that require less capital first before embarking on more ambitious projects.

Private-sector investment will be essential for the rail programme. Valued at $32bn, the programme is expensive and, according to IRR’s director, this means private investors must take the lead. IRR hopes to develop the network through several contracts with private companies that will procure, construct and finance the lines. The companies will be paid under a deferred payment structure. Such a scheme raises questions about the government’s commitment to the projects as it would not be taking an equity position in the projects, only covering the schemes through the Finance Ministry.

Finally, the decision to award the contracts through direct one-to-one negotiations with developers instead of through open tenders exposes IRR to claims of corruption. All of this mean that the rail projects are unlikely to happen for several decades.