Despite opinion that lower government income should not affect the business case or diminish the economic incentive for building infrastructure such as railways, fiscal realities across the region are dictating which projects are awarded, or not.
GCC transport ministers are now reported to have, in principle, agreed earlier this year to push back the target completion date for the GCC rail network from 2018 to 2023. This date will be further discussed in their annual meeting to be held in the last quarter of the year.
The individual states are equally not forthcoming in terms of the status of their mainline rail schemes. The cancellation of the tender for the second phase of the UAEs Etihad Rail in January seems to have provided the other states with one more reason to push back on their mainline rail plans, apart from the ongoing review of projects in line with lower revenue.
The main bottleneck for these schemes is the lack of state funding. While project finance or public-private partnerships (PPPs) are seen as potential options, the scale of risks for banks is seen as enormous because of the greenfield nature of the projects, the size of investments required, and the absence of a clear regulatory framework to protect private funding.
There is also an added factor where certain key decision-makers may be reticent to plunge headlong into PPPs due to the potential increase in costs. We want to provide services at an affordable level for our citizens, a high-ranking public official in Saudi Arabia told MEED earlier this year.
The award and procurement process for the majority of the urban rail schemes are also being delayed. Merely $4.68bn-worth of rail contracts have so far been awarded this year in the Middle East and North Africa (Mena) region, excluding Iran. This comprises only two major contracts awards: Dubais $2.9bn Expo 2020 metro link and the $1.2bn phase 3 of the Cairo Metros Line 3.
However, one can effectively argue that the $64bn-worth of rail schemes under execution should keep contractors busy for a long while yet and that new contract awards, including some segments of the GCC railway, are foreseeable between 2017 and 2020.
In the meantime, there is growing excitement about Hyperloop-based transport infrastructure, with Hyperloop One actively courting Dubai for a potential proof-of-concept of the high-speed transport system. A Hyperloop offers a maximum speed of 1,220 kilometres an hour. In theory, this could reduce travel times between Dubai and Fujairah to under 10 minutes, between Dubai and Abu Dhabi to 12 minutes, and if a submerged tunnel is built, the travel time from Abu Dhabi to Doha could be reduced to 21 minutes.
As the drive by the UAE is to be a global leader and pioneer in a number of sectors, I would not exclude the possibility of seeing a Hyperloop up and running, albeit over a short distance, before the GCC railway, Antony Di Rosa, US-based Aecoms head of rail for the Middle East, tells MEED.
Ironically, such a prediction could possibly help jump-start the regional rail scheme.