On an average day last year, almost 24,000 cars, buses and trucks trundled over the four-lane bridge linking Bahrain to Saudi Arabia. The number of vehicles using the King Fahd Causeway has been rising steadily for years and it is a key element of the island nation’s infrastructure and economy.
The bridge is 28 kilometres long, connecting Bahrain to the most populous nation in the GCC. For most, the bridge is the quickest and easiest way to travel between the two countries, but it can take several days to complete the journey because of the difficulty of getting in to and out of Saudi Arabia.
Businessmen in Bahrain complain that their trucks can sometimes take several days to clear the Saudi side of the border. “We have had trucks stuck for three or four days on the Saudi side,” says one international businessman based in Manama. “It is not the Bahrainis’ fault, but it is hard to see what they can do.”
The difficulties and frustrations these delays can cause have led some companies to seek other ways to move goods in and out of Bahrain. Experience has taught them to split their cargoes between the causeway and the country’s port to ensure their operations can run smoothly. But soon they will have more options as Bahrain expands its road, rail, air and sea links.
Site preparation work on the estimated $2bn Friendship Causeway, connecting the village of Askar on the east coast of Bahrain to Ras Ashiraj on the west coast of Qatar with road and rail links, is due to begin by the end of the year. Dredging and reclamation work is due to follow in 2010.
Bahrain International airport is also expanding. In May 2009, US-based contractor Hill International won an initial four-year deal to provide project management services on the scheme, which will eventually increase the airport’s capacity to 27 million passengers a year from the current level of 9 million. The first phase of the project involves the expansion of the existing passenger terminal and the construction of a second one, with a rail link between them.
A second phase will involve a further expansion to the two terminals. Once that is completed, the existing terminal will be able to handle about 12 million passengers a year, while terminal two will have capacity for about 15 million people a year.
“We have had trucks stuck for three or four days on the Saudi side. It is not the Bahrainis fault”
Manama-based international businessman
Whether the airport will need space for all these people is open to question. It currently handles about 9 million passengers a year and attracting three times as many will involve Bahrain taking on well-established aviation hubs in the region such as Qatar, Dubai and Abu Dhabi.
For now, 34 airlines fly in and out of Bahrain International, 10 of which offer cargo flights. But Bahraini national carrier Gulf Air, which accounts for about half of all the passenger flights at the airport, is thought to be losing about $1m a day, even though it receives a subsidy of $200m a month from the government. While it has recently started up some new routes into Iraq, other connections could be axed to save money.
It is a similar tale for the shipping sector, where the new Khalifa bin Salman Port has the potential to take far more cargo than current trade levels suggest are needed. The port was built at a reclaimed site at Hidd in northern Bahrain at an estimated cost of $500m, replacing the older and smaller Mina Salman Port in the centre of Manama.
The new port welcomed its first boat on 2 April this year when car carrier Hoegh America docked. It has an initial capacity of 1 million 20-foot-equivalent units (TEUs) a year, with four cranes and six 300-metre berths, three of which are dedicated container berths. Capacity could be raised to 2.5 million TEUs a year by increasing the number of cranes at the site to 12.
But such an expansion is unlikely to be needed for years. The volume of cargo imported to serve the Bahraini economy is expected to be 300,000 TEUs this year, according to Iain Rawlinson, chief commercial officer for APM Terminals, the Dutch company that runs the port. That is about the same as 2008.
To date, the port has not been able to secure any customers to use it as a trans-shipment hub, which could substantially boost the volume of trade.
General cargo volumes have been stable this year, with growth of about 2-3 per cent. Steel volumes have been lower and the number of cars imported has dropped “quite substantially”, according to Rawlinson, although that has been offset by strong growth in the volume of aluminium exports.
To make the most of the site’s potential, APM Terminals needs to turn Khalifa bin Salman Port into a base to serve the 100 million people living in the surrounding region, including Saudi Arabia’s Eastern Province, Qatar, Kuwait, and parts of Iraq and Iran.
“We have talked to a number of carriers about using Bahrain as a hub for the upper Gulf,” says Rawlinson. “This year I am not sure we are going to see any. We might see a little towards the end of the year. The upper Gulf is one of the few markets in the world expected to see growth next year.”
The misfortune for Khalifa bin Salman Port and APM Terminals is that the port opened just as the downturn was hitting the region. Where once there had been the threat of a lack of capacity at rival ports, such as Jebel Ali in the UAE, there is now overcapacity.
Even so, the Bahraini port now has an opportunity to establish itself as a regional hub before competition increases in the years ahead. The New Doha Port planned for Qatar, for example, will be able to handle 2 million TEUs when its first terminal opens, possibly in five years’ time.
It is not just international links that Bahrain has been trying to improve; domestic infrastructure is also benefiting from further investment. New roads and interchanges are being built around the country, as are electricity sub-stations, and a study has been launched into a monorail network covering the most congested parts of the island.
The Addur independent water and power project (IWPP) is one of the few schemes anywhere in the Gulf to secure project finance this year. In June, $2.1bn was raised to finance the construction of the project from a wide-ranging group of international banks, including three Saudi institutions: Al-Rajhi Bank, Arab National Bank and Banque Saudi Fransi.
Others involved include National Australia Bank, Singapore-based Islamic Bank of Asia, Belgium’s Fortis Bank, Dexia and KBC, Japan’s Bank of Tokyo Mitsubishi, Jordan’s Arab Bank, and the UK’s HSBC. The remaining lenders are Export Development Bank Canada, Societe Generale and Credit Industriel et Commercial, both of France, and Germany’s Bayern LB, KFW and West LB.
The project is being carried out by a team of Belgium’s Suez Energy International and Kuwait’s Gulf Investment Corporation and will add up to 1,250MW and 48 million gallons a day of desalinated water capacity to the country’s utility networks.
Between now and 2015, any further power and water plants will also be built at the Addur site.
In October, bids are due to be submitted for another important development: the Muharraq wastewater treatment plant planned by the country’s Works Ministry. The successful developer will build a 100,000-cubic-metre-a-day wastewater treatment plant on a build-own-operate basis, and a deep-gravity sewer network on a build-own-operate-transfer basis.
For now, Bahrain’s power and water networks are operating well within capacity. “We always have spare capacity in our electricity and water [networks],” says Abdulmajeed Ali Alawadhi, undersecretary at the Electricity & Water Ministry. “This year our maximum electricity demand could reach 2,500MW, but we have nearly 2,800MW, so we have an excess. Next year, that excess will be less, but we have a new plant that is coming into service. Addur will be producing new electricity and water that will be adding to that.
“All our water and electricity production is planned up to 2030. We know which [plant will come on stream], when and where. It was never like that in the old days. It used to be [planned ahead for] 10 years.”
“Our electricity and water production is planned up to 2030. It was never like that in the old days”
Abdulmajeed Alawadhi, Electricity & Water Ministry
The ministry’s forward planning has meant that Bahrain has not suffered from the power shortages that other Gulf states, such as Kuwait, Qatar and the UAE, have in recent years, and all homes and businesses are directly connected to the electricity and water networks.
The planning is being made easier by the economic downturn, which has curtailed growth in electricity demand this year. In the past three years, demand was growing at a rate of about 10 per cent a year, but this year it has been closer to 5 per cent, according to Alawadhi, mainly because of a slowdown in the construction sector.
While electricity networks need to have some spare capacity to allow for sudden spikes in demand, the danger for other aspects of Bahrain’s infrastructure, including its port and airport, is that the government is being over‑optimistic in the amount of demand there will be, and it will suffer from overcapacity.
Many of the developments that are now coming on stream or being built were initiated during a regional economic boom that has now ended. But the country has a reputation for more realistic development ambitions than many of its neighbours and, although it has the ability to expand its port and airport quickly, it can also delay some phases.
“Bahrain has tended to follow the curve rather than lead it,” says Rawlinson. “To that extent I suspect opportunities may have passed it by. It has tended to follow a more sustainable level of investment.”
For the drivers of trucks stuck on the Saudi side of the King Fahd Causeway trying to get home, any investment in alternative infrastructure and routes will be welcome.