Running much of the length of the Arabian Peninsula’s eastern coast, the 1,500-kilometre GCC Railway is being hailed by many as an important benchmark in the development of the Gulf’s passenger and cargo network.

A pipedream for more than a decade, the GCC railway project is now being advanced in earnest. Construction could begin as early as 2010, with estimates putting the cost of the project at $2.5bn. A feasibility study is already under way.

In the future, intercity travel in the Gulf may not involve wasting hours in taxis or departure lounges. With a new generation of trains offering top speeds of 160km an hour, the commute between Dubai and Abu Dhabi could take less than an hour.

Short international hops between Kuwait City and Dammam, or between Dubai and Muscat, could be reduced to two-and-a-half hours. Cargo routes throughout the GCC would be opened up, slashing transportation times for the raw materials and consumer goods vital to sustaining the region’s economic growth.

Moreover, the railway would be a potent symbol of co-operation between six nations whose relationship with each other can be fractious.

“The railway would integrate the GCC member states socially and economically, but it would also provide important political integration,” says Ramiz al-Assar, senior transport specialist at the resident mission of the World Bank in Saudi Arabia, which is advising the GCC Secretariat on the project.

“It would provide another mode of transport for goods and passengers, improving trade and employment opportunities.”

This, at least, is the vision. Speaking at MEED’s Middle East Rail conference 2007 in Dubai on 30 October, Al-Assar told delegates that construction of the project was being targeted for 2010 and floated the $2.5bn cost estimate. Three rail and engineering consultancies - French group Systra, Lebanese consultant Khatib & Alami and Canarail of Canada - began their examination of the project in September and are expected to deliver their results by the end of 2008.

The line under consideration would run from Kuwait to Muscat, with a further branch likely running down to Oman’s port city of Salalah. At the GCC Summit in Qatar in December, the six nations are expected to sanction an extension of the line into Yemen.

The railway would bind together other rail projects at various stages of development throughout the region. In Saudi Arabia, the line would link with the Saudi Landbridge at Dammam, and with the North-South minerals railway at Jubail. Kuwait’s intended line between the Iraq and Saudi borders would be bound into the network, as would the prospective 800km UAE domestic railway.

In time, it is hoped the line could be linked to other projects in the Levant and North Africa. Arab governments have agreed to use the same gauge specifications when planning their own rail systems in years to come.

Al-Assar cites the success of rail in Saudi Arabia as an example of the potential benefits to the GCC that can be expected from the project. In fact, the only line that exists in Saudi Arabia runs between Dammam and Riyadh, which will form part of the Landbridge linking the Gulf and Red Sea coasts.

Unproven enterprises

Though he concedes the kingdom’s network is modest at present, Al-Assar says revenue from the line reached $63m (SR235m) in 2004, up from $34.5m in 2000, the track’s first full year of operation. Similarly, the quantity of freight transported has leapt to 2.5 million tonnes from 1.6 million in the same five-year period.

However, when applied to the GCC, these benefits remain speculative. Though Saudi Arabia ’s rail building programme is hugely ambitious and the industrial need for it is unarguable, these projects are unproven as commercial enterprises for the developers involved.

Critically, they will barely be completed before construction of the GCC Railway is expected to begin in 2010, giving no oppor-tunity for feedback from the kingdom before work starts. Senior figures within Saudi Arabia’s rail sector say the terms of the eventual construction contracts for the GCC network will be crucial. Contractors and their financial backers in the kingdom are uneasy at taking on build-operate-transfer contracts for rail projects since the industry remains an unknown quantity in the Gulf.

With only the Dammam to Riyadh line operational, risk analysis on such projects is limited, and companies bidding for the Landbridge have found banks nervous about putting forward the necessary finance. Since Saudi Arabia will have the largest section of the GCC railway within its territory, and will therefore be expected to shoulder a similar proportion of the cost, any difficulties with the Landbridge could make Saudi contractors hesitant to take on the project.

“Saudi Arabia is a long way ahead of its neighbours in terms of development and we are still only learning about rail,” says an official at a prominent Saudi contractor closely involved with rail projects in the kingdom.

“The financial case for [build-operate-transfer] rail contracts is hard to make. Contractors find it difficult to get finance for these projects. There is a small population in the GCC - it is not like Europe where there are large populations and an established rail network.”

Cost benefits

Al-Assar acknowledges that Saudi Arabia is likely to be a contributor to the project, but stresses it is also likely to be the principal beneficiary. The direct trade route opened up by the railway between Dubai and Riyadh would be the most important in the region. The benefits of linking the Gulf’s largest port with its largest economy are self-evident.

Moreover, Al-Assar is keen that the GCC should avoid a situation where each country is solely responsible for its own section of track, and is well aware of the potential risk for the private sector of investing in such a project .

“Governments need to remove the barriers impeding the private sector,” he says. “The situation is not moving quickly enough.”

For private developers to be convinced that the risk profile on the railway is satisfactory, he stresses that GCC governments must reform legis-lative and enforcement practices, and overcome the administrative inertia that can hinder such projects. Immigration procedures, for example, will have to be streamlined to avoid the sort of delays at each border crossing that might persuade passengers they were happier in their cars.
“Having the government as rule-maker, player and referee creates institutional uncertainty and unreliability,” he says. “Governments must reassess their procurement procedures.”

Though all GCC nations have agreed in principle to the railway, it remains to be seen whether they can surmount the habitual difficulties inherent in reaching a collective agreement through every step of the process. “The cycle for approving a decision within each country, and then collectively, can be six months to a year,” says Al-Assar.

Many within the rail industry are sceptical about the respective regimes’ ability to compromise, or to overhaul their creaking bureaucratic processes. It does not require great imagination to picture the GCC forced consistently to wait as one or two countries seek to resolve internal wrangling, or seek assurances from one another, leaving each stage of the project’s development lodged in a committee meeting.

Resolving differences

“I do not think there is yet the political unity needed to move the project forward,” says the Saudi contractor.

“Everything will need to be approved at a technical level, then at deputy-ministerial level, then at ministerial level, before it gets dealt with by the GCC as a group, and then international differences must be resolved.”

The final uncertainty hanging over the project is the scale of public appetite for rail travel. While the low-cost, short-haul aviation industry has proved extremely popular in its brief existence, the market is expanding from a low base. Again, the question of the Gulf’s small population becomes an issue. Despite rapid growth rates, the railway will have to compete with the airlines for a relatively small market.

“People in the GCC like their cars,” says the Saudi contractor. “They like planes. It is not clear they will take the train.”

It is these doubts and questions that the feasibility study now under way will seek to resolve. Work has begun on collecting the vast quantities of data required to analyse whether the line might prove commercially viable. While some within the rail industry have suggested the project’s greatest benefit will be as a cargo route, those conducting the investigation stress the need to wait until they have reached their conclusions.
“We are collecting data on traffic, economic issues, sociological issues and pollution,” says Bassam Boustany, consultant at Khatib & Alami. “We will be looking at the topography, alignment of the track and drainage.

“It is too early to say whether there will be a combined line, or if the emphasis will be mainly on passengers or cargo. Only when we have collected all the data necessary can we make a proper assessment.”

Since its inception, the railway has gathered both champions and doubters, and those views are likely to grow more entrenched in the months and years ahead. As the study group continues its work, interested parties across the region will keep an eye on the progress made on other rail projects around the Gulf, particularly in Saudi Arabia, to gauge whether all the fanfare might end in anticlimax, or if the GCC Railway might yet prove the latest flagship project of the region’s economic growth and a lasting symbol of political, social and commercial unity.