Sanaa struggles to progress with projects

28 July 2014

Delays in unlocking donor funds and the deteriorating security situation in the north of the country have held up progress on major transport schemes in Yemen

Yemen’s crumbling infrastructure has long needed an upgrade, and for more than a decade major plans have been in place to improve its transport networks, particularly roads and airports, along with the addition of a railway line. But these, including a multibillion-dollar highway project and a $550m upgrade to the main airport in Sanaa, faltered when nearing implementation.

At the current rate of progress, it would take almost five more years for the [donor] funds to be distributed

Both the Sadah-Aden-Yemen International Corridor Highway and the Sanaa International upgrade have been planned since the early 2000s, with the road link said to be the biggest construction project of its kind to be undertaken in the country. The schemes have been held up by a series of issues ranging from a lack of funding to contractual disputes. Now, however, it seems they may be moving ahead, with almost $8bn in donor funds promised in 2012 and 2013, giving the projects – and many others in the transport sector – a boost.

International highway

The international highway first mooted in 2003, when studies were drawn up by the Washington-based World Bank, is planned to run for 710 kilometres, with four to six lanes connecting the southern port town of Aden with the cities of Taiz, Dhammar and Sanaa, before passing through the provinces of Amran and Sadah into Saudi Arabia. According to the World Bank, which is backing the scheme financially, the highway would increase the average travelling speed between the south and the north of the country from about 40-60 kilometres an hour (km/h) to 120km/h.

A big barrier to getting the project under way has been funding, with the government historically unable to come up with the money or financing required, and donors similarly unable to underwrite its entire cost. When first proposed, the scheme was estimated to cost $2.2bn, but in recent years the overall price tag has been projected to be as high as $3.5bn.

To make the road project more manageable and to control costs, it has been divided into three phases: a 140km stretch from Aden to Taiz; a 214km stretch from Taiz to Sanaa; and a final phase running from Sanaa to Sadah and the Saudi border.

In 2013, the Ministry of Public Works & Highways and the International Planning Ministry signed an agreement with the Saudi Fund for Development and the World Bank to underwrite $550m of the project’s budget. It now appears a decision has been made to divide the scheme into even smaller packages. In May this year, India’s Punj Lloyd announced it had been awarded a $211m deal to build a 42km stretch of the road in the south of the country, while a Chinese firm is understood to have won another major contract on the scheme.

Airport progress

The Sanaa airport scheme has also been long gestating. First planned in 2002, a contract was awarded to China’s BUCG for the construction of the terminal, but the firm was fired from the project in 2007 for failing to comply with the specifications. Since then, the Transport Ministry has been making slow progress in completing the civil works element using local firms. In 2013, the ministry drew up tender documents for a $220m deal to complete the scheme (using the same design firm), with prequalification documents issued in August 2013. A formal tender for the contract is expected before the end of this year.

Analysts remain sceptical of the government’s ability to provide security in the north of the country

The Arab Fund for Social & Economic Development and the government of Kuwait have agreed to pay for 75 per cent of the project, splitting the cost 45:55, on the basis that Sanaa will pick up the remaining 25 per cent. But a recent cash crisis has left the Finance Ministry wary of promising almost $50m for the scheme. Ongoing arbitration proceedings between the government and BUCG are also said to be creating delays in getting the project moving again. Meanwhile government officials remain nervous (as they do about the road scheme) that they are not well-equipped to deal with a series of tenders of the size required by such a big project.

The UN Development Programme and a new Yemeni government body set up in early 2012 – the Executive Bureau for the Acceleration of Aid Absorption and Implementation – are both working to assist the authorities in making sure the deals are properly tendered. The bureau’s work will be particularly important in the next few years in unlocking much-needed funds to move infrastructure schemes ahead. Just a third of the promised $8bn of funds have been dispersed to date, with the bulk of that amount coming from a $1bn grant made by Saudi Arabia to the Central Bank of Yemen in 2012 and existing aid commitments by Western donors. According to the bureau, at the current rate of progress, it would take almost five more years for the funds to be distributed. 

Security crisis

Beyond financing and the logistics of tendering the two deals, however, several other issues could delay the projects. In the case of the highway scheme, analysts remain sceptical of the government’s ability to provide security in the north of the country. Since late 2013, fighting between the Houthis (a rebel Shia movement) and tribal and Islamist militias in the province of Amran has made access to the area extremely difficult.

Similarly, Sadah is now in the hands of the Houthis, and any major construction project in the area will have to be undertaken with their permission. If the conflict in Amran continues, it will be difficult to transport equipment and materials into the area. A number of contractors looking at the scheme doubt it can be much more than an Aden-Sanaa highway project for the foreseeable future.

In the case of the airport upgrade, the government has struggled to obtain access to the construction site, located to the west of the existing airport terminal. Local landowners, including sometimes restive tribesmen, have turned down successive offers of payment for land to build an access road to the site, saying the government is undervaluing their claims. This means that to date much of the construction equipment and material has had to be brought in through a military base that abuts the airport. These disputes will need to be resolved before the airport’s major construction phase begins.

Contractors based in Sanaa also highlight the security risks of working in the area. In 2011, during fighting between different factions of the Saleh regime, the airport was hit by shells on various occasions. The government has long been worried that Al-Qaeda in the Arabian Peninsula, the deadly local franchise of Al-Qaeda, plans to attack the airport, while more recently, fighting between the Houthis and the tribes and Islamists has come within a few kilometres of the airport itself.

Similar issues are likely to affect other major transport schemes planned by the government. These include upgrades to Aden and Mukalla airports in the south, work on the ports in the same cities and a $100m project to widen and rehabilitate the Sanaa-Hodeidah road, for which the Transport Ministry hopes to award a contract before the end of the year.

Beyond infrastructure, Sanaa is still grappling with the best way to improve flag carrier Yemenia and make it profitable after years of incurring deep losses. The airline is a 51:49 Yemeni-Saudi joint venture. It does not issue annual results, but is said to have lost $10m-$20m a year in the decade to 2011; this is without taking into account unpaid airport and fuel fees in Yemen, which government officials say have long served as a tacit subsidy to the carrier.

Due to safety concerns, the airline was for a while on a European blacklist. The 2011 uprising further dented Yemenia’s profits and on several occasions, it had to cancel scheduled flights because of heavy fighting in the capital.

Saving Yemenia

Several consultancy firms had been brought into Yemen to help the ailing carrier formulate a new strategy and build profitability, as part of wider efforts to increase tourism to the country. But again security concerns have meant Yemenia has had to rework its strategy since early 2012, focusing instead on reaching breaking even point.

This has reportedly involved discussions with Toulouse-based aircraft manufacturer Airbus, from which Yemenia ordered 10 A350 planes at a total cost of $2bn in 2007. In 2009, following a crash involving a Yemenia-operated A310, the airline had considered cutting ties with the firm, but instead ordered another 10 A320s at a reported cost of $700m.

The planes were ordered during a period when Yemenia expected relatively strong passenger growth, and it is not clear how it intends to utilise the aircraft (due for delivery in 2015 and 2016) in a period of relative stagnation.

International passenger arrivals and departures in Yemen totalled 1.6 million in 2010, falling to 1.3 million in 2011 and gradually returning to 1.6 million again in 2013, according to the country’s Civil Aviation & Meteorological Authority. In 2009, the government had forecast that passenger numbers would double by 2020, a prediction that now looks overly ambitious. The lower-than-expected traffic is also likely to cast doubts over the value of a new airport terminal in Sanaa as opposed to a cheaper overhaul of the existing facilities.

This, for the time being, will be Sanaa’s biggest issue in the transport sector: adapting to a new reality while trying to get Yemen moving again.

Key fact

Just a third of the promised $8bn of donor funds have been dispersed to date in Yemen

Source: MEED

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