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ROUNDTABLE
Moving in the right direction
Rail infrastructure is enjoying a boom in the Middle East at the moment. MENA Infrastructure talks to a panel of experts to get the outlook for the future of the rail industry in the region. A number of countries in the Middle East are planning to invest heavily in rail infrastructure over the coming years. Most of these developments will be greenfield projects and the first rail infrastructure in those countries. How do you expect these new rail infrastructures to be built and operated? Will governments want full control over process and assets or will we see a strong involvement of private investors and operators as we have seen in other industry sectors in the region? Joss Dare. Much of the region’s new rail infrastructure will be traditionally procured. Governments are attracted to the (perceived) benefits this brings: relative simplicity, control and speed of delivery. However, not all Middle East economies have the wealth to fund this sort of infrastructure, upfront through the public purse. Even those that do, such as Abu Dhabi and KSA, are increasingly concerned with managing their wealth recourses as efficiently as possible and keeping budgets under greater control than was previously seen as necessary. It is likely therefore that, in an age of relative fiscal responsibility, the region’s governments will sooner or later begin to turn to private fi nance for these projects. Inevitably, the region will not be homogenous in this respect, however; some regional governments are more PPP friendly than others. Egypt, Jordan and Kuwait, for example, have made it plain that they see public private partnerships (PPP) as central to their procurement plans across a number of sectors, including rail. In contrast, a
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number of KSA projects – such as Saudi Landbridge and Haramain High Speed Link – have been restructured so as not to involve private fi nance at all. Frank Beckers. I expect a combination of different solutions, depending on the nature, size and location of each rail system. The Middle East uses private sector solutions, PPPs and project fi nance structures more than other regions, in order to benefit from the long-term experience and specialised know-how of private companies in areas where the government has not been active. PPP structures also bring a certain discipline to fi nancing, construction and operation since private contractors, operators, lenders and investors share the corresponding risks. However, some rail developments will not be suitable for PPP/project finance. Either because the enormous funding requirements can only be raised at government level or because PPP financing may not provide the operational flexibility to successfully operate the rail system. Thus the operational, commercial and financial solutions available for each rail system need to be carefully analysed. In some cases it may make sense to use different solutions for different parts of a development; for example, while some parts may be eligible for private financing other parts will have to be financed by the government or through government-supported PPPs.
Joss Dare is Managing Partner, Ashurst Dubai and Head of Ashurst MENA Infrastructure and Transport team. With wide ranging experience of infrastructure transactions including landmark PFI/PPP projects. Dare has advised public sector clients, sponsors, lenders and sub-contractors across the region and globally.
Dr. Said J. Al Qahtani. Railway infrastructure is a legacy that will survive for many years. Hence it must be built
16/09/2010 10:18