Investment Opportunities and PPP

in the Transport & Railway Sector

Table of Contents

1. GCC Transportation Sector Overview

2. Transportation Projects and Financing Options
3. Lessons Learned and Way Forward
4. Conclusion

GCC is positioned as a global transportation hub

through aviation and port initiatives
The attractive regional economic and demographic growth prospects have made
transportation a key investment priority

Total trade value in the GCC region reached a peak of over USD1tn during 2008 before
the onset of the global economic crisis brought it down to around USD868bn in 2010

GCC trade volume (USD bn)

1,200.0

Imports

Exports

Balance

GCC trade growth (YoY)

Total trade

60.0%

Imports

Exports

Total trade

1,000.0

40.0%
800.0
20.0%

600.0

0.0%

400.0

2006
200.0

2007

2008

2009

2010

-20.0%

0.0
2005

2006

2007

2008

2009

2010

-40.0%

Source: IMF (Direction of Trade Statistics - DoTS)

3

Bank credit to the sector has increased significantly,

reaching a peak of 207% in 2007

Credit growth to the transportation sector

Transportation sector growth

60.0%

250.0%

Saudi Arabia

Qatar

Saudi Arabia

UAE

UAE

200.0%

50.0%

150.0%

40.0%

100.0%

30.0%
50.0%

20.0%

0.0%

10.0%

-50.0%

0.0%

-100.0%
2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2002

2003

2004

2005

2006

2007

2008

2009

2010

Source: Respective central banks and statistics authority

4

Top Rail Projects in the GCC

Rank

Project

Country

Sector

Qatar National Rail Scheme

Qatar

Rail

Emirates Railway Project

UAE

Rail

National Freight and

Passenger Railway

Oman

Rail

Kuwait National Railroad

(KNRR) Network

Kuwait

Rail

Bahrain Rapid Transport

Network

Bahrain

Rail

The Land Bridge

Saudi Arabia

Rail

Kuwait Metro System

Kuwait

Rail

Mecca Medina Railway Link

(MMRL)

Saudi Arabia

Rail

Jeddah Light Rail Transit

Tram

Saudi Arabia

Rail

Source:ConstructionWeekOnline.com

Investment in the GCC's civil aviation sector

is massive
Top 10 ongoing aviation projects in GCC
Rank

Project

Country

Kuwait International Airport

Expansion

Kuwait

New Doha International Airport

Qatar

Al Maktoum International Airport

UAE

Ongoing GCC aviation projects

Saudi Arabia

7%
6%

21%

Abu Dhabi Airport Expansion

Bahrain International Airport

Expansion

Bahrain

UAE

King Abdulaziz International

Airport - Phase 1

Saudi Arabia

Qatar

Abu Dhabi Airport Expansion Midfield Terminal Complex

Muscat International Airport

Expansion - Phase 1

9
10

Prince Mohammed Bin Abdulaziz

Airport Expansion - Phase 1
Dubai International Airport
Expansion

Source: Zawya

UAE

Kuwait
16%

30%

UAE
Oman

29%

Oman
Bahrain

Saudi Arabia
UAE

The GCC region is made up of 35 major ports

Top 10 ongoing port projects in GCC

Rank

Project

Country

Khalifa Port and Industrial Zone

UAE

New Doha Port

Qatar

New Doha Port - Phase 1

Qatar

Bubiyan Island Port - Phase 3

Kuwait

Duqm Port - Marine Works

Oman

Bubiyan Island Port - Phase 2

Kuwait

King Abdulaziz Port Expansion Container Terminal

Saudi Arabia

Ras Al Zour Port

Saudi Arabia

Bubiyan Island Port - Phase 1

10

Khalifa Port and Industrial Zone Khalifa Port - Onshore Port Facilities

GCC ports ongoing projects by country

Saudi Arabia
2%

Kuwait
8%

Qatar
18%

UAE
90%

Kuwait
UAE

Source: Zawya
7

Road transport is the preferred mode of travel in GCC

Road density in most of the GCC countries is

Number of registered vehicles in thousand

7398.6

lower than that in the developed nations;

largely due to a low population density

Fuel subsidies in the GCC region have kept

road transport as the popular mode of
transportation

Road transport, especially private vehicles is

1754.4
1364.8

Saudi Arabia

UAE

Kuwait

629.7

605.7

Oman

Qatar

383.0

Bahrain

quite popular in GCC

Saudi Arabia has the highest number of

registered vehicles in the region

Source: WHO latest report

GCC Rail Projects

Other GCC countries are also in the process of rail network development
Saudi Arabia railway network

Source: Saudi Railways Organization

UAE railway network

Table of Contents

1. GCC Transportation Sector Overview

2. Transportation Projects and Financing Options
3. Lessons Learned and Way Forward
4. Conclusion

10

Most transport projects in the region have been

financed by governments
Increased participation of the private sector will be key to sustaining and
accelerating the pace of development

In recent years, a number of initiatives have been taken to attract investment

through domestic and international investors

Private investment is encouraged through a number of means, including sale of

government assets, investments by private equity funds and Initial Public
Offerings (IPOs) of state-owned entities

The region still lags in Public Private Partnerships (PPP), a method broadly
used for financing infrastructure projects in other emerging as well as developed
economies

11

Lack of bankability and weak debt market was the main

obstacle in Saudi Landbridge Rail Project

The 950km Landbridge project was originally packaged as a BOT

PPP project, had

serious structural problems hindering its bankability

The low appetite to transfer demand risk to the private sector and the difficulties of a
50-year concession period

After some delay, the project worth USD7bn is to be funded by Public Investment Fund
(PIF)

12

Table of Contents

1. GCC Transportation Sector Overview

2. Transportation Projects and Financing Options
3. Lessons Learned and Way Forward
4. Conclusion

13

International Investor Appetite

Aggregate value of PPP projects in Europe (EUR bn)

29.8
26.5

Sector-wise PPP projects in Europe by 2010 (EUR bn)

Environment

27.0

Telecoms

24.5

Public Order & Safety

17.0

16.9

18.0

16.5

15.5

General Public Service

Healthcare
Transport

Education
2002

2003

2004

2005

2006

2007

2008

2009

2010

0.0

2.0

4.0

6.0

8.0

10.0

The success of PPP models in Western Europe and US have increased confidence among private equity
investors and banks

Source: European PPP Expertise Centre

14

PPP Lessons from international markets

Essential ingredients needed for a

PPP program

High level government commitment

Skilled central support from a PPP Task Force with
authority over all PPP projects

Lessons from the international

experiences

The single objective should be better services for

the public

Need to have realistic expectations on timing

The involvement of high quality private firms

Focus on realistic risk transfer to private sector

Availability of long-term private capital

PPP does not make a bad project good

Address public concerns

Project success criteria

The project must be bankable

It must offer a service (output) driven solution
There must be scope for innovation in design

Involve all parties in initial discussions

Ensure objective evidence of performance and
value for money

Prioritize projects

15

In conclusion

Involving private capital is not easy

Formalize Legal approach to PPP investment laws is needed

Transportation infrastructure has established itself as one of the key growth drivers of
the GCC economies

Multi-billion Dollar investments are envisaged across the region private capital has
an important role to play

Investors must be driven by the incentive of realizing profitability

16

Thank you