Overseas companies involved in the rail industry are turning their attention to the Middle East, eager to win deals as governments plan far-reaching projects covering city tram and metro lines, as well as heavier freight routes.
“This region is the place to be at the moment,” said Ala Ghanem, the regional director of business development at Invensys Rail Group, based in the UK.
“There are so many projects coming up, and they are bold projects – very big and very ambitious.”
They include Dubai, with its US$4.2 billion (Dh15.42bn) metro system opening in September, and Abu Dhabi, where plans include a freight rail network, 130km of metro lines, a 340km tram system and 580km of high-speed rail to Al Ain, Dubai and Al Gharbia.
A GCC-wide railway plan is gathering momentum, while Bahrain is planning an $8.13bn rail system with six lines spanning 184km and several other Gulf countries are also planning rail projects.
Most are in the early stages and this is reflected in the region’s low annual expenditure on rail projects. The global market is worth €122bn (Dh608.81bn) a year and the Middle East and Africa accounts for just €4bn, according to Unife, a European rail industry group.
“It may not be the largest market, but it is one with substantial opportunities and substantial growth,” said Michael Clausecker, the director general of Unife.
Invensys, which provides rail signalling, automation systems and control centres, set up an office in Dubai last December to develop its regional ties. It is one of many firms that have allocated resources to the region and begun heavily marketing themselves. But while the interest is high, many in the industry are also awaiting crucial details about how the project financing will be structured.
At the MENA Rail conference in Dubai yesterday, one of several new events held this year to focus on urban transportation, the exhibitor’s hall was crowded. Sponsors included IT firms such as IBM and Sharp, and equipment makers such as Vossloh, a German company that makes rail fastening systems.
With the global economy in distress, many firms say they are ready to devote more energy to the Middle East. “Before, we were restricted with growth of the business by our resources because we were busy everywhere in the world,” said Paul Redstone, the regional director of Bovis Lend Lease, a project management firm working on the Dubai Metro. Now, the company was ready to shift teams into the UAE if it won additional contracts, he said.
One emerging issue is how governments will pay for the heavy expenditure involved in rail projects. Several, including the Government of Abu Dhabi, are seeking public-private partnerships. These deals often involve private contractors taking on some of the project risk by financing the construction themselves before transferring it to government clients.
Jean Berge, the vice president of sales at Bombardier Transportation, marvelled at the scale of the projects but warned that Bombardier was concerned about taking on long-term partnerships with public entities.
“Paris has something like 200km of metro, so Abu Dhabi having a plan here for 130km is a major area of interest for us. We have to be here,” he said. “We are manufacturers and our strategy is very clear, we just want to take risk that we can control.”