Will Railway Project See the Light in Jordan?

Published August 26th, 2018 - 09:15 GMT
The century-old Hijaz Railway is the only train transporation system in Jordan, limited mainly to phosphate transport. The government is mulling a modern freight railway system that is part of a regional, and maybe global, network. (JT)
The century-old Hijaz Railway is the only train transporation system in Jordan, limited mainly to phosphate transport. The government is mulling a modern freight railway system that is part of a regional, and maybe global, network. (JT)

After a deal to launch a national railway project in Jordan fell through in 2015, the Ministry of Transport today is preparing to sign another agreement with a Chinese company called Touchstone.

The project will connect Jordan’s cities, industrial zones and logistical hubs to the world through Aqaba and border points to Syria, Iraq and Saudi Arabia. Its estimated net value, four years after constructions are concluded, is $4.65 billion and will cost $4.23 billion, according to Abeer Khanfer of the Project Management Unit at the Ministry of Transport.

Notably, these figures are estimated on the basis of a 2010 feasibility study conducted by the ministry, for the 2015 project, Khanfer explained.

Had the construction works begun in 2012, the railroad should have started bringing in $507 million per year as of 2020, and up to $1.04 billion annually by 2040, she noted.

Unfortunately, the government failed to secure the guarantees and funding needed to finance the project. Back then, the state was looking to construct the railroad itself, out of its own budget, and have the Chinese company, China Civil Engineering Construction Corporation, operate the tracks, Khanfer elaborated. This model was known as the “dual-structure”.

But “things have changed”, she said.

Since the Queen Alia International Airport  project was so “successful”, the government has decided to change its approach towards national projects of such calibre and scale.

The government is now considering the build-operate-transfer (BOT) or build-own-operate-transfer (BOOT) basis for national efforts of the sort, she highlighted.

Both models of financing entail that the private partner builds and operates the project for an agreed “concession period”. The difference between the two is that in the BOOT model the private partner will own the project during that period.

However, Article 11 of the Public-Private-Partnership Law of 2014 prohibits the government from taking financial risks ensuing from any type of partnership with the private sector.

Any project of this scale “must then be an investment on the private company’s part”; no guarantees by the government, financing or otherwise financial assurances beforehand.

Naturally, this means higher risks for the investor, and in order for investors to take such risks, thorough feasibility studies and research must be conducted.

More so, it has to be feasible for all stakeholders: The government, the investor, the commuting citizen and businesses, who happen to be the primary target market of the project, Khanfer stated.

In order for the railroad to be feasible for passenger transport, it needs to be subsidised, she explained. But given the current budget deficit and the government’s approach towards desubsidisation, the allocations for subsidies need to come from somewhere else.

Hence, the railroad will cater for the export and transportation needs of businesses and industrial enterprises until subsidies become feasibly sustainable.

According to the MoT’s documents, the costs of shipping per tonne/container of oil, minerals, grain, goods and feedstock ranges from one to nine US dollars.

At nearly 20.245 million tonnes transported per year by 2040, based on the 2010 numbers, the railroad will be making some $738 million a year in revenues.

However, these figures predated the regional turmoil, the border closures, the domestic economic crisis and the current world and domestic state of affairs.

Economically, Jordan does not need a heavy railroad network, according to an expert. 

In fact, economist Mufleh Akel said: “What the country needs is a light train to connect its major cities. Any other railroad that does not cater to commuters is unnecessary in Jordan.”

“I do not think that the current or future rate of exportation and transport between Jordan, Iraq, Syria, Saudi Arabia and Turkey, requires such a project of this calibre.”

At the current momentum of commercial cargo transport and exportation, Akel thinks such a project will probably harm the truckers and freight transport sectors.

The figures of the project are outdated, “true” he noted, but this plan, first and foremost, “is not driven by purely economic reasons”, he argued.

“It is a geo-political regional project that aims at further naturalisation and economic integration efforts with certain powers in the region and boost Gulf Cooperation Council [Gcc] members’ access to extra-regional markets, like Europe, via the Mediterranean, as opposed to being limited to the traditional maritime routes through the Red Sea for example.”

To that, Khanfer explained that the project, regional as it may be, does not extend into the Palestinian Authority or the Israeli territories.

“It stops at the Sheikh Hussein Bridge,” the northern border crossing with Israel, she said.

When asked about whether the project is related to the Chinese “One Belt, One Road” project, also known as the new Silk Road, she highlighted it is not, as far as the ministry is concerned.

To confirm, the company Touchstone was contacted, but did not respond to the e-mail.

Notably, the ministry’s documents indicate the railroad with Iraq and Syria does in fact connect with Iran, which is part of the Chinese project, according to the China Britain Business Council’s website.

“Connecting Jordan to the Chinese Silk Road project is of immense importance to the Jordanian economy,” said Vice Chairman of Petra Engineering Industries Company and Jordanian Exports Association President Omar Abu Wishah. 

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“China will soon become the world’s most powerful economic force, and we must be part of the big picture. No country can thrive in isolation.”

“Even if the ministry’s project does not seek to connect Jordan’s railroads to the Chinese Silk Road, I would personally demand it,” he said.

It connects Jordan to the landlocked countries of Asia and Europe, he explained, and it radically shrinks exportation time and costs.

Meanwhile, China and Pakistan are working on the deep-sea Gwadar Port, and India and Iran are working on the Chabahar Port, right across the Gulf of Oman from the UAE, Abu Wishah said.

Though the maritime passages around the Arab Peninsula will always remain active and vital for shipping, competition will be cutthroat, he speculated, especially at China’s current rate of expansion in Africa. 

“The Silk Road is an encompassing project that provides an economical alternative.”

Maritime exportation remains the most cost-efficient when access to ports is easy and close, Abu Wishah highlighted. 

“But when it is not, especially in the case of landlocked countries, containers will have to be unloaded unto freight trucks and shipped via land. By railroad, shipping to Kazakhstan, for example, will take days. By trucks or other means, it will take weeks.”

To exporters, the overall costs of railroad exportation and transport compared to the overhead costs of shipping by land — or sea in many cases — are far lower.

Director of the Jordan Chamber of Commerce Nael Hosami agrees with Abu Wishah.

“The problem with maritime transportation is the costs of domestic shipping and transport, for example, between the factories in Zarqa and the Aqaba Port,” he said.

The same goes for transporting freights and containers for example from Chinese ports to industrial areas deep in the mainland and vice versa, he explained.

In terms of quantity too, both Hosami and Abu Wishah agree that Jordan’s exports sectors will benefit greatly from the railroad.

“At JD500 per container to transport a shipment domestically to the port, on average, the railroad will drive these costs down significantly,” Hosami said.

More than 100,000 containers are shipped through Aqaba alone per year, he said.

Abu Wishah’s Petra Company ships 1,000 containers a year via Aqaba, according to the chairman.

More so, a truck transports 20 to 40 tonnes, Abu Wishah said, while a train transports hundreds of tonnes, if not thousands.

Whether it is national exports or transit shipping from the GCC, the railroad will reflect positively on the economy, he reassured.

“There is no downside to it.”

As for expanding into Palestine: “Jordan must not extend free gifts to further normalise relations with Israel, without first ensuring that a permanent peace solution is in place,” Abu Weshah stressed.

“Eventually, it helps bring our industries closer to the ports on the Mediterranean, which opens Jordan to the world even more. So it is in our interests, but not before peace is realised,” he explained.

But in regards to Jordan’s need for a national railway that connects the country to the region and the world, Abu Weshah thinks “it is about time”.

“The railroad is crucial for development and any industrial effort. We are all waiting for the railroad project; businessmen and exporters alike,” he said.

By Abdul Rahman Bazian

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