Saudi Arabia and Bahrain planning new road and rail causeway

Irshad Salim (BE2C2 Report) — Saudi Arabia and Bahrain plan to build a new road and rail causeway between the two countries to ease congestion on the existing link and will seek funding from the private sector, a document about the project showed.

Gulf Arab states including Saudi Arabia have historically financed infrastructure projects but while they still help with the cost of some, the oil price slump has forced them to slash spending and to consider bringing in private investment. The Saudi Vision 2030 and the National Transformation Plan 2020 announced last year aim to create enabling environment for non-oil economy by encouraging public-private partnerships in almost every sector.

Once completed, the King Hamad Causeway will be the second terrestrial link between Bahrain and Saudi Arabia. The existing 25km long King Fahad Causeway built in 1986 had a daily average vehicular traffic of more than 31,000 in 2016. But that is expected to double by 2030, the document distributed at a meeting in Manama showed according to Reuters.

The new causeway will supplement the fast developing rates of commercial activities, urbanism and demography and is expected to cost $4 billion to $5 billion, according to sources who attended the industry consultation event in the Bahrain capital, and the two nations hope private firms and the state can share the costs, risks and profits.

The meeting was reportedly attended by officials from the transportation ministries in the two countries and more than 150 companies that are expected to build the project using the public private partnership (PPP) model.

Besides a new four-lane road causeway running parallel to the existing one, there will be a new 70 km railway connecting a passenger terminal in Salmabad and freight facilities at Khalifa bin Salman port in Bahrain to the Saudi railway system.

Eight million passengers per year are expected to use the rail link by 2050 and some 600,000 containers and 13 million tons of bulk freight are expected to be transported by the railway, which could be developed under a design, build transfer, or design, build, maintain and transfer basis.

According to some experts, the Bahraini market, much smaller than the Saudis, will benefit greatly while Saudi Arabia will benefit from the knowhow of Bahrainis who can commute every day between the two countries without putting pressure on housing or health services in the Saudi kingdom, for instance.

While the project’s technical details were clearly described in the document, key details of the PPP structure were still preliminary, said one of the sources.

The project is expected to be owned by the private sector through a new company with a 25-30-year public-private-partnership (PPP) arrangement.

Private sector developers, co-investors, contractors and lenders should express their interest in the project by June 29, the document said. Advisers will be appointed in the first quarter of 2018 and prequalification requests are due to be issued in the second quarter of next year.

BE2C2 is a business unit of Irshad Salim Associates  which produces reports, infographics, analytics and analyses based on data and information from sources readily available on the web and in the public domain.

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