How can we help you?

In recent years, we have seen a trend across the GCC region towards greater coordination between states, and particularly efforts to improve infrastructure links.

Steps are being taken towards joint investments in transport systems, customs enforcement and air traffic control systems, to encourage uniformity and ease of movement, and those initiatives are creating opportunities for infrastructure investors moving into the region. The launch of Value Added Tax across the region is a good example of a coordinated approach.

One of the most ambitious projects is the USD $200 billion GCC railway network that will link all six countries in the region. That project has encountered some delays, but is still reported to be moving forward, although there are no cross-border operations yet. Phase one of Etihad Rail is operational, and the railway network across a significant part of Saudi Arabia is also now up and running (with suggestions that the Haramain high speed line will be fully operational in 2018).

When it comes to road links, the UAE recently contributed AED 320 million for the newly-opened Amman Development Road, taking on half the project value for the 48-kilometre road aimed at easing movement of passengers and goods between Jordan and the GCC countries.

Meanwhile, Saudi Arabia and Bahrain plan to jointly build a new road and rail causeway between the two countries to ease congestion on the existing King Fahd causeway. The new King Hamad causeway is expected to cost more than USD $4 billion, and will seek funding from the private sector. As many as eight million passengers a year are expected to use the rail link by 2050, while some 600,000 containers and 13 million tonnes of bulk could also be transported by the railway, which could be developed using a public private partnership model.

There are also plans for three other interstate bridges, although current political difficulties may delay them.

Abdul-Haq Mohammed, International Managing Partner of Trowers & Hamlins, based in Bahrain, says: "At the heart of all of these initiatives is the ambition on the part of the GCC states to develop, and an appreciation that without easy transport links between them, they are at a disadvantage. This goes back to the early ideas of what the GCC was meant to be about, which included a level of seamless borders, and is yet another sign of closer integration between the members."

All of these infrastructure projects are of such a scale and complexity that they are particularly challenging when set against the backdrop of different states with quite distinct legal and regulatory systems. There is, therefore, a huge demand for international expertise to deliver on these projects, because capabilities are not always readily available on the ground.

Peter Greatrex is a partner and member of the firm’s Real Estate team in Dubai, and says: "There’s a certain level of concern at the borders, not necessarily in the other countries themselves, but in their regulatory systems. This complicates the passage of good and people across borders."

He adds, "Each of the different states has different laws, and they all allow different levels of compliance with various principles of Sharia law. Despite both Saudi Arabia and Bahrain’s constitutions stating their laws are based on Sharia, there is no commonality. Currently there’s a firm, fixed border between them, which means that everything going from one country to another, particularly via the King Fahd Causeway, has to be checked, which can lead to a backlog of several weeks for goods to cross that border."

The challenges around customs clearance could prove particularly complex in the future. With the construction of the GCC rail network between Saudi Arabia and Kuwait, it was agreed there would likely be a checkpoint operated by the Saudi Ministry of the Interior somewhere close to or within the freight-loading areas inside the Kuwaiti border, at which point Saudi Arabia would take responsibility for goods being put on trains. However, this is the starting point of the currently-planned GGC Rail Network, and is one of the smallest stretches of track operating only into Saudi Arabia.

But things may get more complex: "The big issue is going to be where you have trains going from the south of Oman, into the UAE and then into Saudi Arabia and Kuwait or Bahrain," says Greatrex. “If goods are travelling through four countries, you cannot carry out four sets of checks without significantly delaying the operation of the rail network."

For now, the momentum appears to be behind developing the infrastructure, and then establishing the necessary regulatory harmonisation to underpin transport links later. For infrastructure funds, investors and developers, there are clear opportunities as the region seeks to improve its communities, working environments, living spaces and transport links.

Greatrex says: "One of the things that is very important with these projects is pitching them at the right scale. One reason why Saudi Rail has been a relative success is that they have looked at the most important routes first, and started developing those in tranches, so that they now have an operating rail system. It’s not complete yet, and there is still more work to go on other lines, but instead of trying to do everything at once they have focused on getting key routes operational, and that has been successful."

The other key piece of learning is around getting the procurement strategy right. In June, private sector developers, investors, contractors and lenders were invited to express their interest in the King Hamad causeway, which might be developed under a design, build transfer, or a design, build, maintain and transfer model.

Mohammed says: "Having the right procurement framework on all these projects is critical. In Oman, they spent a long time trying to decide on the best procurement route, and getting that proper planning in place is critical." Trowers & Hamlins worked with the Bahrain Ministry of Transportation setting up a joint venture between National Express and Ahmed Mansoor Al A’Ali to develop the public bus network in the country, advising on the bid process, the selection of preferred bidders, and the finalisation of the project documentation with the operators. That was done with a view to future integration of the bus network into a broader public transport network, including cross-border rail.

As demands for transport infrastructure become increasingly complex, and move from being local, to national, to international, the need for cross-border cooperation across the GCC is growing.

The Hyperloop: Another significant investment is the plan for a 500mph hyperloop train to travel between Dubai and Abu Dhabi in just 12 minutes, which is being developed by Los Angeles-based company Hyperloop One. The system would be the first of its kind in the world, and is currently being developed in the Nevada desert, with a vision for building an operational system in the UAE in the next five years.