Jordanian Government Puts a Six Billion Dollar Railway

UNCLAS AMMAN 001581

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ELTN ETRD ECON EINV PGOV JO
SUBJECT: Jordanian Government Puts a Six Billion Dollar Railway
Project on Hold


1. (SBU) Summary: The Jordanian Ministry of Transport (MOT)
announced that a USD 6 billion national railway project had been
placed on hold due to a lack of funding and interested bidders.
Despite the hold on the national railway network, MOT officials
stated that the Government of Jordan (GOJ) had decided to proceed
with financing the construction of an Amman-Zarqa light railway and
was conducting a feasibility study for a separate railway project
between Amman and Aqaba, Jordan's only seaport. In addition to
addressing domestic transportation needs, MOT believes development
of a rail system is necessary for maintaining transit trade through
Jordan. Similarly, the Commissioner of the Aqaba Special Economic
Zone Authority said a railway connecting Aqaba to the rest of the
region was essential to establishing Aqaba as a key, regional
shipping hub. End Summary.

Grand Plans to Revive and Expand Jordan's Railways
-------------- --------------


2. (U) MOT announced that due to a lack of funds and the failure to
attract foreign investors, a planned six billion dollar project to
build a comprehensive national railway network had been placed on
hold. (NOTE: Jordan currently has two working railway routes. The
Hijaz railway, established in 1918, has not been conducting
commercial trips since 1967 and is limited to use for tourism within
Jordan and irregular trips transporting people between Jordan and
Syria. The second railway line connects Aqaba to the southern
potash mines. END NOTE.) The new rail project, initially announced
in August 2008, would connect major Jordanian cities, including
Amman, Zarqa, Irbid, Ramtha, and Shuna in the Jordan Valley. The
proposed railway network would also run to the Northern Jaber border
with Syria, to the Karama border with Iraq, as well as to a ferry
connection to Egypt. The railway was further planned to eventually
extend to Omari on the Saudi border. The overall proposal also
included two sub-projects: a light railway connecting Amman and
Zarqa, Jordan's two largest cities, and a railroad connecting the
Aqaba seaport to Amman which would be mainly used for commercial
purposes.


3. (SBU) A feasibility study conducted by MOT determined the
railway project would require USD 4 billion for infrastructure, and
USD 2 billion for equipment and machinery. MOT officials told
EconOffs the Ministry had acquired lands along the planned routes
and allocated USD 750 million, before the project stalled. The
railway's future now remains uncertain as the study predicted that
any delay in launching the project would result in higher future
costs.


4. (SBU) MOT officials told EconOffs that the initiative to build
the railway network was motivated by fuel price increases in 2008,
noting that fuel for transportation makes up 37 percent of total
fuel consumption in Jordan, which the GOJ hoped to cut by one-third,
saving an estimated USD 120 million annually. MOT officials added
that the originally proposed railway network would eventually
connect the Jordan-Iraq border with the Aqaba seaport, thus
facilitating oil transport and eliminating the need to construct a
pipeline, with its estimated cost of USD 500 million. In addition
to easing the flow of oil, the railway was expected to enhance
Jordan's position as a transit country for other commercial goods.
The study warned that unless Jordan developed its railway network,
it would eventually deter neighboring countries from using Jordan
for the transit of goods. (NOTE: The trans-shipment of goods
through Jordan to neighboring countries reached USD 1.6 billion in
2008; MOT reported 90% of transit goods went to Saudi Arabia and
Iraq. END NOTE.)

GOJ to Finance Amman-Zarqa Light Railway
--------------


5. (SBU) Zuhair Hatter, MOT Chief Engineer, told EconOffs that
despite putting the national railway network on hold, the GOJ
decided to proceed with a light railway project between Amman and
Zarqa, Jordan's largest cities. Hattar said the GOJ had opened a
window for private investors to take part in the project on a
Build-Operate-Transfer basis giving them thirty years exclusivity to
operate the railway before transferring it to GOJ, but received no
bidders. So, Hattar said, the GOJ had already started laying down
basic infrastructure for the light railway, and would announce a new
bid for a contractor to construct it. Hattar added that hundreds of
thousands of commuters travel between Amman and Zarqa each day, thus
prompting the Ministry's actions.

Making Aqaba a Regional Hub Requires a Railway
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6. (SBU) Former Transport Minister Ala'a Batyneh had initiated a
feasibility study for a separate railway project between Amman and
Aqaba. Naeem Fakhouri, Commissioner of the Aqaba Special Economic
Zone Authority (ASEZA),the governing and administrative body of the
area that includes Jordan's only seaport, told EconOffs that the GOJ
strategy to establish a railway connecting Aqaba to the rest of the
region was essential for establishing Aqaba as a key regional
shipping hub. Currently, the Aqaba Railway only serves the potash
industry. To further develop Aqaba as a transit hub, MOT plans to
institute new regulations aimed at easing restrictions on licensing
for transportation companies and allowing the creation of joint sea
and land transportation companies.

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Beecroft