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Rail in the GCC: Risks and rewards

Construction projects in the GCC region never lack ambition. The scale and pace of infrastructure development puts most other parts of the world firmly in the shade. Rail projects totalling $194 billion are now a key part of that mix, with a range of metro, light rail and long-distance routes either underway or in the advanced planning stages. The largest of those projects aims to connect the GCC member states, facilitating the flow of passengers and freight and providing an integrated transport network to harness and enhance the economic benefits of new ports, airports and logistics zones.

The benefits of rail include reduced freight transport costs, increased passenger mobility, greater economic integration and the environmental benefits stemming from reduced road traffic or improved urban transit. While those projected benefits naturally loom large in official announcements and press comment on the region's rail schemes, it is important to consider at the earliest possible stage their specific impact on the use and development of other land. What are the likely impacts of rail development? How can the promise of increased prosperity be realised, and how can adverse effects be averted or minimised?

Freight or passenger?

While demographic and economic modelling might produce impressive projections for passenger traffic and revenue, the largely casual nature of inter-city passenger travel means that revenue streams based on "ridership" remain both contingent and precarious. Shorter-distance commuter traffic might be marginally more predictable, and somewhat less vulnerable to economic pressures, political or mechanical disruption. However, for predictable, legally enforceable and therefore fundable income streams potential rail investors are far more likely to look to freight. This matters because it directly affects both the regulatory and contractual aspects of rail development and the physical shape of the infrastructure.

Freight has the capacity to provide the crucial contractual underpinning for large-scale rail development. Operators' access to the network is generally based on contracts that impose a traffic commitment throughout the term of the agreement. A contractual traffic commitment translates, in investment terms, to a legally enforceable income stream. Freight access agreements also commonly impose stringent safety requirements and operating rules. From a regulatory perspective, there is ample scope for standardisation through the adoption of model agreements and criteria-based general authorisation regimes.

Freight also brings specific regulatory challenges. Transportation of hazardous substances, particularly using infrastructure that is to any extent shared with passenger traffic or likely to affect residential areas or adjoining commercial uses, requires close and stringent regulation together with well-developed and robust incident response and disaster recovery planning. Those issues must figure prominently in any risk assessment or business care evaluation for rail investment. They feed directly into the contractual allocation of risk, insurance and reinsurance requirements and, in all likelihood, into the requirement for a state role as insurer of last resort.

The infrastructure requirements for freight and passenger also diverge. Freight must be integrated with both sea transport and internal road and rail distribution networks. On the ground, that points towards the development of large-scale intermodal freight terminals, preferably with access to a developed rail distribution network but also to road haulage. While export of raw material and commodities might be largely or even entirely served by rail, imports and distribution inevitably require road links as goods approach the "last mile". Efficient planning is therefore paramount if congestion hotspots and bottlenecks are to be avoided.

For passenger traffic, by contrast, the primary need is for direct access to urban and city centres, whether for commuting or more casual inter-city transport. Quite apart from the inherent logistical differences, safety requirements dictate as much separation as it practicable between freight and passenger services and facilities. Where track must be shared, the key regulatory challenge is to determine the priority between passenger and freight services. In other jurisdictions, that tends to result in freight access to tracks taking precedence overnight, while passenger services prevail during the day and particularly at peak commuting hours.

Track access regimes tend to apply a "flex" approach to freight services, allocating time slots to freight operators that might be moved within an agreed range to accommodate other users of the line. By contrast, passenger services tend to be dealt with on a "hardwired" basis, with specific time slots for track access determined by the necessarily greater precision of published passenger timetables. Track access is a scarce resource and a key regulatory objective is to ensure its optimum use. In practice, that tends to mean 24 hour use divided between freight and passenger traffic.

Predicting and managing impacts on adjoining land use

Usually, the first opportunity for adjoining residential or commercial owners or occupiers to assess the likely impacts of rail development occurs when detailed plans are published as part of the authorisation process for a scheme. Where a project will cut through existing land uses, authorisation might involve the compulsory acquisition of land or  of rights over it. It is usually clear at once whether a particular piece of land will definitely be required, and the key question then becomes the amount of any compensation payable in respect of its acquisition.

Far less clear is the impact on land that is identified as being within the "limits of deviation". However detailed the initial surveys and plans, historic experience has shown that a railway is never built wholly in accordance with the plans. Minor deviation, horizontally or vertically, must be permitted to overcome engineering issues that become apparent only once construction has begun. When considering the potential impact of a scheme, adjoining owners or occupiers should assume that the line will deviate to the maximum extent permitted. The difference can be significant. In a very early UK case construction of a line in Scotland would have had no visual or other impact on nearby houses as it would have followed a cutting through a hill. However, encountering difficult ground conditions, the railway company exercised its right to deviate, with the result that the line passed extremely close to those houses with significant visual impact, noise and disruption. There was no remedy because the rail company had done no more than exercise its legal entitlement.

Preserving development potential

Railway development requires the creation of a secure operational corridor. The effect was described by Lord Radcliffe, a senior English judge, as driving a "steel barrier" through the country. To ensure the railway's safe operation the points at which other land uses cross the line must be kept to a minimum. Rights over the railway, whether by means of a bridge,  underpass or level crossing must be limited. In many jurisdictions, those rights are defined by and limited to the use of the adjoining land at the date the railway was constructed. That is because the design and capacity of any crossing must be determined at the outset, with the result that physical limits on (for example) the size or weight of vehicles are likely to have been factored in to the design to ensure that any costs borne by the railway company are kept to a minimum. If land has development potential, there is often a very strong case for adjoining owners to negotiate for crossing rights that exceed current requirements, even though that may mean taking on a proportion of the costs associated with that initial infrastructure. The longer term risk of sterilisation, or of having  to negotiate for extended rights at a time when the railway company has no need to make concessions, are likely to outweigh that initial cost. It is also essential to ensure that rights are specifically granted in a way that accommodates, rather than limits, future development or changes of use.

Noise, nuisance and chemical reactions

Rail projects affect adjoining owners and occupiers during the construction phase and also once the line is in operation. Rail operators have, through long experience, become adept at distinguishing the impacts on particularly sensitive uses, such as recording studios, and tend to arrive at negotiated settlements with those users. Other users must generally take steps to ensure their own protection and comfort. Measures can include enhanced soundproofing for residential premises or hotels alongside the line, or decisions at an early stage to ensure the orientation of a new building. In those cases, responsibility and costs are likely to rest with the developer.

There can also be some very unexpected effects. In most cases the GCC rail projects are intended initially to run on diesel. However, the design briefs include capacity for future electrification of lines should that prove economically desirable. Where lines are electrified, adjoining owners and occupiers must be alert to the risk of "electrolysis". The phenomenon was first noticed in Melbourne, Australia when electric trains and trams were introduced in 1919. Electricity takes the path of least resistance, and tends to flow through the earth and, particularly, through any conductive material such as metals in the vicinity. The effect can be significantly accelerated corrosion of nearby structures - not good news if the structure in question is the steel frame of a building. There is ample engineering expertise to deal with such problems, but adverse impacts are still occasionally reported.


While it is important to be alert to potential problems, rail development undoubtedly offers significant opportunities for enhanced economic activity. Rail offers linear routes that a well-served by ducts and other infrastructure that is highly suitable for shared use. Telecommunications services can be significantly extended, with fibre connections providing essential backhaul capacity. New stations also tend to create hubs for economic activity, including significant retail opportunities whether for the convenience sector or to address the "last half mile" issue for goods delivery. For property developers, whether commercial or residential, improved transport links, including the option of rail or urban transit services, can materially add to value. Approached constructively, rail can be an immensely positive element in the economic mix of the region.