Companies from around the world are teaming up to vie for the Saudi Arabia's ambitious railway project which is expected to be carried out entirely by the private sector.

The $2 billion-plus project will involve the construction of two lines which will link the Kingdom's eastern coast with the western coast and the northwestern part of the country with the capital Riyadh. It is also aimed at increasing transport facilities to the Kingdom's untapped mining areas.

The project received the go-ahead from the Supreme Economic Council last year. Businessmen and investors, local and foreign, have since been invited to participate in the project. Among the latest to expressed desire to participate in the venture is a group of German, French, Korean and Japanese companies.

Earlier this year, a Saudi company LAM Company signed up Chinese state-owned firm CCECC which specialises in building railway networks as part of a consortium to bid for the railway project. The other members of the consortium are from Canada, Germany and Austria. CCECC has built extensive railway networks in China and other parts of the world and is currently executing a project in the Libyan desert.

According to Khalid Alyahya, president of the Saudi Railways Organisation (SRO), the construction of the two lines will take about five years ro complete.

''The Railway expansion project is to be undertaken by the private sector on a build-operate-transfer (BOT) basis. The selection of parties will be through the process of open bidding. Before going to the bidding stage, the government will appoint financial, technical and legal advisers to carry out prebidding tasks,'' he says.

''Along with the work of advisers, the government will have to take certain policy decisions like the level of incentives to be provided, the status of SRO and setting up of a regulatory agency to enforce economic and safety regulations. At the same time, new laws will have to be introduced to allow working of a privately-owned and operated railway, to define obligations and rights of the rail operator, users of the services and the public at large,'' Alyahya adds.

The project essentially will be an expansion of the existing Saudi railways network which connects the port of Dammam to Riyadh.

Elaborating on this network, he says: ''The first railway line was built in the kingdom in the early 1950s. This network was considerably enhanced in the 1980s when a high-speed direct line was constructed connecting these two cities. The old line, which is 556 km long, is now used for freight operations while the newer 449 km line is used by passenger trains.

''Considering the size of the economy and the area of the country, the existing railway network is very modest, as is its share in the transport sector. It handles about 850,000 passengers and 850 million tonne km of cargo every year of which about 80 per cent is container traffic from Dammam to Riyadh.

"The need for a reliable, fast and economical means of transport cannot be overemphasized for the economic development of a country - railways as a mode of transportation meets all these criteria.''

Expansion

Saudi Arabia's intentions to exploit its vast mineral resources has put the spotlight on the need to expand kingdom's rail network, he says.

"Saudi Arabia has huge deposits of phosphate in the north of the country near Al Jalamid and of bauxite near Al Zubairah and the Ministry of Petroleum and Mineral Resources is actively considering exploring these mineral reserves. The feasibility of these mining projects depends to a large extent on the availability of a reliable and cost-effective mode of transport from the mines to the industrial city of Jubail," Alyahya points out.

Another factor which has emphasised the importance of implementing the expansion plan is the desire to make Jeddah a distribution centre.

He explains: "Jeddah with its strategic location on the Red Rea, lies on the main trade route from north America and Europe to Asia and has great potential of becoming an international regional distribution centre. A rail link to Dammam will be essential as it would provide a fast, reliable and economical mode of transport especially of containers between the Red Sea and the Gulf.''

The government commissioned a study in 1997 to assess the feasibility for the expansion of the rail network with emphasis on a northsouth line, which will connect Riyadh to Al Jalamid, with a spur to Al Zubairah to access the mineral deposits - and the East-West line connecting Jeddah to Riyadh to serve transPeninsula and domestic container traffic, in addition to the Dammam-Jubail link. The study also aimed to determine whether the returns on the investment in the expansion would be of a sufficient magnitude to attract private sector participation.

''The final report of the study, received in March 2000, is detailed, based on traffic forecasts, technical design parameters and work details, expected capital expenditure, operating expenses and revenues likely to accrue from the rail project,'' says Alyahya. ''It also contains a comprehensive 'Financial Model' which enables one to gauge the effect on the rate of return due to change of any of the variables like traffic forecast, capital cost, operating expenses, tariffs, etc - thus allowing prospective investors to make their own assessment of the expected rate of return based on their judgement of the variables.''

The study focused on two lines: the NorthSouth line and the East-West line with Dammam-Jubail link forming a part of both the lines.

The NorthSouth Line extends a total distance of 1,400 km connecting Riyadh to Al Jalamid with a spur to Al Zubairah and the DammamJubail link. Important towns that the line would connect are Buraidah and Hail.

The EastWest line connects Jeddah to Dammam. It will serve Al Quwayiyah and Muway AlJadid and pass north of Taif and Makkah before reaching Jeddah. The length of the new railway line is about 950 km.

Infrastructure of the two lines is estimated to cost approximately $2 billion.

The findings of the study are summarised below: