The Hindu Business Line : Mega venture on the Red Sea

If everything proceeds as planned, a 30-km long rail-cum-road-pipeline bridge network across the Red Sea will be ready in the next 12 to 15 years, connecting Djibouti in East Africa with Yemen in West Asia and will be the first physical connection between Africa and West Asia since 1869 when the Suez Canal was opened.

The bridge will have a six-lane highway and four light railway lines as well as pipelines for transportation of water and oil, supported by girder and suspension bridge structures. The suspension portion of the bridge will be the longest in the world and, once operational, will handle a large volume of traffic — an estimated 1,00,000 cars and 50,000 rail passengers will cross the bridge daily in addition to thousands of tonnes of cargo in trucks, rail wagons and through pipelines.

The proposed bridge network, estimated to cost $25 billion, will be part of a $200-billion plus mega infrastructure complex also comprising two modern cities, to be known as Al Noor cities, on two sides of the Red Sea, ports and logistics and transport hubs, power stations and various other projects.

“As the reliance on oil revenues is due to diminish gradually, the economies of West Asia have to look towards income diversity and the traditional trade routes across West Asia and Africa, long neglected due to a variety of reasons, will be revived when the two Al Noor cities are connected via the rail-road-pipeline bridge across the Red Sea,” observes a spokesman for Al Noor Holding Investment, the promoter of this massive project.

Al Noor Holding Investment belongs to Sheikh Dr Tarek Awad Mohammed Bin Laden, the brother of Osama bin Laden. At an international press conference in Djibouti last week, where the project was announced, Sheikh Tarek Bin Laden was present but declined to talk to the media.

The master -plan

The master plan for the proposed Al Noor Cities reveals a 1,500 sq.km city situated on the south-west tip of Yemen mirrored by a similar 1,000 sq.km city at Ras Siyan, located about 200 km from Djibouti, and the two to be linked by the bridge.

The geographical location of the cities, it is felt, will make them the obvious trade and distribution hubs that will link major trade routes through Africa, West Asia and beyond. As in any major urban infrastructure development, the Al Noor cities will house all the services essential to a modern hi-tech connected metropolis.

Aside from essential services, the project will also feature free trade zones, research and development campuses, technology parks, financial districts and major commercial and business centres to house the world’s leading commercial entities. The cities, as per the plans being worked out, will also have educational institutions, medical facilities and high-end tourism attractions making them ”compelling destinations.”

Ports, transport, logistics and distribution hubs will constitute very important components of the proposed venture.

With a total population of about 400 million, Africa, as the sources point out, holds out the promise of a major market.

The strong growth of the West Asia economies at an average rate of around 6.5 per cent annually is fuelled mainly by the connecting high oil and non-oil commodity prices, ensuring that the combined GDPs of the GCC countries together with Egypt and Jordan will cross $1,045 billion in 2008.

Economic growth in east Africa (Djibouti, Eritrea, Ethiopia, Kenya, Somalia, Sudan, Tanzania and Uganda) in 2007 had a similar average 6.47 per cent in 2007, according to one estimate. “Asia is fast approaching saturation point while the growth prospects of Europe and the US appear to be bleak and only Africa holds out promise”, the spokesman observes, pointing out that that it is no wonder that Chinese, Americans and others are now flocking to Africa.

Finance, it is pointed out, will not be a problem. The promoters, it is learnt, have already put in $30 million as the initial contribution.

The funding strategy that has been structured presupposes in stages other options such as asset backed securities and collaterals, non-commercial sources of revenue, commercial revenue stream, private equity and IPO (initial public offering). Once the project becomes bankable, it will not be difficult to sell it to prospective financiers.

Hurdles aplenty

But then it will be wrong to presume that everything is going to be smooth and easy for this huge project. The most critical issue facing the promoters of the project is to conclude negotiations over the framework agreement outlining the taxation regime, the legal rights and various other issues.

The rules of the law must be in place to allow the project to be successful. This is very critical because the two countries, Djibouti and Yemen, have two different political, legal and other systems. “We do not want to take away the sovereign powers but we must enough authority delegated to us”, observe the sources. While the MoUs with the respective governments of Djibouti and Yemen have been signed, the signing of the framework agreements with them is still awaited.

The bridge will be a challenge technologically also. The bridge promises to be one of the great engineering feats of recent times linking Yemen to the Island of Perim in the Red Sea and on to Djibouti. Structures have to be built in the sea at a depth of 330 metres, which will be the world’s deepest.

The Red Sea is one of the busiest and most important seaways of the world and is also one of the most dangerous due to great irregularity and complexity of water currents. Ship traffic primarily travels north or south currently; getting resources and people east or west across this constant traffic by ships could be close to impossible and treacherous.

Finally, as it has been pointed out by some experts, unless Djibouti gets connected by proper rail and road networks to the rest of Africa, particularly more prosperous western parts of Africa and Yemen to the rest of West Asia, mere construction of the two cities and the massive rail-cum-road bridge across the Red Sea connecting them will not help achieve the desired objective.

The development of the market in Africa presupposes proper connectivity to facilitate smooth and fast distribution of goods and service and the huge fund available with multilateral agencies for infrastructure development could be used for this purpose, it is felt.

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