While government-funded rail systems initially thought cheaper, Jerusalem now looking for outside assistance in bankrolling projects.
Israel is preparing for a massive transportation investment from the private sector in an effort to unclog congested roads throughout the country, as traffic problems have metastasized in light of the government’s poorly executed railway projects.
Accountant General Rony Hizkiyahu, who oversees government spending, said Wednesday that the infrastructure push could see transportation investments in Israel double to roughly $16 billion a year.
Among the projects that Israel is seeking private sector funding for are the perennially delayed Tel Aviv light rail and an expansion of the Jerusalem light rail.
While declining to name the specific companies interested in such investments, Hizkiyahu told Reuters that “these are companies that were never before interested in Israel. The moment you create this certainty, they are here.”
In the past, the government has financed most of the country’s most prominent transportation projects, including the Jerusalem-Tel Aviv fast train, which opened partially last September.
But Lior Mentser, head of project finance and infrastructure at the country’s biggest bank, Hapoalim, told Reuters that “it’s double the time and money if the government does the project,” he said.
Last month, the Knesset Economic Affairs Committee held an emergency debate about persistent problems in the newly inaugurated high-speed train line from Jerusalem to Ben Gurion Airport, after three consecutive days of failures that caused delays and, in one incident, left hundreds of passengers stuck in a tunnel.
Days of glitches and malfunctions brought on public criticism that the line may have been launched before it was fully ready.
In addition, due to a lack of available carriages and electric engines to form the trains, some have been taken away from other routes, in particular the coastal line, which had to reduce its regular service of four trains an hour to just three, leading to overcrowded carriages.
Announcing the planned committee meeting, MK Eitan Cabel of the opposition Zionist Union faction said that the project had turned out to be “one of the biggest failures of recent years.”
The train opened at the end of September after years of delays with promises of bringing relief to passengers who previously had to endure a ride between Jerusalem and Tel Aviv that could take as long as two hours each way.
But the route from Jerusalem currently goes only as far as Ben Gurion Airport, with the line only expected to be extended to Tel Aviv in several months.
The project was conceived in 2001, at an estimated cost of around NIS 3.5 billion ($978 million). Works began in 2005, only to be halted by environmentalist opposition until 2009. Tunneling recommenced in 2012. The final cost has amounted to around NIS 6.5 billion ($1.8 billion).
With the new rail’s lack of reliability, commuters have preferred using personal cars, which have caused massive traffic.
The number of vehicles per kilometer of road in Israel is three times the average among 36 OECD countries.
In hopes of more effectively rolling out transportation projects in the future, the government is turning to the private sector for help in bankrolling and directing them. Last month, the government chose the local Shapir engineering firm along with Italy’s Impresa Pizzarotti to invest more than $260 million in a new entry road into Jerusalem.
The news wire also reported that bids for a $2.7 billion expansion project of the Jerusalem light rail will be taken early next year, with the Finance Ministry already looking into firms in Canada and Greece.
The government’s delayed Tel Aviv metro project will enjoy new investments from the private sector as well, with bidding slated to open in the beginning of 2019.
Reuters reported that Israel will now utilize Public Private Partnerships for all transportation projects costing more than NIS 250 million ($67 million).
Due to the limited number of local investors available for such expenditures, Deutsche Bank director Ido Gonen told Reuters that the government has turned to banks in Germany, Italy and Japan.
“Israel’s rail projects certainly have the right attributes and will attract international attention. Tel Aviv definitely will be attractive,” Gonen said.
But Bank of Israel economist Shay Tsur told Reuters that despite the change in strategy, it is unlikely that the Jewish state will be able to close the gap that has grown over the years with other OECD countries.
“Looking forward at the plans for the next 10 to 15 years, it doesn’t seem that the scope of investment will manage to close the gap,” Tsur said.
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