Major infrastructure works set to expand Bahrain's transport network

 

Targeting improvements in domestic infrastructure as well as expanding the links between the kingdom, the rest of the Gulf region and further afield, Bahrain is investing heavily in its transport networks. Among the major ongoing developments is the Airport Modernisation Programme, launched in 2016 to cater for rising air traffic and with the aim of turning Bahrain International Airport into one of the key regional hubs for tourism and services.

Plans to construct a second causeway linking Bahrain and Saudi Arabia are also on the agenda, while the ambitious Gulf Railway, a network that would run through all the Gulf nations, has been pushed back and is now likely to move forward in 2021. Proposals to create a light rail system in Bahrain are also in the works, albeit slowly, while roads and bridges are under construction (see analysis).

RAPID GROWTH: According to the December 2017 “Bahrain Economic Quarterly” issued by the Bahrain Economic Development Board (EDB), transportation and communications was the third-fastest-growing sector of the kingdom’s economy in the third quarter of 2017, with an annual real growth rate of 6.6%, up considerably from the 3.2% average recorded over 2016, when it was the fifth-fastest-growing sector.

REGIONAL CONNECTIVITY: In 2015 the government established the Bahrain Logistics Board, which has spearheaded recent efforts to improve the kingdom’s regional competitiveness.

In the World Economic Forum’s “Global Competitiveness Report” for 2017-18, Bahrain’s place was unchanged from the previous iteration at 48th among the 137 countries surveyed, although this was still down from 39th place in the 2015-16 report. The country’s infrastructure was ranked 39th overall. In the category of quality of roads it placed 25th, in port infrastructure 30th and in airport infrastructure 49th, down from 46th in 2016-17. With no rail infrastructure as yet, Bahrain did not feature in that category. Elsewhere, the 2018 Agility Emerging Markets Logistics Index ranked the kingdom fifth out of the 50 countries surveyed in terms of market connectedness, up two places from 2017.

HIGH SPEED & LOW COST: Maritime trade is a key strength. An August 2017 report the EDB highlighted Bahrain’s faster shipping times compared to other ports in the region. The time taken and cost involved of moving a set quantity of goods between Shanghai and Saudi Arabia’s capital Riyadh, were shorter and lower, respectively, via Bahrain than by the main ports in Saudi Arabia and other Gulf countries. Transiting through Bahrain took 28 days and cost $2467, versus 35 days and just under $3000 for Dammam in Saudi Arabia and Jebel Ali in Dubai.

Likewise by air, the transportation time between Shanghai and Riyadh via Bahrain was just seven days, versus nine when going via Dammam and 14 via Dubai. The cost by air via Bahrain was $160 plus $3.77 per kg, versus $175 and $4.15 per kg via Dammam and $300 and $3.87 per kg via Dubai.

AVIATION: Bahrain implemented the Civil Aviation Law and its accompanying regulations in 2013, in order to bring the industry in line with international best practice. Furthermore, the Ministry of Transportation and Telecommunications (MTT) has agreed 95 air service agreements with other states, 40% of which are based on an open skies policy.

According to the MTT, Bahrain International Airport experienced a 2% rise in passenger numbers in 2016, handling a total of 8.76m. The airport received Transportation and communications was the third-fastest-growing sector of the kingdom’s economy in the third quarter of 2017, with an annual real growth rate of 6.6% an average of 986 flights per week, connecting passengers with 52 destinations, with Dubai remaining the most popular, seeing total traffic of 1.36m passengers. Overall, 5.1m passengers travelled by air between Bahrain and other GCC countries in 2016. Traffic to the UAE as a whole rose by 5% over the year, while passenger volume to and from Saudi Arabia grew by 4%, that between Bahrain and Kuwait by 17%, and to and from Oman by 19%. Hyderabad International Airport in India saw the biggest drop in 2016 among the top 25 destinations, down by 16% over 2015. Currently, 32 commercial airlines fly to and from Bahrain International Airport. Gulf Air, the national carrier, continued to dominate in 2016, carrying 60% of all passengers, or around 5.3m.

The number of transit passengers passing through the airport in 2016 dropped by 39% compared to 2015. Total cargo imports and exports handled by Bahrain International Airport hit 214,945 tonnes in 2016, along with 2115 tonnes of mail, and total trans-shipment of cargo and mail amounting to some 46,896 tonnes, according to MTT data. Between 2013 and 2016 annual passenger numbers rose from 7.37m to 8.76m, with an average annual growth rate of 6%, despite the fact that the airport has not undergone a major upgrade since 1994.

AIRPORT EXPANSION: Much of the focus in the aviation sector revolves around the new $1.1bn terminal being built at Bahrain International Airport. The project is one of the key recipients of finance from the Gulf Development Fund (GDF). Approximately 80% of the costs of the new terminal scheme are being met by the Abu Dhabi Fund for Development, which manages the UAE government’s contribution to the GDF, a GCC grant scheme that finances development projects.

The terminal is set to increase the annual number of passengers able to arrive in and depart from the kingdom through Bahrain International Airport to 14m. The existing terminal has been experiencing steady growth, with the new terminal expected to expand Bahrain’s position as both a regional transit hub and a tourist destination in its own right.

“In our case, we have been witnessing a steady growth rate in passenger traffic despite recent disruptions,” Mohamed Yousif Al Binfalah, CEO of Bahrain Airport Company, told OBG. “We are confident that the ongoing modernisation programme of the airport’s infrastructure and facilities and the expansion of its passenger capacity, will play a major role in laying a solid foundation for significant growth in the future and will attract additional traffic, while also contributing to the kingdom’s potential as a tourism destination,” Al Binfalah added.

NEW FEATURES: The new terminal will cover an area of 210,000 sq metres, around four times that of the existing building, and will include a 6600-sq-metre arrivals hall, 104 check-in desks, 36 security lanes, 2 premium-class lounges and a 424-sq-metre duty-free area on arrival and 9000 sq metre on departure. It will also feature 12 departure gates and a fully automated baggage handling system capable of processing 4700 bags per hour.

In January 2016 UAE-based Arabtec and Turkish firm TAV won the construction contract, which also includes a services building and an aircraft bay, with the project expected to be completed in phases up to 2020. The existing terminal building is set to be demolished at the end of the first phase.

In 2017 the MTT announced that it had chosen Thales, a leading air traffic management firm, and Sita, which provides IT and telecoms services to the air transport industry, to provide the overall security and operations management system for Bahrain International Airport. The security system will include smart video protection as well as access control and biometrics, among other features. In August 2017 Bahrain’s Ministry of Electricity and Water Affairs inaugurated a new 220-KV power facility, at a cost of BD17.2m ($45.6m), which will supply electricity to the new terminal.

GULF AIR: Bahrain’s national carrier is currently awaiting a new fleet of aircraft. The airline – which is wholly owned by Mumtalakat, the government’s sovereign wealth fund – has invested approximately $7.6bn to modernise and expand its current fleet, with the purchase of 16 Boeing 787-9 Dreamliners and 29 Airbus A320s and A321s, which are expected to begin arriving in 2018.

In April 2017 Gulf Air signed a $37m deal with German aircraft manufacturer Recaro to supply the economy-class seats for its new fleet of aircraft, having previously signed a contract with B/E Aerospace to supply all business-class seating. The airline currently flies to more than 40 destinations, with a fleet of 28 narrow and wide-body planes.

In March 2017 Gulf Air reported that it had successfully cut its losses by 62% in recent years, as a result of restructuring and staff reductions that began in 2013, with losses down from BD62.7m ($166.3m) in 2014 to BD24.1m ($63.9m) in 2016. The airline saw losses of BD196m ($519.8m) in 2013.

In October 2017 Gulf Air signed a codeshare agreement with Turkish Airlines, allowing passengers of both to take advantage of their combined twice-daily flights between Bahrain and Istanbul. Gulf Air also entered into a codeshare agreement with Oman Air in August 2017, allowing passengers of both to connect to the 55 destinations Oman Air serves, and the 42 that Gulf Air flies to and from.

The airline has also recently partnered with VFS Global, the largest visa service provider in the world, to enable Gulf Air passengers to obtain short-term visas for Bahrain through its website.

CAUSEWAY & EFFECT: Opened in 1986, the 25-km King Fahd Causeway has become one of the main transport arteries linking Bahrain with the rest of the world, connecting the country directly with Saudi Arabia. According to the EDB’s December 2017 “Bahrain Economic Quarterly”, nearly 12.7m inbound visitors crossed the King Fahd Causeway in 2017, up 3.9% year-on-year. Daily traffic throughout 2016 averaged 31,000 people, with this number expected to double by 2030.

The construction of a second causeway, to be named the King Hamad Causeway, has been under discussion for several years and is expected to cost $4bn-5bn, with the project set to be owned through a public-private partnership. It will run parallel to the current causeway, and will help relieve congestion and improve traffic flow on the busy route.

The proposed design for the new causeway features four vehicle lanes, as well as a rail line linking Khalifa Bin Salman Port in Bahrain to the Saudi Arabian railway system, and eventually to the rest of the Gulf Railway when it is completed.

The rail link alone is expected to be used by 8m passengers a year by 2050, and to carry 600,000 containers and 13m tonnes of bulk freight. Advisers for the project were expected to be appointed in the first quarter of 2018, with pre-qualification requests set to be issued in the second quarter.

CUSTOMS CLEARANCE: Bahrain has been pushing to streamline its Customs processes and procedures at all entry points, and it has achieved some significant results. A 24/7 lane for perishable goods has been established at the King Fahd Causeway to ensure time-sensitive produce gets through faster, while the overall processing time taken on the causeway has been reduced from seven days to seven hours, according to an August 2017 EDB report.

Meanwhile, the list of restricted items has been cut by half. Bahrain is working on fast-lane access for strategic export-oriented companies, to be called the Known Shipper Lane, a single-window Customs clearance system that would allow e-payments, pre-clearance and authority approval, and a dedicated lane for top-10 exporters out of Bahrain to Saudi Arabia that support locally produced goods.

There are also efforts under way to set up a Saudi laboratory testing office on the Bahraini side of the border, in order to pre-clear goods that require testing before they can be brought into Saudi Arabia.

GATEWAY: With the GCC economy expected to be worth $2trn by 2020, and the region’s growing role in trans-shipment, Bahrain is taking additional steps to build on its already strong role as a gateway logistics hub for the GCC, especially to Saudi Arabia, the largest economy in the region. Between 2002 and 2014, intra-GCC trade expanded seven-fold, from $15bn to $121bn, with this trend expected to be a key growth driver for the regional economy.

Bahrain’s improved land, sea and air transport infrastructure, in addition to its newly streamlined Customs procedures and reduced import/export timescales, could lead to more international logistics companies setting up operations in the kingdom or, for those already present, expanding.

“With several new signings, the Bahrain Logistics Zone (BLZ) has seen a significant increase in land occupancy during 2017, leading the team to begin Phase 2 of the project. BLZ’s Phase 2 will increase the total area of the project by over three times, as the kingdom continues to attract the logistics sector,” Hamad Fakhro, director of BLZ, told OBG.

CLOSE CONNECTIONS: International shipping, courier and packaging firm DHL made Bahrain its Middle East hub in 1976, and the company has since been joined by key players including UPS, Aramex, FedEx, TNT and Kuehne + Nagel, which have all established a local presence. DHL currently has 11 aircraft covering the region, with the number of weekly flights up to 155 as of 2016. DHL aircraft from Bahrain fly to destinations in Saudi Arabia, the UAE, Afghanistan and Pakistan. In April 2017 DHL launched a new daily flight between Bahrain and Jeddah, bringing the total number of DHL flights from Bahrain to Saudi Arabia to 21 per week. In addition, the firm increased the number of its Bahrain to Beirut flights to five per week in February 2016, with the route acting as a reliable alternative for shipments now unable to pass overland through Syria to Lebanon.

Furthermore, in recent years Bahrain has liberalised the transport and logistics sector, with the Cabinet approving legislation allowing international firms to have 100% ownership of regional distribution centres, as well as opening up the ship registry.

“The transport and logistics sector has been identified as a key growth pillar in Bahrain’s economic diversification strategy, alongside manufacturing, financial services, ICT, start-ups and tourism,” Ali Al Mudaifa, manager of manufacturing, transportation and logistics business development at the EDB, told OBG. “The transport and telecoms sector currently contributes 7-8% of GDP, and this segment is expected to grow with the increasing emphasis on enhancing the kingdom’s position as a logistics gateway to markets in the region, and a centre for cloud computing and digital economy,” he added.

“An independent assessment of the transport and logistics sector undertaken in 2015 identified what Bahrain needs to focus on: its strengths as a hub or sub-hub for value-added logistics services for all types of goods, and leveraging our strategic location and hinterland connectivity,” said Al Mudaifa. “In line with directives of HRH the Crown Prince in 2015, a government committee called the Bahrain Logistics Board was formed with the mandate of developing the sector. Accordingly, notable milestones have been achieved, such as the streamlining of Customs processes across all points of entry, improvement in the King Fahd Causeway’s performance, development of air cargo and rail, and liberalisation that now allows foreign companies to set up wholly owned regional distribution centres.”

GULF RAILWAY: In September 2017 transport ministers from the GCC countries announced that work on the Gulf Railway would be postponed from 2018 until 2020-21. The 2117-km project, which when complete will link Kuwait City with Muscat via Saudi Arabia, Oman, Bahrain and the UAE, is expected to cost $200bn, and could have a strong impact on regional trade and economic growth.

The network, which is being built domestically by each of the countries, would increase regional connectivity. Passenger trains utilising the network are expected to carry upwards of 16m passengers a year once the project is fully realised.

It would also help to cut down on the number of freight trucks on the roads, drive down delivery times and expenses, and reduce overall energy costs; some reports have suggested that freight trains could lower energy costs by up to 80% over the transport of goods by road.

With Bahrain relying heavily on imports and exports, and many visitors coming from the surrounding area, efforts to improve connectivity to neighbouring countries is likely to have a profound effect. “Greater regional connectivity will have a huge impact on Bahrain’s economy,” said Al Mudaifa.

LIGHT RAIL: First discussed in 2008, the establishment of a light rail network in the kingdom would help to reduce road congestion, and would ease movement for residents and visitors alike. Key details regarding the public transportation project, which is expected to be developed under a build-operate-transfer model, are yet to be fully determined.

Preliminary studies suggested that the first phase of the network would cover 25 km and have a capacity of 8000-10,000 passengers per hour in each direction. It is expected to have 17 stations initially, with each connected to footbridges or bus stops in important locations, including City Centre Bahrain, Bahrain Financial Harbour, Bahrain Bay, Seef District and Bahrain International Airport.

In early 2017 Spain’s Idom Consulting, Engineering, Architecture undertook a study into the overall design of the prospective light rail network. The nine-month study was completed in September.

PUBLIC TRANSPORT: Private cars continue to be the main means of transportation for Bahrainis, and a substantial effort is currently going into improving the kingdom’s roads infrastructure (see analysis).

At the same time, Bahrain has made strides to introduce a comprehensive public transport network in order to reduce congestion on its roads, as well as to offer alternative options for residents and visitors. Following a comprehensive study of Bahrain’s transportation needs, the MTT launched a revamped bus service in April 2015 with 25 initial routes, though this has since risen to 28.

Bahrain’s bus network is run by Bahrain Public Transport Company, a private joint venture set up between UK-based international transport provider National Express and Bahrain’s Ahmed Mansoor Al Aali, the largest contracting and construction group in the country. The current bus network covers 77% of the total urban area of Bahrain. As of April 2017 the average daily ridership on the network was around 36,000 passengers, with 22.4m journeys made between February 2015 and April 2017.

Buses come equipped with CCTV cameras, free 4G Wi-Fi, air conditioning and a smart-ticketing system. In June 2017 the MTT announced the launch of a Bahrain Bus application for smartphones, with the aim of improving access to information on all routes and at bus stops in the kingdom. The app, available in both Arabic and English, includes routes and stops, real-time tracking of buses en route and a feature outlining all available public transportation options to reach a user’s chosen destination.

SEA ACCESS: Bahrain’s marine gateway is provided by Khalifa Bin Salman Port, which opened in April 2009, replacing Mina Salman Port, which is now used mainly by the US Navy’s Fifth Fleet. Khalifa Bin Salman Port is situated on 110 ha of reclaimed land, and includes a 1800-metre quay broken down into a 900-sq-metre container terminal and four 61-metre post-Panamax cranes, a general cargo quay, and a 300-metre multi-purpose quay.

Operated by APM Terminals Bahrain on a 25-year concession agreement that runs until 2034, the port can host vessels of up to 360 metres in length, and has a total warehouse area of 63,500 sq metres and an overall annual throughput capacity of 1m twenty-foot equivalent units (TEUs). Supervised by the MTT’s Ports and Maritime Affairs Directorate, the facility is one of the most advanced in the Gulf region. The port lies 13 km from Bahrain International Airport, and is linked to Mina Salman Port by a 5-km, purpose-built causeway.

From Khalifa Bin Salman Port to the Saudi Arabian border via the King Fahd Causeway is a 40-km drive, making the facility strategically valuable. Indeed, its deepwater berths located in the Gulf and overland links to nearby countries make it a major regional distribution centre, with increasing opportunities in trade and trans-shipment.

CONTAINER THROUGHPUT: Khalifa Bin Salman Port had a total container throughput of 374,475 TEUs in 2016, up from 370,059 TEUs in 2015, with the number of full containers rising from 260,857 to 263,981. General cargo was down, with sugar and steel seeing particularly notable drops.

Sugar had previously been imported from Brazil for re-export to Saudi Arabia until a policy change in 2016, while steel prices fell largely due to higher quantities of Chinese steel on the market.

Mark Hardiman, managing director at APM Terminals, told OBG, “2016 was a challenging year – a year in which we saw a decline of around 40% from 2015 in general cargo volumes. Container volumes were more stable with a 2% increase in volume for the local market. However, in 2017 we saw a strong growth turnaround in container and general cargo volume with local container volume growing by 7% and general cargo by 21%, from 2016.”

Cars also experienced a sharp reduction in both re-exports and local consumption, while Aluminium Bahrain’s export volumes rose, with 50% of its production being sent across King Fahd Causeway and the other half shipped from Khalifa Bin Salman Port. In June 2017 Khalifa Bin Salman Port received its largest ever container ship, the 366.5-metre-long Orient Overseas Container Line Singapore, which has a capacity of 13,208 TEUs. The ship is part of the Ocean Alliance MEA3 service, which provides a direct main-line call to China and South-east Asia, highlighting the growing role that Bahrain and the port can play in trans-shipment.

NEW OPERATING SYSTEM: To further improve the overall port experience, in 2017 APM Terminals announced plans to launch a new operating system focused on digitising Khalifa Bin Salman Port’s maritime services, in order to achieve greater transparency and reduce turnaround times. The new centralised information portal will include cargo booking and movement, documentation, and pre-arrival notifications, among various other services.

“As a general trend we are seeing port capacity across the region expanding significantly, with developments in Saudi Arabia, Oman and the UAE most notably,” Hardiman told OBG.

“In order to compete with regional ports, Bahrain is taking steps to implement the digitisation and automation of port services, which will simplify paperwork and allow a more seamless environment for companies to operate in. We already operate a true multiport in Khalifa Bin Salman Port with many service offerings and going forward our strategy is to increase this further in so becoming even more of a port and logistics integrator,” he said.

OUTLOOK: The willingness of Bahrain to invest heavily in major transport infrastructure improvements point to a promising future for the sector, with increased opportunities for the economy. Efforts to streamline Customs procedures and to liberalise the sector are also welcome developments, and could further encourage export-driven and logistics companies to set up shop in the kingdom.

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The Report: Bahrain 2018

Transport chapter from The Report: Bahrain 2018

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