The construction costs of rail infrastructure in the Arab world are globally atypical. We looked at the entire region, because of the common use of the literary Arab language; nearly all of this work is due to a New School student named Anan Maalouf, who’s doing long-term work on urban planning as relevant to Nazareth. Here is a presentation he gave at NYU on the subject last month. Update 7/22: here is an updated version of the presentation.
There are identifiable clusters in the Arab world, which is not surprising – it’s similar to how there is a common Nordic cost (which is low), a common cost to the English-speaking world (which is high), and so on. Of course, these clusters are not perfectly predictable ex ante; in light of the most important global pattern with the coronavirus crisis, I keep stressing that there is no distinct Europe vs. East Asia cluster when it comes to costs, and instead both regions have similar averages and huge internal variations. The Arab world does not form an entire cluster itself, but its clusters are at least somewhat understandable based on internal divisions.
One cluster is the six states of the Gulf Cooperation Council: Kuwait, Saudi Arabia, Qatar, Bahrain, the UAE, and Oman. All are distinguished by high incomes, comparable to those of the developed world, but coming almost exclusively from oil extraction. All also have atypically large numbers of immigrants, who form large majorities of the populations of the UAE and Qatar, and who have few rights and earn very low wages by local standards. One might expect that in such an environment, construction costs should be low, since there is ample cheap labor but also money for imported capital. Instead, these states all have high costs; for example, the Doha metro project costs around $700 million per kilometer, and is not even 100% underground but only 90%.
The explanation, per Anan and an Israeli-British planner named Omer Raz, is that there is no interest in cost control in the Gulf region. The GCC states have money. They are buying prestige and the trappings of modernity; for all of their crowing about the superiority of their traditional values and Islamic law, they crave Western acceptance, in similar vein to Singapore. So they invite first-world consultancies to build their infrastructure to build what Aaron Renn would call “world-class in Doha” (or Dubai, or Riyadh, etc.), as opposed to “world-class Doha,” i.e. domestic production that is good enough that other people are attracted to it. On top of it all, Omer gave an example in which Saudi Arabia was not a reliable partner for these foreign consultancies; Anan, too, notes a plethora of postponements and cancellations of rail lines, sometimes because of changing economic conditions, sometimes because these lines are international and relationships between Saudi Arabia and Qatar deteriorated recently, etc.
Another cluster consists of Egypt and Iraq. Both have high costs, in line with other third-world ex-colonies, like India, Vietnam, Indonesia, and Nigeria. The Cairo Metro extensions are $600-700 million per km; the Baghdad Metro is, in PPP terms, $330 million per km for an all-elevated project. This is not surprising – these countries use first-world consultancies with background in high-wage, strong-currency, cheap-capital economies. Unlike in the other datasets, like mine or Yinan Yao’s, Anan included a crucial piece of information: who the lead contractor or consultant was. It’s often a foreign firm, from a much richer country – in Iraq’s case, it’s Alstom. On the other hand, Egypt is using a domestic contractor, Orascom, and costs there remain high.
Finally and most interestingly, there is the Maghreb. One would expect that Tunisia, Algeria, and Morocco should have high costs, just like the other ex-colonies. However, they do not. Anan pointed out that the Arab world inverts my theory about how ex-colonies have higher costs than never-colonized countries like Iran, Turkey, and China. He adds that these countries have much closer ties with France than other ex-colonies do, whether they used to be French outside Africa (i.e. Vietnam) or other European empires’ (e.g. India, Indonesia, Nigeria). Alstom has had continuous presence in the area for 20 years.
In a sense, France didn’t fully decolonize in the Maghreb and the Sahel. It still views these regions as its near abroad, with a forever war in Mali, currency pegs, and deep economic ties with the higher-functioning countries. One can even see the French way of building urban rail in the Maghreb, for example on the Sfax tramway. This isn’t quite every urban subway – the Algiers Metro is pretty expensive. But the Oran Metro has normal costs, and light rail systems like those of Sfax and Casablanca have reasonable costs, as does the TGV system running as Morocco’s high-speed rail system.
So perhaps the issue is that the French planners in the Maghreb are there for long enough that they know the local conditions, and build in accordance with them. In contrast, systems have higher costs if they try to imitate first-world methods either due to first-world consultants’ unfamiliarity with the local situation or due to local cultural cringe.