Railroad Infrastructure
Railroad Infrastructure
Business Model Description
Construct new railway lines with the public-private contract/agreement model implemented in Iraq, export credit agency (ECA) financing or the Public-Private-Partnership (PPP) model, offering turn-key solutions, or subcontracting, for the spectrum of services related to railroad infrastructure, including building station facilities, tracks, tunnels, and railway bridges. Iraq’s USD 17-billion multimodal transportation project, the Development Road Initiative, incorporate international railway linkages with neighbouring countries and domestic connections between Umm Qasr to Basra and a high-speed railway between Baghdad and Basra.
Expected Impact
Streamline post-conflict reconstruction with improved connectivity and freight capacity, enhancing economic growth, stability and, in the long term, the global trade movement between Asia and Europe.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Iraq: Countrywide
- Iraq: Northwestern Iraq and Anbar
- Iraq: Southern Iraq and Mesopotamian Marshes
- Iraq: Kurdistan Region of Iraq
Sector Classification
Transportation
Development need
Greenhouse gas (GHG) emissions from Iraq’s transportation sector has grown by 80% in last ten years, and accounts for 13% of the total GHG emissions of the country and the main source of air pollution. The passenger and freight transport in Iraq relies on roadways, while the major airports and railway lines are outdated (2, 7).
Policy priority
Launched by the government in May 2023, the Development Road Initiative is a multimodal transport project, comprising the Al Faw grand port, rail and road links with neighbouring countries, and has an estimated worth of USD 17 billion. Iraq’s Vision 2030, and National Development Plan (NDP) 2018-2022 target increasing railway connections for infrastructure development (1, 2, 3).
Gender inequalities and marginalization issues
Means of transportation and associated costs and security concerns are major setbacks of women’s inclusion in the private sector jobs, of rural communities’ participation in key value chains, and children’s access to education, especially for displaced children in conflict-affected governorates such as Kirkuk (8, 10).
Investment opportunities introduction
Iraq's transportation sector is currently dominated by State-Owned-Enterprises (SOEs). Iraq's USD 17-billion Development Road Initiative and public policy towards increasing private sector's contribution in reconstruction efforts translate into viable SDG investment opportunities in ports, airports, railways and rehabilitation and building of roads (2, 5, 7).
Key bottlenecks introduction
Most of the transportation infrastructure in Iraq has exceeded their efficient use life, being in use since 70s or 80s. The technology adoption in transportation sector is low. The large-scale transportation projects are often unimplemented by consecutive governments due to prolonged conflict and lack of long-term financing (11).
Land Transportation
Development need
More than 1100km long railway lines were decommissioned due to security concerns, during the ISIL insurgency in 2015, and conflict-related destruction of the key infrastructure, including 125 bridges (2). The number of automobiles in Iraq increased by almost a million since 2015, without relevant improvements in the road network, amidst the lack of public transport (7).
Policy priority
Ministerial Curriculum of the Government (2022-2025) stipulates an inventory of development projects for achieving the SDGs in Iraq, including the construction of a road and rail network for advancing SDG 9. Iraq Investment Map 2023, by the National Investment Commission (NIC) proposes new railway tracks. In April 2023, Iraq’s acceded to international TIR convention (4, 5, 6).
Gender inequalities and marginalization issues
Iraq’s major cities lack or have limited gender-sensitive urban transportation solutions, such as ride hailing, in the absence of regulated public transport and limited secure inter-city connections, which disproportionately impact women and poorer households’ participation in social and economic activities (8, 11).
Investment opportunities introduction
Railway investment proposals in Iraq include inter-city high-speed trains (e.g., connecting Baghdad and Basra), elevated rail system in Baghdad, monorail system for al-Najaf, and light rail systems in major cities. The lack of public transport vouches for various urban connectivity solutions, such as Bus Rapid Transit (BRT) or taximeter system (8, 9).
Key bottlenecks introduction
Deployment of new roads and rail tracks are undermined by illegal violations and informal settlements. The talent pool for and skills levels of engineering and railroad management staff are inadequate. The corruption perception, aggravated by lack of investment and fiscal imbalances impede the development of capital-intensive road and railway investments (8, 11).
Rail Transportation
Pipeline Opportunity
Railroad Infrastructure
Construct new railway lines with the public-private contract/agreement model implemented in Iraq, export credit agency (ECA) financing or the Public-Private-Partnership (PPP) model, offering turn-key solutions, or subcontracting, for the spectrum of services related to railroad infrastructure, including building station facilities, tracks, tunnels, and railway bridges. Iraq’s USD 17-billion multimodal transportation project, the Development Road Initiative, incorporate international railway linkages with neighbouring countries and domestic connections between Umm Qasr to Basra and a high-speed railway between Baghdad and Basra.
Business Case
Market Size and Environment
> USD 1 billion
The oil price volatility and regional trade connectivity has revitalized the railroad sector in MENA region, including Iraq where ongoing rail projects are estimated at a size of about USD 22 billion (16).
The Development Road Initiative was launched by the government in May 2023. The multimodal transport project, which comprises the Al Faw port, rail and road links with neighbouring countries, has an estimated worth of USD 17 billion and is expected to create 100,000 jobs (3).
The Iraq Republic Railways (IRR) currently operates a railway system of around 2,900km. IRR generated about USD 3.5 million from freight transport in 2020 (11).
Indicative Return
15% - 20%
Internal Rate of Return (IRR) of between 15-20% for the original investment, and higher for rehabilitation investments, could be expected based on regional benchmarks (17, 18).
Investment Timeframe
Long Term (10+ years)
Railroad investments are expected to generate positive return later than 10 years (17).
Ticket Size
> USD 10 million
Market Risks & Scale Obstacles
Capital - CapEx Intensive
Capital - Requires Subsidy
Market - Volatile
Impact Case
Sustainable Development Need
Iraq’s nonoil economy, notably transport, trade and financial services much needed for an inclusive reconstruction are more sensitive to conflict. Inadequate railway services impair regional integration as the freight volume by road in the Arab world is about ten-fold the freight by rail (20, 21).
Iraq’s transportation sector is emission-intensive as sectoral greenhouse gas (GHG) emissions have grown by 80% in last ten years, and accounts for 13% of the total GHG emissions of the country as well as being the main source of air pollution (2,7).
The traffic jams are common in Baghdad where about 30% of the total vehicles in the country are, and the number of cars increased by more than six-fold between 2007 and 2020, in the face of lack of urban rapid transport systems and less emitting public transport
Gender & Marginalisation
Displaced people, women, youth and children bear the brunt of lack of secure and cheap mobility options (8, 11, 19).
Lack of safe mobility options undermines Iraqi women's participation in diverse and private sector-led economic activities, such as participation in post-harvest activities or seeking formal employment outside the public sector.
Expected Development Outcome
Rail freight solutions in Iraq streamline reconstruction efforts, while promoting peace, international cooperation, and regional integration. Access to markets and trade volumes enable nonoil sector in Iraq to achieve sustainable growth.
Railways offer a less carbon-emitting option than land freight transport, therefore decreasing greenhouse gas (GHG) emissions from the transportation sector.
Improved nationwide railroad infrastructure could have spill over effects for urban solutions, targeting the issues of lack of formal public transport, air pollution and urban congestion that resulted from increase in number of automobiles.
Gender & Marginalisation
Improved connectivity and trade may benefit disadvantaged groups, youth and women with upward mobility opportunities, in terms of accessing public services and formal employment outside public sector.
Primary SDGs addressed
8.4.1 Material footprint, material footprint per capita, and material footprint per GDP
8.6.1 Proportion of youth (aged 15–24 years) not in education, employment or training
N/A
36.7% in 2021 (22).
N/A
The National Development Plan (NDP) for 2018-2022 sets out the objective of improving youth labor market engagement as post-conflict reconstruction measure, without a target level (2).
9.1.2 Passenger and freight volumes, by mode of transport
77,000 passengers (435,000 in 2019) and about 1.3 million tons of fright were carried by railway activities. In 2017, in the Mashreq region including Iraq, freight by road and rail stood at 376 and 35 billions of ton-kilometres, respectively (11, 20).
The National Development Plan (NDP) for 2018-2022 sets out the objective of increasing rail transport by enhanced private sector participation and foreign investment (2).
11.a.1 Number of countries that have national urban policies or regional development plans that (a) respond to population dynamics; (b) ensure balanced territorial development; and (c) increase local fiscal space
N/A
N/A
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Outcome Risks
High railroad subsidization that is needed for such investments may place pressure on public resources, therefore leading to corruption concerns and risk of overshadowing other public priorities.
Although, Iraq has recently acceded to the New York Convention, if arbitration clauses are not well accounted for, disputes could remain politicized.
Given the high perception of corruption, large infrastructure projects may exacerbate governance and transparency issues.
Large infrastructure projects in Iraq may intensify the reliance on foreign workforce, especially in the engineering fields (8).
Nationalization of large land areas, including informal settlements, without strategic government oversight, may result in displacement.
Impact Risks
Limited experience with long-term contractual arrangements may constrain the application of safety and economic feasibility dimensions, therefore undermining the transition to railroad transportation.
Impact Classification
What
Post-conflict reconstruction and economic recovery, and reduction of multidimensional poverty, especially in rural areas, through environmentally friendly transport solutions.
Risk
Implementation capacity and outreach to diverse community and businesses are undermined by limited experience with long-term contracts. Conflict may disrupt execution of railroad projects.
Contribution
Railroad infrastructure provides a greener, safer, and more monitorable alternative to freight transport otherwise dominated by trucking in roadways in Iraq.
Impact Thesis
Streamline post-conflict reconstruction with improved connectivity and freight capacity, enhancing economic growth, stability and, in the long term, the global trade movement between Asia and Europe.
Enabling Environment
Policy Environment
Ministerial Curriculum of the Government of Mohammed Shia Al-Sudani, 2022-2025: presents the vision of the government, and the projects, including railway construction, with respect to SDG priorities (4).
National Development Plan, 2018-2022: provides the situational analysis, challenges and objectives for developing railway transport in Iraq as per its dedicated Sectoral and Spatial Development targets (2).
Investment Map of Iraq, 2023: sets out the priority transportation projects, including the construction or rehabilitation of new railway lines, and emphasize the activation of the public mass transit systems (5).
Framework for Urban Development in the Governorates of Iraq, 2018: proposes the development of new cities across Iraq, upholding railway infrastructure development as a key intervention for transportation (24).
Financial Environment
Financial incentives: Iraq's USD 17-billion Development Road Initiative offers public risk sharing opportunities in large railroad investments (3).
Fiscal incentives: Strategic projects, including transportation projects with capital greater than USD 30 million, are subject to tax exemptions for up to ten years (27).
Other incentives: Iraq’s accession to TIR convention in April 2023 offers improved trade conditions (6).
Regulatory Environment
The Public-Private Partnership (PPP), 2017: provides a legal framework for collaboration between the public and private sectors in the development of infrastructure and public services.
The Revised Investment Law No. 13 of 2006 in Iraq: sets out fiscal incentives for the Iraqi and foreign investors, establishes the National Investment Commission (NIC) for promoting and facilitating investments (25).
Investment Law of the Kurdistan Region of Iraq (KRI), Law No.4 of 2006: grants equal rights to foreign and local investors and offers tax incentives for investments, including special clauses concerning strategic projects under the article 6 (26).
Marketplace Participants
Private Sector
Alstom, Martin Rose GmbH, HG Gruppe, Progetti Europa & Global S.p.A. (PEG) , Hemn Group (KRG), Kavin Group (KRG), Etihad Rail, Yapi Merkezi.
Government
Ministry of Transport, Ministry of Planning, the State Company for Travellers and Delegates Transportation, the State Company for Land Transport, Iraqi Republic Railways (IRR).
Multilaterals
United Nations Development Programme (UNDP), UN Habitat, International Finance Corporation (IFC), USAID, Japan International Cooperation Agency (JICA), Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ).
Non-Profit
Al-Bayan Center for Planning and Studies, Middle East Research Institute (MERI).
Public-Private Partnership
The Government of Iraq (GoI) and International Finance Corporation (IFC) signed a public-private partnership (PPP) agreement in September 2023 for the modernization of the Baghdad Airport, making the first PPP deal for IFC in Iraq (29).
Target Locations
Iraq: Countrywide
Iraq: Northwestern Iraq and Anbar
Iraq: Southern Iraq and Mesopotamian Marshes
Iraq: Kurdistan Region of Iraq
References
- (1) Ministry of Planning of Republic of Iraq. 2019. "The Future We Want". Iraq Vision for Sustainable Development. https://andp.unescwa.org/sites/default/files/2021-05/The%20future%20we%20want-Iraq%20vision%20for%20Sustainable%20Development%202030.pdf
- (2) Ministry of Planning of the Republic of Iraq. 2018. National Development Plan 2018-2022. https://andp.unescwa.org/index.php/plans/1139#:~:text=The%20National%20Development%20Plan%202018,ecological%2C%20psychological%20and%20spiritual%20levels.
- (3) Mahmoud, Sinan. 2023. Iraq showcases $17-billion Development Road project that will link Asia to EuropeThe National News, Baghdad. https://www.thenationalnews.com/mena/iraq/2023/05/27/iraq-showcases-development-road-project-that-will-link-asia-to-europe/?gclid=EAIaIQobChMIupPK7tb5gQMVwgaLCh1b7AeLEAAYASAAEgJNCPD_BwE
- (4) Prime Minister's Office, Republic of Iraq. 2022. Ministerial Curriculum of the Government of Mohammed Shia Al-Sudani (2022-2025).
- (5) National Investment Commission, Presidency of Council of Ministers, Republic of Iraq. 2023. Investment Map of Iraq 2023. https://www.iraqiembassy.us/sites/default/files/documents/Investment%20Map2023%20.pdf
- (6) UNECE. 2023. Iraq’s accession to the United Nations TIR Convention will boost trade and growth in the Middle East. https://unece.org/media/transport/TIR/press/377333
- (7) World Bank Group. 2022. Iraq Country Climate and Development Report (CCDR). https://documents1.worldbank.org/curated/en/099005012092241290/pdf/P1776390cfceae0d908ff8073b7e041bea6.pdf
- (8) UNDP SDG Financing in Iraq project team consultations with multilateral organizations in Iraq, in March 2023.
- (9) KRG Board of Investment. 2023. Invest in Kurdistan: Overview of Priority Sectors. https://online.fliphtml5.com/wbsvb/aoef/#p=1
- (10) Norwegian Refugee Council (NRC). 2022. Twice displaced: The unmet needs of Iraq’s children in informal settlements. https://www.nrc.no/globalassets/pdf/reports/iraq-informal-settlements-children/twice-displaced---english.pdf
- (11) KAPITA. 2022. Transportation Sector in Iraq: Roads and Railways Scene Overview. https://kapita.iq/storage/app/media/New%20Research%20Publications/Reports/Transportation%20Report%20Roads%20and%20Railways%20Overview.pdf
- (12) Logistics Middle East. 2023. 30 companies vie for Iraq-Turkey $17 bln rail link project. https://www.logisticsmiddleeast.com/news/iraq-turkey-rail-link
- (13) Zawya. 2022. Transport Projects: Designs for Iraq-Turkey rail to be ready in July. https://www.zawya.com/en/projects/construction/projects-designs-for-iraq-turkey-rail-to-be-ready-in-july-fxe6a2bt
- (14) Iraq Business News. 2023. Abu Dhabi Ports and Etihad Rail meet Iraqi Min. of Transport. https://www.iraq-businessnews.com/2023/07/20/abu-dhabi-ports-and-etihad-rail-meet-iraqi-min-of-transport/
- (15) Ircon International Limited. 2023. Railway, Completed Projects. https://www.ircon.org/index.php?option=com_content&view=article&id=40&Itemid=410&lang=en
- (16) Middle East Business Intelligence. 2022. Laying the Tracks: How investment in rail is transforming mobility in the Middle East. https://meedmashreqindustryinsight.com/wp-content/uploads/2022/07/Laying-the-Tracks_Mashreq-MEED-Partnership-Railways-Briefing-Paper-July-2022.pdf
- (17) Japan International Cooperation Agency (JICA). 2001. The Master Plan Study on the Development of Syrian Railways in the Syrian Arab Republic, Volume I, Development of Phased Rehabilitation and Modernization Plan for the year 2005, 2010 and 2020. https://openjicareport.jica.go.jp/pdf/11661550_01.pdf
- (18) Gulf News. All you need to know about UAE's National Rail Network - Etihad Rail Project. https://gulfnews.com/uae/year-of-the-50th/all-you-need-to-know-about-uaes-national-rail-network---etihad-rail-project-1.1630825366768
- (19) Friedrich-Ebert-Stiftung. 2020. The Mobility Transition in the MENA region. https://library.fes.de/pdf-files/bueros/amman/16656.pdf
- (20) United Nations Economic and Social Commission for Western Asia (ESCWA). 2020. Arab Sustainable Development Report 2020. http://asdr.unescwa.org/
- (21) World Bank Group. 2020. Iraq Economic Monitor: Navigating the Perfect Storm (Redux). https://documents1.worldbank.org/curated/en/446201588465646751/pdf/Iraq-Economic-Monitor-Navigating-the-Perfect-Storm-Redux.pdf
- (22) Central Statistical Organization (CSO), Kurdistan Region Statistics Office (KRSO) and International Labour Organization (ILO). 2022. Iraqi Labour Force Survey 2021. https://www.ilo.org/wcmsp5/groups/public/---arabstates/---ro-beirut/documents/publication/wcms_850359.pdf
- (23) Anadolu Ajansi. 2023. Iran, Iraq launch cross-border railway line: Long-delayed project will connect Iran's Shalemche with Iraq's Basra. https://www.aa.com.tr/en/middle-east/iran-iraq-launch-cross-border-railway-line/2981852
- (24) Republic of Iraq Ministry of Planning, UN Habitat and the Boston Institute. 2018. Framework for Urban Development in the Governorates of Iraq. https://iqforum.mop.gov.iq/images/issues/%D8%AA%D9%82%D8%B1%D9%8A%D8%B1%20%D8%A7%D9%84%D8%AA%D9%86%D9%85%D9%8A%D8%A9%20%D8%A7%D9%84%D8%AD%D8%B6%D8%B1%D9%8A%D8%A9.pdf
- (25) Republic of Iraq, Presidency of Ministers’ Council. 2015. The Investment Law No (13) of 2006 as amended with Law No.2 of 2010 and the Law No. 50 of 2015. https://faolex.fao.org/docs/pdf/irq201855E.pdf
- (26) Kurdistan Regional Government (KRG) Board of Investment. 2006. Investment Law. https://govkrd.b-cdn.net/OtherEntities/Board%20of%20Investment/English/Publication/Investment%20Law/Law%20No.%204%20of%202006%20-%20Investment%20Law%20in%20Kurdistan%20Region-Iraq.pdf
- (27) National Investment Commission. 2016. Legal Guide to Investment in Iraq [Access: October, 2023]. https://investpromo.gov.iq/wp-content/uploads/2016/10/legel-guide%20-final.pdf
- (28) International Railway Journal (IRJ). 2023. Works starts later this month on Iran - Iraq railway. https://www.railjournal.com/infrastructure/works-starts-later-this-month-on-iran-iraq-railway/
- (29) International Finance Corporation (IFC). 2023. IFC Signs PPP Agreement to Modernize Baghdad Airport, Ushering in New Era of Public-Private Cooperation. https://pressroom.ifc.org/all/pages/PressDetail.aspx?ID=27728#:~:text=Baghdad%2C%20Iraq%2C%20September%2003%2C,model%20for%20other%20critical%20infrastructure