The Spanish and Portuguese economies have also been giving considerable cause for concern as both countries have huge debts, and the situation regarding investment in rail seems confused and fluid. In Portugal, the government's plan to cut debt from 9% of GDP to 3% during the next three years appears on the face of it to have slowed down plans to build a high-speed network. While the first public-private partnership (PPP) contract has been awarded for the Portuguese section of the Lisbon - Madrid line, the projects to build high-speed lines linking Lisbon, Oporto and Vigo in Spain have been delayed by two years, but this is more to do with difficulty in obtaining environmental permits than funding.
Portugal's minister of public works says construction will definitely start in September on the Portuguese section of the line to Madrid even though the BPI bank says it will pull out of the consortium of banks funding the Portuguese high-speed project.
As we reported last month, the Spanish prime minister has launched a €17 billion two-year PPP infrastructure investment plan, 70% of which is destined for rail. The scheme was said to be fully funded by the government, financial institutions and business, and is designed to maintain the momentum of Spain's huge high-speed line construction programme, as well as commuter and freight schemes.
However, more recently the government has indicated it wants to review the high-speed construction programme, which could lead to delays of up to 18 months for some projects.
The French government regards PPPs as a solution to the difficulty of funding new line construction entirely by the state. The first of a series of deals was concluded recently for the TGV Sud Europe Atlantique high-speed line, and negotiations are underway for a second PPP for the Le Mans - Rennes line. Two more high-speed lines are included in president Sarkozy's economic stimulus package, and they are also likely to be prime candidates for the PPP model.
PPPs could be a way out of the financial crisis facing many governments keen on the one hand to push ahead with capital investment schemes but on the other hand strapped for cash. While banks may be reluctant to lend money at the moment, there are other financial institutions such as pension funds looking for a relatively secure, long-term home for their money.
We should not confuse relatively-straightforward PPP projects (if one can ever use that phrase to describe such schemes) to fund the construction of high-speed lines and light rail schemes, which have a relatively low risk and in the case of high-speed a revenue stream to support them, with the spectacular failure of the ridiculously-complicated PPPs to maintain and upgrade the London Underground. Transport for London's announcement that it will buy out the shareholders in Tube Lines, will bring the whole sorry adventure to an end, but at considerable cost to taxpayers.
The whole concept of trying to maintain and modernise a very old metro was flawed from the outset, as it is very difficult to predict problems which may be encountered when work starts on ageing structures and installations, and therefore the cost of doing such work. The contracts were extremely complex and there was constant disagreement between the two PPP contractors, Metronet and Tube Lines, and London Underground over the work being done and the cost, frequently leading to recourse to the PPP arbiter.
There have been failures of other rail projects where the private sector has been awarded contracts to build and fund them, such as the light rail and light metro lines in Kuala Lumpur and more recently the rail link between Incheon Airport and Seoul in Korea, which has now been integrated into the national network. One could argue that at least the new lines were built, with the government being forced to pick up the tab in the end anyway.
In any event, PPPs are usually more expensive than direct government funding because of the need to pay for the risk that is being transferred to the private sector. But, if PPPs are the only option to enable a project to go ahead, then this is clearly the path to take.
Of course the world is a big place, and there are still countries which are either investing or planning to invest heavily in rail, such as those in the Middle East (apart from Dubai) and North Africa, India, China, Vietnam, Australia, the United States and Brazil. As we report this month, Russian Railways is again moving ahead with investment and privatisation plans.
Rail will continue to benefit from its strong position as a more environmentally-friendly form of transport than other modes and from its now proven ability to unclog our congested cities and move large numbers of people and quantities of freight efficiently. Despite the current financial challenges, I still firmly believe that rail has a bright future.
