Using PPP in Israel to create a rail connection to the Galilee

By Hannah Aronshtein

High-speed transportation infrastructure is the cornerstone of developed economies. In addition to influencing economic growth, the design of transportation systems also play a key role in shaping density and land use patterns. Many countries and cities are learning that they can achieve faster and more efficient results with public-private partnerships for a variety of infrastructure projects. This is particularly true for governments that have low revenue bases or high expenses.

Israel, for example, must cut its budget for 2013 by NIS 15 billion, and the Ministry of Finance plans to use more PPP and BOT (build-to-operate) to continue its planned infrastructure projects. The Minister of Transport, Katz, says he prefers not to give administrative responsibility to private hands and prefers a private financing initiative which uses shadow tolls (Barkat, 2012). This differs from the successful Road 6 project, which is the first toll road in Israel and first large project built through PPP.

A strategically important project is creating a rail-line to the Galilee region, connecting to the center of the country. This region’s importance is supported in the National Master Plan that does not allow for any new towns to be built, except in the Negev (South of the country) or the Galilee (North of the country). Land around the major cities in Israel is particularly expensive and affordable housing is very difficult to find. Israel is a nation with a population of 7 million and a land area of 22,150 km2 and population increase rate of 1.8% (Assif, 2007).

Israel constantly faces a legacy of planning policy based on population disbursement; critical for a young nation trying to build itself and ensure its security. The consolidation and expansion of existing cities, decreases the amount of new infrastructure that must be developed at such a distance from one another. Which is environmentally damaging, inefficient, and difficult for regional governments to manage.

The distance between Tel Aviv and the Galilee is only approximately 105 km, but it can take up to 3 hours to get there by public transportation. This lack of transit connection is one of the barriers to the densification of residential dwellings or the establishment of a dense city with a bustling economy.

While building a rail to connect the Galilee area to some major cities in Israel by rail makes sense for several reason, not only because it aligns the government’s strategic planning mission, the economic advisor to the Prime Minister has rejected the idea on the grounds that it would not make enough money. However, if inexpensive housing were to be built there, it is almost certain that people would move, since families are continuously moving to the settlements in Samaria (West Bank) to find affordable housing options.

The budget for transportation increased by 84% from 2000-2008 with more than NIS 100 billion allocated between 2005-2015, however, there has been a gap in planning and execution, with the actual amount invested dropping by .9% between 2000-2015. Projects become delayed as minister change and each comes in with policy change and replacements of key positions. The Ministry of Finance is the second with its micromanagement, preventing the flexibility that is needed for complex projects (Globes, 2011).

Assif, S. (2007, January). Tama 35 Presentation. Jerusalem, Israel: The Ministry of the Interior.

Barkat, A. (2012, September 5). Treasury seeks to outsource infrastructure projects. Retrieved from Globes Israel’s Busibess Arena: http://www.globes.co.il/serveen/globes/docview.asp?did=1000782664&fid=1724

Globes. (2011, September 8). Lack of gov’t continuity blights transport planning. Retrieved from Globes Israel’s Business Arena: http://www.globes.co.il/serveen/globes/docview.asp?did=1000680810&fid=1724

 

 

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One thought on “Using PPP in Israel to create a rail connection to the Galilee

  1. Hannah,

    It seems like the Poland model we discussed in class could be a really viable model for development here. There seems to be relatively clear value for multiple industries in expansion, such as hotels, real estate developers, merchant associations.

    Your example made me think of the importance of trade associations in urban development. As we’ve discussed mulitple times, private sector funding seems to be a necessity for many of these projects. However, individual companies may lack the capital or risk appetite to be a major investor in one of these projects. In this case, industry trade associations could pool risk and resources from their members for investments in infrastructure that ultimately benefits the entire industry.

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