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The 1,000 kilometer Qom to Mashhad road project, dubbed the “Shrine to Shrine Highway”, will see the construction of a six-lane freeway between the two cities at an estimated cost of $3 billion. Iran’s seaports are the lifeblood of the economy. © The Business Year © The Business Year TBY Sponsor

REVIEW

Moving Around

The transport sector has all the hallmarks of making Iran a regional heavyweight. Government investment in infrastructure will have to match the pace of economic growth.

With a territory of more than 1.6 million square kilometers, Iran is among the world’s largest countries, making transport a big deal. The dispersed nature of both the population and economic activities makes the provision of a functional logistics system a challenge. In addition, Iran occupies a special location in the region that allows it to act as a transport bridge between Europe, the Middle East, and Central Asia. As a result, transport has become one of the most important economic sectors in the country, employing more than a million people and accounting for more than 9% of GDP in 2009.

The Ministry of Roads and Transportation is responsible for formulating and implementing policies for the improvement of transportation activities in line with the Five-Year Development Plans (FYDPs). Many of the targets set by the Fourth FYDP were realized for the transport sector, and policymakers are now laying out the targets of the Fifth FYDP.

In this framework, in August 2010, the government announced that it intends to invest $2.8 billion in the transport and transit sector. The capacity for the transit of goods in the country is 144 million tons per annum and the government aims to increase this amount to 200 million tons mainly through the road and rail network. Moreover, customs points will be soon equipped with x-ray systems to facilitate the reception of goods.

 

ROADS

Iran has some 173,000 kilometers of roads, 73% of which are paved. Paved roadways also include 1,429 kilometers of expressways, which connect the main cities to each other. In 2Q 2008-1Q 2009, 512 million tons of goods were carried by road, indicating growth of 6%. Moreover, 4.7 million tons of goods were transited via the road network. The share of the road transport fleet in total goods transport increased 6% as well. In 2Q 2008-1Q 2009, 846 million passengers were carried by road, indicating growth of 6.5%. Private sector bus companies offer high quality services for intercity transportation, though their dominance of the intercity network is being challenged by the growth of low-cost air carriers. 

In order to decrease road accidents and improve the road transport network the government is constructing a six-lane freeway extending 1,000 kilometers from the central city of Qom to the northeastern city of Mashhad, passing through Tehran. The Ministry of Roads and Transportation has pointed out that it expects to reduce accidents and fatalities by 60-70% when the project is completed. The project commenced work in September 2010.

 

RAIL

The rail network is not being forgotten in the current government’s plans. As of 2010, there are 9,500 kilometers of rail in Iran. The primary purpose of the rail network is to link Iran’s southern and northern ports as well as serve economically culturally significant cities such as Qom and Mashhad. In 2Q 2008-1Q 2009, Iran’s railroads carried 20.5 billion ton-kilometers of goods and 14.1 billion person-kilometers of passengers, both of which show an increase of just over 1% compared to the previous year. Moreover, 1.4 million tons of goods were transited via rail.

In order to exploit its strategically and economically important position in the world, Iran is currently working on projects to improve its railway network and act as a hub between its neighbors and Europe and Asia. One of these projects is the ECO Train Line, which will connect the founding states of the Economic Cooperation Organization (ECO), Turkey, Iran and Pakistan, to each other via rail. In August 2010, the international freight train line connecting Istanbul to Islamabad via Tehran became operational. The capacity of the line is estimated to be around 8 million tons of goods annually. 

Another project aims to revive the Silk Road, the 3,000-year-old trade route for caravans between Europe and Asia, by connecting three traditional Silk Road countries together. When the heads of state of Tajikistan, Afghanistan, and Iran met in Iran in August 2010, they decided to mount an action plan to revive the historic route. The revival of such a link would decrease the transit time between Europe and China from two months to two weeks, providing Iran with numerous economic benefits as a transit country.

Another railway connection that would contribute to Iran’s logistics capacity is the so-called North-South Corridor, which aims to connect the Iranian railway network to that of Azerbaijan. Thus, a connection would be built between northern Europe and Scandinavia, and the Indian Ocean region and Southeast states via Iran. The project requires the construction of railroads between Astara (Azerbaijan) and Astara (Iran), and a railway connection between Qazvin, Rasht, and Astara. More than $400 million is required to implement the project, and most of the cost will be covered by Iran. Via this corridor it is forecast that 5 million tons of goods per year will be carried, which is expected to increase to 10-15 million tons as the project matures.

In August 2010, the government released its road map for the advancement of rail transport in Iran. Accordingly, some 3,500 kilometers of rail split into 30 separate projects is under construction, while 5% of the rail network will be renovated annually over the course of the Fifth FYDP. In order to meet the increasing demand for cargo transport, Iran aims to add 18,000 wagons to its present stock of 30,000 wagons.

The rail network is also slated for privatization, with both passenger and cargo services to be sold off to the private sector. The Islamic Republic of Iran Railroads, while maintaining and developing the railway network, will not interfere in the purchase of new engines, carriages or wagons and will allow other companies to use its rail network. By August of 2010, some nine companies had been privatized, including Raja Passenger Trains Company. The liberalization of the Iranian railway network is expected to increase the sector’s efficiency and boost passenger and cargo levels. 

 

METRO

Traffic congestion has become a major issue in all large Iranian cities, and the provision of world-class public transport systems has become a must. Both municipalities and the central government are cooperating to provide both above ground and underground public transport systems. Tehran’s first metro line became operational in 1999, while construction is still continuing on two other lines for the network. Currently, there are four operational lines of the Tehran Metro and daily ridership reached 4 million in 2010, indicating the importance of the system for the city as a whole. The Municipality of Tehran and the national government are working together to finance the project: In November 2009, the Parliament approved a $1 billion budget for the further development of Tehran’s metro.Other cities in which underground metro systems are under construction include Shiraz, Mashhad, Esfahan, Tabriz, and Ahvaz. Tehran has also installed four separate bus rapid transit (BRT) lines, some 100 kilometers in length, crisscrossing the city to further improve traffic circulation. BRT lines differ from normal bus networks in having dedicated lanes set aside for them, allowing for faster travel times and far higher passenger loads than possible via other means of public transport, while the setup costs are far less than  those of traditional rail-based public transport solutions.

 

AIR TRANSPORT

As most air corridors between Europe and Southeast Asia and between members of the Commonwealth of Independent States and Persian Gulf pass through Iranian airspace, the country has an enormous potential to become a passenger and cargo transport hub. The national air fleet amounted to 132 aircraft in March 2009, and of the 54 major airports in Iran, eight are international. 

The age of the low-cost domestic carrier is very much in full swing in Iran. In addition to the national carrier Iran Air, there are now 16 private companies operating flights inside Iran, while some, such as Mahan Air and Kish Air, also operate international flights. The total number of departing and arriving passengers reached 33 million in 2Q 2008-1Q 2009, showing 3.5% growth compared with the same period in the previous 12 month period.

In 2Q 2008-1Q 2009, the amount of cargo carried by air (domestically and internationally) decreased by 8.4% and 27.7% to 34,000 tons and 89,300 tons, respectively. Tehran’s new airport, Imam Khomeini International, has a capacity of some 700,000 tons of cargo and hosts a special handling area for transit goods. Although the facilities exist to expand the amount of both passengers and cargo that the Iranian fleet can handle, it may well take new investment to make better use of this potential.

 

SEA TRANSPORT

Iran has two coasts to think about: one alongside the Caspian Sea, and the other running along the Persian Gulf and into the Gulf of Oman. The port of Anzali is the most important lying along the coast of the Caspian Sea, having a handling capacity of 4,000 tons. Iran has 14 ports lying along the coast of the Persian Gulf, and the most important of them include Bandar Imam, Bandar Bushehr, and Bandar Abbas. Together, these 14 ports have a total of 90 jetties with major expansions under way. In the past, Iran’s lack of adequate port facilities had held up both imports and exports, causing major headaches for shippers to the country. Currently, Iranian ports have sufficient capacity to meet the current flow of incoming and outgoing cargo to and from the country. In recent years, the Ports & Maritime Organization (PMO) has undertaken numerous measures to enhance the operational capacity of the national port network. The country is looking to upgrade its port facilities to not only allow for more freight to be handled, but so as to accept larger sized freight carriers into its ports. 

The share of sea transport in total imports and exports was 92.6% in 2Q 2008-1Q 2009. CBI statistics suggest that the amount of imported commodities coming via sea transport amounted to 51.8 million tons and exports amounted 30.1 million tons. In the same period, Iran had 9,000 cargo ships of more than 1,000 tons capacity and 5,100 cargo ships with less than 1,000 tons of capacity, supporting the break bulk trade between Iran and the other ports of the Persian Gulf. 

Presently, all commercial ports in the north bordering the Caspian Sea and the south bordering the Persian Gulf have development plans. The enhancement of commercial port capacity is also foreseen in the Fifth FYDP. The highlights of the Fifth FYDP to be implemented by 2014 include: Increasing Iranian commercial port capacity from 150 million tons to 200 million tons; increasing the container capacity from 4.4 million TEUs to 7.5 million TEUs; and increasing the passenger terminal capacityfrom 6.8 million passengers to 8 million.


© The Business Year

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