Two of the foreign companies that have bid in the management and planning tender for the Metro lines in Greater Tel Aviv are considering withdrawing their candidacy, sources tell "Globes," due to the government's attempts to enact the judicial overhaul and the accompanying political atmosphere, which creates negative sentiment towards investment in Israel for decision makers. This negative sentiment is accentuated by Minister of Transport Miri Regev's declarations about taking the Metro project's management away from NTA Metropolitan Mass Transit System and transferring it to another company.
At the same time, market conditions and the rise in interest rates do not help companies considering participating in the huge tender. Fifteen years ago the tender for building the Tel Aviv light rail Red line, which was won by a consortium led by Africa-Israel, ultimately failed because the financial crisis of 2008 made it difficult for the tender winners to obtain financing.
The Metro tender, worth an estimated NIS 10 billion, attracted bids from seven consortia, each comprising foreign and Israeli companies, some of them bidding for a tender in Israel for the first time. At the end of the process, three consortia will be chosen, with each one of them planning and overseeing works and the construction tenders and management of the contractors, for each of the three planned Metro lines.
More problems on the way
The tender for the Metro project has arouses great interest among many foreign companies. The overall project is worth an estimated NIS 150 billion, making it the most expensive and complicated project ever undertaken in Israel. In recent years, government ministries have worked hard to make the tender accessible to as many companies as possible, in order to increase competition and attract leading companies from around the world.
Despite the great interest and advantages of the tender, it also has risks. The statutory planning of the lines has not been completed, the work intended for the winning companies is not yet closed and there is a lot of flexibility. The Metro Law has also still to be fully approved by the Knesset, despite the coalition's plans to pass it by the end of the previous Knesset session.
Added to the inherent risks are new risks, which are severe. The business environment is changing due to the judicial overhaul attempts, protests and warnings from international agencies.
All this creates negative sentiment among decision makers in the foreign companies who are not familiar with what is happening in Israel. The companies are afraid of future lawsuits, which characterize many infrastructure projects, against NTA and the state, in such a situation.
NTA said, "Seven international companies have bid for the tender to manage the Metro lines. The tender is moving forward according to the timetable and the work plan."
Easing the congestion
The Greater Tel Aviv Metro project encompasses plans for 145 kilometers of underground railway lines, with 109 stations in 24 local authorities. The first part of the Metro network is due to be completed by 2034 and the second part by 2037.
The estimated economic benefit, according to professional assessments, is estimated at NIS 33 billion, from when the Metro begins operating, as a result of saving time, economic development around the stations, shortening the time it takes to transport goods, saving on vehicle maintenance and other variables.
According to forecasts, by 2040 the proportion of the low socio-economic level population able to reach employment centers in the metropolis within an hour is expected to be only 38% but will jump to 57% after the Metro is operating.
Published by Globes, Israel business news - en.globes.co.il - on May 24, 2023.
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