Will Israel nationalize the Tel Aviv light rail project?

Official says franchisee has yet to obtain financing, so state considering "alternatives."

Light rail in Jerusalem 311 (photo credit: Sybil Erlich)
Light rail in Jerusalem 311
(photo credit: Sybil Erlich)
The Accountant-General’s Office is working on alternative solutions to complete the NIS 11 billion Tel Aviv light rail project, in case the state’s agreement with the private company contracted to build and operate the project falls  through, Accountant-General Shuki Oren told the Knesset’s Economic Affairs Committee on Tuesday.
The committee heard testimony from Oren as well as from representatives of the company, Metropolitan Transportation Solutions (MTS), in response to a request for an urgent debate issued by Hadash MK Dov Henin and Likud MK Carmel Shama.
As the MKs heard, the project, which has been on hold since May 2008,when the global economic crisis caused MTS to lose its financing, iscurrently at an impasse due to the inability of the two sides to agreeon the financial arrangements of the project.
MTS is jointly owned in equal parts by Israeli construction giantAfrica Israel, German Siemens, the Egged bus cooperative, Chinese civilengineering cooperative CCECC and Portuguese infrastructure firm DaCosta Soares.
Negotiations between the two sides have been frozen since March 16,when MTS sent a letter to the accountant-general proposing what itthought were reasonable solutions to the financial hurdles.
“Today is the 70th day since we sent the letter and we have heardnothing from the Finance Ministry,” said MTS CEO Yohanan Or, referringto the Accountant-General’s Office as a sphinx.
“We have a conglomerate of nine international banks willing to financethe project’s construction and a local bank willing to back theoperation phase. We can guess at the three issues that are holdingthings up, but we are waiting for feedback from the ministry to hearwhat the problems on their side is.”
For his part, Oren said he was willing to meet with MTS as he had donein the past, but was waiting for a concrete proposal that would signifya breakthrough in the dealings. In the mean time, he said, “We areworking on alternatives.”
While Oren didn’t agree to go in to the details of the possiblealternatives, saying it would be improper to do so in the midst ofnegotiations, failure to complete the contract with MTS could only meanone of two options: either the state issues a new tender, or it decidesto nationalize the project. Both cases would mean further delay of aproject that was supposed to start two years ago.
The committee’s MKs expressed their frustration with the situation,with committee chairman Ofir Akunis describing the projects collapse as“a tragedy on a national scale.”
“According to my counting, MTS has been given five separate extensionsto ensure financing, but enough is enough. Even Leviev has to honoragreements,” said Henin, referring to Africa Israel owner Lev Leviev.“The state has gone above and beyond to assist MTS. No other body woulddo the same.
“This is a major project and I can understand the hesitancy to cancelit. If it was the first extension I would say ‘give them a chance,’ butno more.”
Henin said that the conclusion that the accountant-general was reaching– and according to him, should have reached months ago – was that therewas no choice but to nationalize the project.
Kadima MK Yulia Shamolov Berkovich said she thought it was too late tomove back the clock and restart the tender. She urged the two sides toenter intensive negotiations.
“The state should have put an end to this after the first extension,but since it didn’t, I want to see the parties put aside their egos andclose themselves in a hotel room and talk until white smoke comes out,”said Berkovich.
Oren said that the he was currently waiting for Prime Minister BinyaminNetanyahu to weigh in on the matter and that a meeting with Netanyahuand the finance and transportation ministers was scheduled for earlyJune.
Akunis concluded the meeting by urging the sides to meet and talkbefore the prime minister’s meeting in hopes that a workable solutioncould be found.
The Tel Aviv light rail project will be the largest infrastructureproject ever undertaken in Israel. The first line, the red line, thebackbone of the system, starts from Petah Tikva, runs through BneiBrak, Ramat Gan, Tel Aviv and Jaffa and ends up in Bat Yam.
The line, which spans 23 kilometers (half of it underground), will takepassengers from one end to the other in about 45 minutes and isexpected to carry nearly 400,000 passengers every day.