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China set to pull out of two railway projects

bluesky

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Govt Plea to Reduce Cost
'China set to pull out of two railway projects'
Anowar Hossain
(Dhaka)
Published: 18 Jun 2021, 01:40
'China set to pull out of two railway projects'


China is set to pull out of two railway projects as they were told to reduce the project expenditure. They said they would not finance the construction of a dual gauge double line from Joydebpur in Gazipur to Ishwardi in Pabna.

The Chinese contractor has stated that it would not work on the project of converting the metre gauge line to dual line from Akhaura to Sylhet.

Apart from this, an agreement has been reached with the Chinese contractor for the construction of a dual gauge double line from Joydebpur to Jamalpur via Mymensingh. Sources said that the future of the project has become uncertain under the existing circumstances.
These three projects were approved under G2G agreement with China. Chinese contractors were appointed for the implementation of these projects. Their government will provide loans for these projects.

But an investigation by the Prime Minister's Office revealed that the project cost was estimated very high. Therefore, prime minister Sheikh Hasina directed to reduce expenditure by Tk 46.5 billion (4,650 crore) on two projects worth Tk 303.25 billion (30,325 crore).

The railway ministry also formed an expenditure rationalisation committee and proposed to reduce the project expenditure. China then announced that it was withdrawing from financing a project. During Chinese president Xi Jinping’s visit to Bangladesh in 2016, it was agreed that China would finance these projects.

On 15 September last year, Prothom Alo published a report on the G2G projects with China titled “Development on high interest loans, luxurious expenditure in project”. On 30 September a probe committee was formed by the Prime Minister’s Office. The committee submitted the report by mid-October.

After the submission, prime minister Sheikh Hasina directed to reduce the project expenditure. At the same time, she directed to take necessary steps including amendments in compliance with the law by analysing the observations and recommendations of the probe committee. A letter regarding this was sent to the railway ministry on 5 November.

Apart from this, the construction project of Joydebpur-Mymensingh-Jamalpur mixed gauge double line is also being done under G2G agreement. The estimated cost of this project is Tk 115.57 billion. For this, a settlement of Tk 80 billion was signed with a Chinese contractor for the construction of the main structure. This project is yet to get the official approval of the government. The prime minister's directive also mentioned to rationalise the cost of this project too.

According to the railway sources, the processes involve the assessment of the cost of these three projects, conditions of appointing contractors and finance are the same.

When asked about this, railway minister Nurul Islam told Prothom Alo, “We are reissuing letters to China for the Joydebpur-Ishwardi and Akhaura-Sylhet projects. We will take necessary initiatives once we get a reply from them. The future of the Joydebpur-Jamalpur project is also relying on these projects.

Bangladesh is supposed to bear the local expenditures including land acquisition, rehabilitation and salary allowances. And China is supposed to carry the cost of the construction which is 80 to 85 per cent of the total cost of the project. The main condition for China's financing is that open tenders cannot be called and Chinese contractors must get the job.

At least three officials of the railway told Prothom Alo that the cost of uncontested projects is usually high. At the moment, only the project of constructing railway tracks at the both sides of the Padma bridge is going on under G2G agreement with China. The estimated cost of this project is Tk 392.47 billion. There are allegations of extra expenditure in this project too.

Joydebpur-Ishwardi dual gauge double line

The China Civil Engineering Construction Corporation (CCECC) is the contractor of the project. A cost of about Tk 610 million (61 crore) was estimated to construct per kilometre of railway tracks.
Construction of similar railway tracks is underway in Akhaura–Laksam route spending Tk 190 million (19 crore) a kilometre of tracks. Contractor of this project was appointed through competitive bidding.

According to railway sources, the expenditure of the Joydebpur-Ishwardi project was fixed with price of the project equipment estimated to be increased by 25 per cent a year.

Instructed by the prime minister, the rationalisation committee proposed it at 10 per cent, reducing the project cost by Tk 10.85 billion (1,085 crore). A cost of Tk 800 was fixed to fill a cubic meter of soil. Yet, it was Tk 250-400 in other projects of the railway.

The rationalisation committee proposed to decrease Tk 1.43 billon (143 crore) in land filling, Tk 1.27 billon (127 crore) in installing railway tracks, Tk 1.50 billon (150 crore) in constructing bridge and culvert plus a five per cent reduction on the estimated cost to build the station building.

The expenditure decreased by Tk 14.95 billion (1,495 billon) – a 12.91 per cent of the total project cost. The project expenditure was estimated at Tk 142.51 billion. The Chinese contractor is fixed at Tk 115.87 billion (11,587 crore) for constructing the main structure.

The railway authorities sent a letter to the Chinese government through Economic Relations Division on 17 January on the matter of cost reduction.

After that, China evaluated the project by an independent agency and informed that many portions of the project require high cost because adequate technical preparation and survey hadn’t been carried out.

If the project is implemented, revenue from goods transportation won’t be achieved as much as it was estimated. Hence, payment of debt will be in a big risk. So, the project didn’t pass the evaluation of the Chinese government.

Railway officials said in fact, China said that they are pulling out of the project. Then again, the CCECC on 24 February also said that they would not work in compliance with the reduction in the project expenditure.

Project director Golam Mostofa told Prothom Alo a letter will be sent to China requesting the latter to refinance. If the response is negative, alternative way will be considered then, he added.

Construction of Akhaura-Sylhet mixed gauge railway

The cost of the Akhaura-Sylhet mixed gauge railway construction project was estimated at Tk 161.04 billion (16,104 crore). A Chinese contractor was fixed at Tk 120.79 billion (12,079 crore) for the construction of main structure.

A proposal was also prepared to reduce Tk 33.54 billion (3,354.31 crore) from the cost of the contractor’s portion as per the prime minister's directives.
China approved the China Railway Construction Bridge Engineering Bureau Group Limited (CRBG) as the contractor of the project.

A cost of Tk 555.1 million (55.51 crore) was estimated to construct a kilometre of railway tracks. Yet, Tk 103.7 million (10.37 crore) was estimated to build a kilometre of similar tracks in Kulaura-Shahbajpur railway.

The expenditure rationalisation committee summited its report proposing to reduce the expenditure in similar manner. But the contractor didn’t agree. The Chinese government has approved credit to this project. However, uncertainty remains until signing the agreement.
On 26 August, foreign minister AK Abdul Momen wrote a letter regarding this project to prime minister Sheikh Hasina claiming the project expenditure is not high.

At that time, the expatriates' welfare and overseas employment minister Imran Ahmad and the environment, forest and climate change minister Shahab Uddin sent letter to the planning minister to expedite implementation of the project.

Regarding this, executive director of Transparency International Bangladesh (TIB) Iftekharuzzaman told Prothom Alo that it’s a good sign the Prime Minister's Office has found out the extra expenditure. However, it is the incapacity of the railway officials not to find out the extra cost during the bargain. There are examples of Chinese contractors enjoying privilege through illegal transaction around the world. This time whether such incident has happened should be scrutinised, he added.

He further said, “China might have some conditions since they finance the majority of the fund. However, an international standard should be maintained. China is a big economic and diplomatic partner of Bangladesh. That is why we expect China will not take any illogical stance on Bangladesh’s government reducing the project expenditure.”

This report appeared in the print and online edition of Prothom Alo and has been rewritten in English by Ashish Basu and Hasanul Banna.
 
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Bilal9

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Well this is a game of one-upmanship between Chinese contractor and Railway Ministry. They are bargaining hard.

If we look at it carefully, Railway ministry may have the upper hand. They may have other options (Korean, and Allah forbid, Indian). I don't know if the Chinese contractor does...
 

mb444

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If the economics dont work either party is free to walk away.

Chinese loans exist to facilitate their interests as is the case with all countries. BD will need to look to alternatives to fund this.
 

TOTUU

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Regarding this, executive director of Transparency International Bangladesh (TIB) Iftekharuzzaman told Prothom Alo that it’s a good sign the Prime Minister's Office has found out the extra expenditure. However, it is the incapacity of the railway officials not to find out the extra cost during the bargain. There are examples of Chinese contractors enjoying privilege through illegal transaction around the world. This time whether such incident has happened should be scrutinised, he added.
Transparency International is an openly Western imperial NGO, and like many NGOs is a tool for the West to run the world .

Can anyone feel the power of such NGOs and media? With their mouths alone they can control people's emotions. They are like gods, and their various organizations and their agents have tentacles all over the world, exerting their influence .

China and Bangladesh have a very large number of cooperative projects, and it is normal and reasonable for some of them to change, and only those Western-funded organizations and proxies would be keen to channel changes in projects into smearing and villifying China .

Just like vaccines, the West itself buys a lot of vaccines for its own use and does not export them, while at the same time it has to discredit other countries' cooperation with China's vaccines and discredit Chinese vaccines. The West is using the same approach for these construction projects.

If the economics dont work either party is free to walk away.

Chinese loans exist to facilitate their interests as is the case with all countries. BD will need to look to alternatives to fund this.
You are right, the collaborative project must be in the interest of both parties, and if not, change the partner.

In addition, some benefits are intangible, but very important: emotions. There are some loans and projects that may not make money, but they can increase the feelings between the two countries' people, and this kind of benefit is the greatest benefit.

There are media and organizations whose aim is to destroy the trust between two countries, the feelings between two countries' people, so that they can achieve their goals.

If I were an American, a Brit, I would do the same. Because it is in the interest of Britain and the United States to undermine the cooperation of developing countries, to undermine the development of developing countries.
 
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Shabi1

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Well this is a game of one-upmanship between Chinese contractor and Railway Ministry. They are bargaining hard.

If we look at it carefully, Railway ministry may have the upper hand. They may have other options (Korean, and Allah forbid, Indian). I don't know if the Chinese contractor does...
The people who did the bidding are at fault here, just as pointed out in article its railway authority which might have inflated for kickbacks. With the Chinese contractor also goes their credit facility, they won't allow other contractors. Kickbacks have to be proved here if the gov wants to negotiate else if taken to litigation the gov wont have a case.
" China approved the China Railway Construction Bridge Engineering Bureau Group Limited (CRBG) as the contractor of the project. "
 

Bilal9

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Transparency International is an openly Western imperial NGO, and like many NGOs is a tool for the West to run the world .

Can anyone feel the power of such NGOs and media? With their mouths alone they can control people's emotions. They are like gods, and their various organizations and their agents have tentacles all over the world, exerting their influence .

China and Bangladesh have a very large number of cooperative projects, and it is normal and reasonable for some of them to change, and only those Western-funded organizations and proxies would be keen to channel changes in projects into smearing and villifying China .

Just like vaccines, the West itself buys a lot of vaccines for its own use and does not export them, while at the same time it has to discredit other countries' cooperation with China's vaccines and discredit Chinese vaccines. The West is using the same approach for these construction projects.


You are right, the collaborative project must be in the interest of both parties, and if not, change the partner.

In addition, some benefits are intangible, but very important: emotions. There are some loans and projects that may not make money, but they can increase the feelings between the two countries' people, and this kind of benefit is the greatest benefit.

There are media and organizations whose aim is to destroy the trust between two countries, the feelings between two countries' people, so that they can achieve their goals.

If I were an American, a Brit, I would do the same. Because it is in the interest of Britain and the United States to undermine the cooperation of developing countries, to undermine the development of developing countries.
You are correct.

Transparency International Bangladesh (TIB) is a Western/Indian shill. People in Bangladesh know this and know their intent to insert distrust between China and Bangladesh.

I am sure this minimal hassle and disagreement over price can be ironed out by dialogue and discussion.
 

fallstuff

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Transparency International is an openly Western imperial NGO, and like many NGOs is a tool for the West to run the world .

Can anyone feel the power of such NGOs and media? With their mouths alone they can control people's emotions. They are like gods, and their various organizations and their agents have tentacles all over the world, exerting their influence .

China and Bangladesh have a very large number of cooperative projects, and it is normal and reasonable for some of them to change, and only those Western-funded organizations and proxies would be keen to channel changes in projects into smearing and villifying China .

Just like vaccines, the West itself buys a lot of vaccines for its own use and does not export them, while at the same time it has to discredit other countries' cooperation with China's vaccines and discredit Chinese vaccines. The West is using the same approach for these construction projects.


You are right, the collaborative project must be in the interest of both parties, and if not, change the partner.

In addition, some benefits are intangible, but very important: emotions. There are some loans and projects that may not make money, but they can increase the feelings between the two countries' people, and this kind of benefit is the greatest benefit.

There are media and organizations whose aim is to destroy the trust between two countries, the feelings between two countries' people, so that they can achieve their goals.

If I were an American, a Brit, I would do the same. Because it is in the interest of Britain and the United States to undermine the cooperation of developing countries, to undermine the development of developing countries.

Here is China's offer,

We finance the project, therefore
we will charge you three times the regular bid unlike other builders and
there is no competitive bidding.
And oh we bring the entire construction crew from china.

This what we call sub-prime offer, kinda like subprime lending ! This is when the lender thinks you can't get a better deal than the one lender is offering. China is basically trying to fund work for its own workforce in BD.
China forced Western corporations to share technologies and methods to get access to local markets.
BD should do the same with China.
 
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Bilal9

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China forced Western corporations to share technologies and methods to get access to local markets.

BD should do the same with China.
We can always ask - but will they comply?

And more importantly, if they don't, do we have other options, like Korea or even EU?

At the end of the day, business is business.
 

fallstuff

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We can always ask - but will they comply?

And more importantly, if they don't, do we have other options, like Korea or even EU?

At the end of the day, business is business.
Business is business. Bangladesh provided China with billions of $ of contracts over the decades. Its time Bangladesh start to figure out how to do the projects on their own. This does not mean end of working with Chines loans or companies, but to have some in-house companies with similar capabilities.
Its a shame we have the engineers and some willing politicians, just not the project management knowledge needed to put all these together.
 

Bilal9

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Business is business. Bangladesh provided China with billions of $ of contracts over the decades. Its time Bangladesh start to figure out how to do the projects on their own. This does not mean end of working with Chines loans or companies, but to have some in-house companies with similar capabilities.
Its a shame we have the engineers and some willing politicians, just not the project management knowledge needed to put all these together.
We can get very experienced older retired Project managers from Western countries, friendly Muslim countries like Turkey, Pakistan, Indonesia, Malaysia or even Australia (for rail technology purposes). Of course some countries like Australia are more developed in Rail expertise. English skills are a must have.

These experts (as I have seen) usually have a great amount of expertise and experience over managing projects and most of them are PMP (Project Manager Certification) certified as well. We have a dearth of Project Management expertise locally somewhat and need to infuse new blood, considering how many mega projects are going on at the same time.

If we pay them good salaries (maybe similar to Dubai salaries), these 50+ older people can be easily employed locally (or even remotely, via zoom as we do nowadays), for technology transfer and supervision purposes.

This is what countries like Malaysia, Thailand and Singapore did, we can do the same.

A final note, I am sorry - I will not support hiring Indian consultants, especially Hindutva chest-beaters. They typically have interests in bringing in more business from India, which is not helpful. We have enough Sanghi Indians working in Bangladesh.

A local PDF West Bengal "expert" has recently claimed in a recent post (for example) that we in Bangladesh are uneducated and cannot run our country without expertise from India. This is what I'm talking about. :coffee:
 

Indos

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Well this is a game of one-upmanship between Chinese contractor and Railway Ministry. They are bargaining hard.

If we look at it carefully, Railway ministry may have the upper hand. They may have other options (Korean, and Allah forbid, Indian). I don't know if the Chinese contractor does...
Indonesia should be put on the consideration
 

Indos

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We include local companies

The Indonesia Railway Development Consortium has announced plans to begin work in 2021 on a 400km rail line between Vietnam and Laos for a price of $1.9bn

The consortium is made up of INKA, Indonesia’s state-owned train maker, and Indonesian Railways Company, its main operating company. It also includes electronics company Len Industri and contractor Waskita Karya.


The consortium has signed a cooperation agreement with Vietnam’s HT Construction company and Laos’ PetroTrade.
 

Bilal9

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Indonesia should be put on the consideration
Yes brother - why not?

I did mention Indonesia in post #10 above.

I think Bangladesh will even pay premium to give business to PT INKA which has successful track record in Bangladesh. People are very happy with PT INKA coaches being used in our Railway. :-)

At some point - PT INKA may help refurbish our old coach factories with equipment from Indonesia to help assembly (and eventual manufacture with parts) of Indonesian coaches locally. The demand for coaches locally has exceeded the threshold where it is profitable to assemble coaches from CKD parts.
 

zhxy

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There are 3 options:

1. Investing in the project and recovering capital through ticket sales: This is a risky solution, because the project's cost is very high and it is difficult to recover the investment.

2. Investment in the form of loans and mortgages: The project will be successful and Chinese investors will receive benefits. But it is a political risk. Maybe in the future, many Bangladeshis will see this as a "debt trap" and a Chinese conspiracy. Relations between the two countries will be affected.

3. Cancel the project. Avoid future financial and political risks.
 

Bilal9

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There are 3 options:

1. Investing in the project and recovering capital through ticket sales: This is a risky solution, because the project's cost is very high and it is difficult to recover the investment.

2. Investment in the form of loans and mortgages: The project will be successful and Chinese investors will receive benefits. But it is a political risk. Maybe in the future, many Bangladeshis will see this as a "debt trap" and a Chinese conspiracy. Relations between the two countries will be affected.

3. Cancel the project. Avoid future financial and political risks.
I don't think we are in Sri Lanka situation of debt trap. In fact we just lent them 200m to bail them out on the Hambantota port payments.

The thing to watch is National debt to GDP ratio, so you can service (or better, pay off) debts. Bangladesh in this respect is doing a lot better than other developing countries.

Sri Lanka's issue was that their GDP total was not sufficient to service the humongous infra debts...

Current debt to GDP for India (for example) is around 90%, whereas that for Bangladesh is around 44% (and that, with two dozen mega infra projects ongoing). This railway thing is a tiny project in relation to the other ones.



@Destranator bhai am I right, or am I right? :-)
 
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