Rail line promises to be 'new Silk Road'

Legend has it that Chinese Emperor Wudi of the Han Dynasty (156-87 BC) once looked to the lands west of his vast empire and proclaimed them to have people who placed "great value on the rich produce of China".

That regal observation soon spurred exploration of those foreign lands, leading to a network of trading routes between the East and West that came to be known as the Silk Road.

The historic route declined in the centuries that followed as maritime trade increased, but there are now renewed efforts to revive the continental link - this time through the latest addition to the Eurasian land bridge rail.

Connecting Lianyungang port in East China's Jiangsu province to distant Belgium, the railway is being promoted as a shorter, more efficient way to transport goods between China and Europe. Lianyungang lies near the center of China's eastern coastline, where the country's southern economic and manufacturing hubs have helped enrich cities in provinces like Jiangsu and Zhejiang.

The land bridge traverses more than 10,000 km through China, Central Asia and Eastern Europe before arriving at European trading hubs like Rotterdam and Antwerp in about two weeks. The route is expected to benefit more than 40 countries and regions by taking less than half the time and enjoying a similar reduction in costs compared with transporting goods by sea.

Other routes under the Eurasian land bridge concept include an earlier one that consists of the Trans-Siberian Railway and the Russian seaport of Vladivostok. Yet another rail link considers connecting the southern Chinese city of Shenzhen with Rotterdam, through a 15,000-km route across 17 countries and regions - via Guangdong and Yunnan provinces as well as the Guangxi Zhuang autonomous region in China - before entering Myanmar, Bangladesh, India, Pakistan, Iran and Turkey toward its western destination.

Faced with higher production costs, maturing manufacturing industries and changing economic modes in eastern China's more economically developed coastal areas, Chinese authorities are now stepping up efforts to promote the benefits of the latest working route of the land bridge for Chinese goods to reach markets in the West as they look for ways to stay competitive.

Shen Dingli, professor of international studies at Shanghai-based Fudan University and executive dean of its Institute of International Studies, said the land bridge can help break the logistical barriers and bottlenecks in China's regional logistics flow as the country's western regions stand to benefit significantly from the new link.

To that effect, Chongqing, the southwestern municipality and an increasingly important manufacturing and trading hub of inland China, is already positioning itself as the latest crucial link of this Eurasian land bridge.

The megacity, one of the largest and fastest growing cities in the world with a 32-million-strong population, has opened a route to form part of the land bridge in the north at Shaanxi's provincial capital Xi'an - the historic city that flourished as the Chinese terminus of the Silk Road centuries ago.

The new link is expected to offer an attractive alternative for trading companies in Chongqing that need to operate through southern Chinese coastal ports such as Shanghai or Guangzhou before shipping their goods through the Strait of Malacca if they choose the maritime route, which can end up being more time consuming and costly.

Logistics companies such as DB Schenker and Far East Land Bridge are already using the land route to transport containers between Chongqing and European ports like Duisburg in Germany's Ruhr industrial belt.

The Chongqing-Europe link, which takes about two weeks, is banking on the megacity's goods coming from the IT, electronics, auto, steel, chemical and other sectors that are headed for European markets. Chongqing authorities said the railway will also seal the city as an international logistics hub by connecting the Yangtze River Delta economic belt to Europe.

Xu Ming, a senior official of Chongqing municipal committee, said the land bridge will be vital to China-Europe businesses.

"The old Silk Road connected the Eastern and Western empires. It was a great trading route of utmost importance and a vital artery in international commerce and the exchange of ideas between the East and West.

"This new route linking Chongqing to the West is the next big thing. It can shorten present shipping times by up to 20 days. It has received full support from various government ministries and departments to ensure the smooth flow and handling of goods. In terms of safety and security, it trumps the threats that maritime shipping might face, such as piracy," Xu said at this year's Liangjiang Forum in Chongqing to discuss the development of the land bridge as part of the challenges and opportunities in western China with business leaders and officials from both sides. Xu is also the director-general of the administrative committee of Chongqing's new Liangjiang development area.

"This 'New Silk Road' is better, faster and more efficient as it transports valuable goods between China and Europe. China-EU trade last year hit nearly $600 billion. Europe is China's biggest export market and we are Europe's second largest. In terms of luxury goods, China is set to become the largest market and that also has great significance for the European luxury goods market," he said.

"Chongqing is a major manufacturing hub and draws on the strengths of the Yangtze River Delta as an economic center. Its transportation links connect important cities and regions.

"As the next major trading link between China and Europe, the economic significance of its impact on helping the European debt crisis cannot be underestimated."

Zhai Qian, deputy director-general of the European Department at the Ministry of Commerce, said the European market and its development is extremely important for China and that has most recently been expressed in Chinese leaders' visits to the EU.

"The next stages of the Chinese economy spelled out in the country's 12th Five-Year Plan (2011-15) that call for sustainable development offer numerous opportunities for China-European businesses to contribute," Zhai said.

"Multipronged efforts are already being made to expand the exchange of goods and services between the Chinese and European markets and we will continue to encourage the development of these sectors of the new economy."

Jens Ruebbert, senior vice-president of the European Union Chamber of Commerce in China and managing director and chief administrative officer of Deutsche Bank (China), said the chamber is well aware of Chongqing's growth and it is "quite committed" to opening its next office in the megacity.

"There is no doubt about it. EU-China economic relations are hugely important. In 2011, the EU-China trade relationship was the second largest in the world. In 2012, it is expected to become the largest in the world," said Ruebbert, whose chamber now has more than 1,700 members split into 42 working groups with seven local chapters in China.

"The EU and China have both recently issued medium-term development strategies and these two strategies are very similar. The core of both the EU's 2020 strategy and China's 12th Five-Year Plan is the guide for green and sustainable growth based on innovative products. China aims to rebalance its economy through increasing domestic consumption and opening its economy further. This process will bring the economies of China and the EU closer.

"The EU offers great opportunities for China and for increasing cooperation. In a time of continued debt crisis in Europe, China has indeed opportunities to increase its investment in Europe. The European chamber is a proponent of open markets and welcomes and encourages such investment."

The Chinese government's "go west" policy to spur investment inland also bodes well for EU companies that are making their presence felt in Chongqing, Ruebbert said.

"It absolutely creates opportunities for EU companies. This Eurasian railway is really very efficient. We have heard it takes less than about 16 days, it is less than half the shipping speeds with convenient customs passing and integrated operating platforms. It will also serve to further enhance the economic and trade ties between China and Europe, and to attract investment to Chongqing. It shows the logistics development of Chongqing and offers opportunities for further European cooperation. The railway is another example of the strong competitive advantages of Chongqing and contributes to efficiency to infrastructure."

Fudan University's Shen pointed out that the Chongqing connection in the Eurasian land bridge can help transfer foreign investment to western China, significantly increasing the export capacity of the megacity.

"In recent years, Chongqing has been promoting the production capacity of notebook computers to reach 1 million units annually, which is the sum of China's six coastal provinces. This strategy itself is a major boost to the economic boom of Chongqing and the central regions," Shen said.

Mu Huaping, director of Chongqing's Municipal Commission of Economy and Information Technology and head of the Municipal Logistics Office, said when the authorities discussed the latest rail link two years ago, they were still not confident of the project. But it has taken just that time for them to be convinced of the numerous benefits of the connection and the role it will play in cross-border trade.

"Chongqing's auto and electronics products are seeing strong growth. Of these, the low-end variety heads to Shenzhen before being transported by ship to Western markets, while more high-end products are delivered by air. We started exploring the land bridge as an alternative to these routes," Mu said.

But he said there are many issues that still need to be resolved before the bridge can be operated optimally. These include different track gauges in countries like Russia along the route, the limited storage capacity of rail containers when compared to those used on ships, time-consuming land border checks and extreme temperature and environmental conditions as the trains wind through Central Asia and Eastern Europe, all of which make the cost of using the land bridge significantly higher than maritime shipping.

"Stakeholders in the West and China, as well as those along the route, need to work together to iron out these issues to get the land bridge rolling. We are now providing the necessary platforms for these to happen," Mu said.

To that effect, a logistics company is also being set up to serve as a platform for the rail link co-funded by the Chinese, Kazak, Russian and German railway authorities.

"Lowering the cost will be the major factor in making this land bridge more competitive, especially when many Chinese exports headed to the West are extremely sensitive to price differences. These are naturally the top concerns for businesses that choose the land bridge over other forms of shipping."

Similarly, He Mingke, vice-president of the China Society of Logistics, pointed out that the land bridge traverses six different countries, all with political, economic and environmental conditions that could pose major obstacles to the smooth running of the railway.

"The success of the land bridge will ultimately depend on factors including a concerted political will and coordination of technology and operational systems for businesses to become confident enough to use it."

But Claudio Facchin, senior vice-president of Swedish-Swiss power and automation technology giant ABB Group and president of its North Asia Region, said European companies such as his are already taking advantage of Chongqing's efforts to play a central role in China-EU trade via new channels such as the land bridge.

"We see the particular importance of being here in the western region, particularly in Chongqing. It has been growing at almost double the speed of the country, which we all know is the largest growing market."

Facchin's confidence in the growth of the region and the logistics advantages of the megacity follow those by various industry leaders including IT giants Acer and Hewlett-Packard.

Automakers have also been quick to move, with Ford China investing in at least three factories inland. Germany's largest steelmaker ThyssenKrupp has also said it was planning an assembly shop, painting workshop and quality control laboratory in the region to help provide parts for major automakers.

At the Liangjiang forum, Jochum Haakma, chairman of the Netherlands Council for Trade Promotion, cited a Chinese saying of an auspicious purple cloud being blown from the east, to allude to the help that the Chinese economy will give to its beleaguered counterpart in the West.

"We have seen from all this that China is in relatively very good shape while the European Union is anything but. So whenever this purple cloud appears again in the East, in China, you should send it straight to the West to help us."




China Railway Operator Offers To Build $1.3-B LRT 1 Extension

China’s biggest railway builder and operator China Railway Construction Corp. Ltd. (CRCC) has renewed its commitment in building the $1.3-billion LRT Line 1 extension to Cavite province under PNoy’s Public-Private Partnership Program.

This was bared by Jerome Canlas, executive vice president of Ecorail Transport Services, Inc., the original proponent for the construction of LRT-1 Extension, who said that its foreign partner China Railway Construction Corporation Limited, one of the world’s leaders in railways construction and technology, has relayed to the consortium that that it wants to pursue the project under the PPP.

Canlas said Ecorail is already in the third stage of its unsolicited proposal to design, finance, build, transfer and manage has the advantage over the project proponents considering its track record in railway and train construction and its strong financial capability is readily available once the government gives the final for the project to proceed.

CRCC is one of the biggest in the world with assets of more than US$1 trillion and ranked 6th consistently for a period of nine years in the 225 largest contractors and among the top 500 enterprises in the world by Forbes magazine. CRCC is the operator of the world’s fastest train that traverse the Wuhan-Guangzhou line. CRCC, has already built 34,000 kilometers of railway tracks in 60 countries all over the world, including the 1,200-km Qing Hai-Tibet railway line. In 2008, CRCC listed its shares in the Shanghai and Hong Kong Stock Exchanges, raising the second largest initial public offering (IPO) in the world with US$ 5.71 billion second only to the IPO of Visa with US$19.65 billion.

“We hereby affirm our interest to cooperate with your esteemed organization to jointly pursue the above project which not only further underscores our mutual long term relationship but also progression of the framework of cooperation agreement entered into by both our organizations in Tianjin in June 2009, Hu Zhenyi, CRCC Executive Director and Vice President, said in his letter to Ecorail.

Cost-wise, the infrastructure development of Ecorail proposal is a lot cheaper at US$ 42.165 M per kilometer as against the other proposals at more than US$ 45 M per kilometer. The proposal for electro-mechanical works inclusive of the provision for rolling stocks sufficient to accommodate the peak ridership at 25 minutes headway over a period of time is also cheaper at US$409.14 million as against other proposals.

Ecorail is composed of well-experienced and experts in the fields of project financial packaging, project development inclusive of Engineering, Procurement and Construction as well as Operations and Maintenance Management at par with international standards.

Ecorail proposition will reduce the government’s balance of payment deficits and/or reduce subsidies which are advantageous to the Philippine Government, which is expected to minimize exposure to the project because it has no government guarantee.

Length-wise, the alignment of the LRT Line 1 South Extension proposed by ECORAIL is longer by more than 4 kilometers with its terminal point in Imus, Cavite as against the other proposals with terminal stations in Bacoor, Cavite. The project provides the much-needed link between the southern cities and municipalities of Cavite province and northern cities of Metro Manila. The railway system is intended to provide an efficient and reliable mode of transportation to help decongest the main arteries of Metro Manila.

LRT 1 extension will supplement the LRT 1 by extending it from Baclaran to Imus, Cavite; It will pass NAIA, Sucat, both in Paranaque Las Pinas, Zapote in Muntinlupa, and Talaba, Bacoor, Aguinaldo and finally Imus, all in Cavite.

Canlas said Ecorail has a ‘programmed solution’ for system enhancement and full integration provided by its designated team of specialists covering the North Line 1 Extension, the Existing Line 1 and the proposed South Line 1 Extension into a ‘‘seamless operation.’’






China may fund Cambodia-Vietnam rail

Cambodia was in discussions with the Chinese government on funding for a 250-kilometre stretch of rail line between Phnom Penh and Vietnam, in what Cambodian officials yesterday called a move away from a “complicated” Asian Development Bank loan.

Va Sim Sorya, director general at the Ministry of Public Works and Transportation, said the government could do without the requirements tagged to ADB loans, and fund the project with up to US$600 million in Chinese backing.

“China doesn’t have so many conditions, but Chinese technicians are still well-studied,” he said yesterday at a workshop on infrastructure, although he did not specify which conditions were undesirable.

Interest rates on ADB concessional loans averaged an annual 1.32 per cent after grace periods, according to data compiled by NGO Forum for Cambodia last year.

China’s concessional lending held the highest rates from any institution or country at an average 1.83 per cent per year.

ADB’s social safeguard policy from 2009 listed several requirements for compensating and restoring income to those affected by its rail project, although some NGOs have claimed that the bank has not followed some of the specifications.

Loans from China did not appear to have any such conditions.

“ADB stands by its very comprehensive and well-developed safeguards. That’s something that comes along with the loans,” Peter Brimble, deputy country head at ADB Cambodia, said yesterday.

Projects implemented by China happened more quickly than those by “other parties”, Tram Iv Teuk, Minister of Public Works and Transportation, added yesterday.

The railway rehabilitation project on the country’s northern and southern lines – of which the majority was funded by ADB – saw substantial setbacks earlier this year when concessional holder Toll Royal quietly suspended its operation, reportedly because the project was taking too long.

Now, a 300-kilometre section of track on the northern line lacks the funding to be completed, ADB said last month.

Finding new sources of funding was the responsibility of the government, the bank noted.

Yesterday’s announcement from the government met with strong opposition from Sam Rainsy Party lawmaker Son Chhay, saying Chinese companies have built low-quality roads and other infrastructure at higher interest rates.

“We don’t oppose the need to get funding to serve the national economy, but it must be done transparently,” he said, adding that no bidding process existed for such projects.



China Trainmaker CSR Says Euro Crisis Deters Europe Deals

CSR Corp. (1766), China’s biggest trainmaker by market value, is unlikely to act on proposed acquisitions in Europe this year because of concerns about the region’s economy and the future of its single currency.

“The debt crisis in Europe is still developing and I think there is a risk of the economy getting worse,” Chairman Zhao Xiaogang said in a June 8 interview in Beijing. “I want to stay calm and watch for a while.”

The debt crisis threatens the long-term profitability of companies in Europe and it could cause the euro to tumble, which would cut the value of earnings repatriated to China, Zhao said. CSR, based in Beijing, said in April that it was in talks on possible deals in Spain, Italy, Germany, the U.K. and France, to add new technologies and to pare its reliance on domestic sales.

“It makes sense that CSR is being prudent, given the economic and credit environment in Europe right now,” said Han Weiqi, a Shanghai-based analyst at CSC International Holdings Ltd. “CSR should have little worries about other European competitors stealing a march on them, as the overall environment is tough.”

Zhao declined to comment on specific deals that the company had considered. Italian newspaper Il Sole 24 Ore said in April that the group had bid for stakes in Finmeccanica SpA (FNC)’s train- making unit AnsaldoBreda and signal-maker Ansaldo STS SpA. (STS)

Spain, Greece
The euro has weakened 16 percent against the yuan in the 12 months through June 8, as European leaders struggle to revive growth and to reign in debt crises in countries including Spain and Greece. Spain requested a bailout of as much as 100 billion euros ($125 billion) to rescue its banking system over the weekend.

The euro crisis “means we may be able to buy an asset at lower price, but the economic slowdown also threatens companies’ survival and development,” Zhao said. “It is a dilemma.”

CSR will focus its export push on Southeast, Central and Western Asia, possibly including the formation of overseas ventures, Zhao said. The company, which also makes carriages, wagons and wind turbines, signed an agreement to assembly shunting locomotives in Kazakhstan last month.

The trainmaker will have “no problem” doubling overseas orders this year, and foreign markets will account for 10 percent of sales, Zhao said. The company wants to generate 20 percent of sales overseas by 2015 from 7.7 percent last year, he said in April.

Still, high-speed trains are unlikely to form part of China’s rail exports for at least five years because many overseas projects, including one in California, are still at an early stage, Zhao said. The company said in 2010 that it planned to work with General Electric Co. (GE) on bids for high-speed contracts in the U.S., including the California line.

China Reforms
In China, rail construction has slowed following a fatal high-speed crash in July and the ousting of a minister in a corruption probe in February 2011. The government is now under taking reforms including public tendering and the introduction of private capital into rail projects.

CSR has dropped 16 percent in Hong Kong since the July 23 crash, matching the decline for the benchmark Hang Seng Index. It rose 2.1 percent to HK$5.82 today. In Shanghai, the trainmaker has tumbled 29 percent since the accident, while rival China CNR Corp. has fallen 33 percent. The benchmark Shanghai Composite Index has lost 17 percent.

CSR will consider investing in urban rail projects in second or third-tier cities in China to help boost sales, Zhao said. The trainmaker is also in talks with the rail ministry as it works to develop a vendor-financing business, he said.

“We hope the country can have a breakthrough in this area,” Zhao said. He didn’t elaborate.






Mongolia on track to supply Asia with coal

Already the landlocked north Asian state supplies 44 per cent of the coking coal imported by China, compared with Australia's 22 per cent market share.

But there is also the looming threat that a new railway could mean Mongolian coal can be supplied more cheaply and quickly to our large markets in Japan and South Korea.

It takes a bulk carrier up to 17 days to haul coal from Newcastle to a South Korean port. Once a proposed new Mongolian rail line is built it will take just three days to transport coal to ports in Siberia and just a few days sailing across the Sea of Japan.

Everybody, it seems, wants a piece of the Mongolian resources action. The latest mover is Singapore state investment agency Temasek, which has taken a 5.5 per cent stake in Canada's Ivanhoe Mines, 66 per cent owner of the huge Oyu Tolgoi copper-gold mine. Just weeks earlier, the Steel Authority of India inked a deal to gain access to coking coal and iron ore projects in Mongolia.

 Standard Chartered says China is likely to seek increasing supplies of coking coal from its northern neighbour given its prices are cheaper (by about $US25 a tonne) than from the seaborne trade.

We've been overtaken by Indonesia as the largest supplier of thermal coals to China. Indonesia has used its closer proximity to Chinese ports to account for 35 per cent of China's thermal imports, leaving Australia in second place. Mongolia is coming up fast, with Standard Chartered expecting almost all of Mongolia's thermal coal output to be transported by rail to Chinese power stations.

But the biggest of all the projects is the plan to build a 1100km railway from the Tavan Tolgoi deposit in the southern Gobi desert to the Siberian coast to access the Japanese and South Korean markets. This deposit contains six billion tonnes of coal, 1.6bn tonnes of which are high-calorie coking coal.

Meanwhile, an Australian company, Aspire Mining, which claims to have the third largest coking coal resource in Mongolia, is to benefit from the new 406km Erdenet-Moron railway, which will carry the coal to the main trans-Mongolia line.

The top 10 deposits in Mongolia are said to have a combined minerals value of $US2.75 trillion.

But even smaller projects have been of interest in the big foreign players. The Japanese, for example, have been very active in trying to nail down rare earths projects in the country.

Nuclear alternatives

BACK in Japan, meanwhile, there has been a lot of effort to lessen the demand of industries for expensive raw materials.

With the closure of all the country's nuclear reactors, Japanese companies are firing ahead with plans for alternatives to buying more imported liquefied natural gas and coal to provide electricity.

The Nikkei news service reports that Nippon Telegraph and Telephone Corp is getting into the solar power business. It plans to build what are being called megasolar farms on idle sites and sell the output to utilities.

The initial six plants, to be completed by January, will have a combined generating capacity of 11 megawatts.

Altogether, about 40 large companies have announced plans to generate electricity.

Kyocera, the diversified giant making products from document imaging equipment to cutting tools, is involved in building a 70MW solar plant in Kagoshima prefecture while train operator Kintetsu (which also runs shipping companies and sells real estate) is building a 20MW solar plant on idle land along one of its railway lines. Mitsui Chemicals is also getting into solar generation while convenience store giant Lawson will have solar panels on 1000 of its stores by February.

On the metals side, the advanced materials section of Tohoku University has come up with a lithium-ion battery (used in hybrid and electric vehicles) that has dispensed with nickel and cobalt, making them a good deal cheaper to manufacture.

Japanese companies have been mounting a massive effort to reduce the reliance on rare earths. Hitachi has just unveiled an electric motor containing no rare earths and Mitsubishi is aiming to produce hybrid cars that no longer rely heavily on several rare earth metals.

Red hot futures

WHILE we're all down in the mouth on everything from copper to oil, India's National Commodity and Derivatives Exchange is a place you can still get a bit of action.

Chilli futures prices hit their daily upper limit this week on strong export demand, traders were scooping up oilseed and soy oil contracts due to a shortage of soybeans while barley prices jumped 2 per cent on Tuesday thanks to strong demand from breweries and cattle feed makers.

Things weren't quite so rosy for turmeric and pepper sellers, with futures slumping on weak demand.

Still, you can't win 'em all.


Storm disrupts railway in central China

Heavy storms triggered flood in central China's Hunan Province Sunday, inundated parts of Jiaoliu railway(Jiaozuo-Liuzhou Railway), a major trunkline railroad in central and southern China.

Heavy rains poured down around 2:15 Sunday in Hunan, inundated parts of railway and track bed of Jiaoliu Railway in Gaoqiao Village, Qiancheng Township of Huaihua City, according to sources from Guangzhou Railway (Group) Corporation.

Freight trains were mainly affected on the railway, and only one passenger train was suspended for about five hours, an official of local railway department said.

Rescuers have been mobilized to the spot to repair the railway. The railway traffic is expected to resume at about 8:30 Sunday evening, local railway department said.

Jiaoliu Railway, linking Jiaozuo City, central China's Henan Province, and Liuzhou City, southwestern China's Guangxi Zhuang Automonous Region, runs north to south through Henan, Hubei and Hunan province and Guangxi region.







Landslide disrupts railway traffic in central China

Torrential rains triggered landslide in central China's Hunan Province Sunday evening, disrupting traffic on Hukun Railway, local authorities said Sunday.

Hukun Railway, linking Shanghai and Kunming, capital of southwest China's Yunnan Province, is a major rail line across eastern, central and southwest China.

The landslide, which occurred at 7:54 p.m. in Lianyuan City, Hunan, buried parts of the railroad track, according to sources with Guangzhou Railway (Group) Corporation.

Workers were dispatched to the spot to clean and repair the railway, local railway department said.

Sutor Technology's Board Approves JV With China Railway Materials Wuhan

Sutor Technology Group Ltd. (SUTR: News ) said Wednesday that its Board of Directors has approved a plan for a joint venture among its indirect wholly owned subsidiary, Jiangsu Cold-Rolled Technology Co., Ltd., China Railway Materials Wuhan Company Limited, a subsidiary of China Railway Materials Company Ltd., and Changshu Binjiang Urban Construction Investment & Management Company.

The registered capital for the joint venture is about $16 million, among which, about $6.24 million will be contributed by Cold-Rolled.

Initially , the venture will be used mainly to provide raw material procurement, logistics and other related services to third parties.

Lifang Chen, Chairwoman and CEO of Sutor, said, "We believe the joint venture will improve our vertically integrated business model by extending our value chain into the upstream raw materials purchases. In the long term, we also believe it will open doors for other strategic growth opportunities."


Big Chinese firm eyes LRT 1 extension project

The project extending the LRT Line 1 to Cavite province makes a forward stride with the publication Monday, June 4, 2012, of the invitation to interested parties to prequalify to bid for the P30-billion contract.
Despite territorial tensions between Beijing and Manila, China Railway Construction Corp. (CRCC), China’s second-biggest state-owned construction company, has signified its interest in taking on the Light Trail Transit (LRT) South Extension project to be bid out this year. But instead of participating in the bidding process for the project, the Chinese company’s partner, Reghis Romero II-led Ecorail Transport Services Inc., has proposed a joint venture with the government. Should its proposal be accepted, Ecorail said it would bring to the Philippines the same cutting-edge, affordable train technology that has allowed China’s own railway system to prosper. The Department of Transportation and Communications (DoTC) last week published its invitation for interested parties to “prequalify” to bid for the P30-billion project—currently the most expensive contract on the state’s auction block. Ecorail executive vice president Jerome Canlas said CRCC had sent a letter signifying its willingness to pursue the project, which it first explored in 2009. “We hereby affirm our interest to cooperate with your esteemed organization to jointly pursue the above project, which not only further underscores our mutual long-term relationship but also progression of the framework of cooperation agreement entered into by both our organizations in Tianjin in June 2009,” CRCC vice president Hu Zhenyi said in the letter to Ecorail. The LRT South Extension will lengthen the current Baclaran-to-Roosevelt line, known as “Line 1,” to Imus, Cavite, passing through Parañaque and Las Piñas cities. The winning contractor will also be tasked to operate the entire Line 1 from Cavite to Quezon City. The government’s plan is to split the project in half, with the private sector funding and handling the civil works costing P30 billion and the government acquiring the new trains and electromechanical systems for another P30 billion. But Ecorail said it would submit a proposal to take on the entire project on its own since it had more than enough cash for it. “Ecorail [will] fully provide the financial requirements of the project without government subsidy unlike other propositions seeking overseas development assistance (ODA) from multilateral and bilateral funding agencies that require counterpart funds from the Philippine government,” Canlas said. Despite giving the government access to cheap capital, the main disadvantage of ODA funding for taxpayers is the usual limitation on the participation of Filipino contractors as subcontractors, in favor of foreign contractors from sponsor countries. Under its proposed joint venture, the government’s only part would be to provide the land to be used for the project. In return, the government would get a share in fare revenues. Canlas said the Ecorail-CRCC partnership would complete the project in 36 months, much faster than the government’s own projection of completing it in close to four years. CRCC is one of the biggest construction companies in the world with assets of more than $1 trillion. CRCC has already built 34,000 kilometers of railway tracks all over the world.





China’s top train group, PHL firm in joint bid for P60-B LRT project

CHINA’S biggest railway builder and operator, China Railway Construction Corp. Ltd. (CRCC), and Ecorail Transport Services Inc. will partner to bid for the P60-billion LRT (Light Rail Transit) Line 1 extension to Cavite.
Jerome Canlas, Ecorail executive vice president, said CRCC recently expressed its interest to build the railway system.

“We hereby affirm our interest to cooperate with your esteemed organization to jointly pursue the above project, which not only further underscores our mutual long-term relationship but also progression of the framework of cooperation agreement entered into by both our organizations in Tianjin in June 2009,” Hu Zhenyi, CRCC executive director and vice president, said in his letter to Ecorail.

Canlas, in a statement, said Ecorail has the advantage over the other project proponents, considering its track record in railway and train construction as well as its strong financial capability.

Hu’s statement came ahead of that of Philippine Vice President Jejomar Binay, who over the weekend said ties between the Philippines and China have remained intact despite “focal points raised by political concerns of the times.”

Binay cited the need to maintain the two countries’ long-standing

CRCC is the operator of the world’s fastest train in Beijing and has built 34,000 kilometers of railway tracks all over the world.

Canlas said Ecorail is composed of experts in project financial packaging, project development inclusive of engineering, procurement and construction as well as operations and maintenance management at par with international standards.

Ecorail’s proposal is seen to reduce the government’s balance-of-payment deficits or reduce subsidies or both, which are advantageous to the Philippine government. Manila is expected to minimize exposure to the project because it has no government guarantee.

Canlas said Ecorail is proposing a “socially-acceptable” average fare optimization level of P16.50, plus distance-related fee of P 1.90 per km. The Ecorail proposal, he added, indicates a faster project start-up with initial funds readily available and shorter project completion of 36 months as against other proposals of more than 44 months.

Last week the Department of Transportation and Communications (DOTC) published bid invites for the railway project.

Of the P60-billion approved budget cost of the project, P30 billion will go to construction works for the extension of LRT Line 1 to Cavite, while the balance, which will come from a loan from the Japan International Cooperation Agency, will be used by the government to purchase train coaches.

The DOTC said the bidder must be able to provide the design, engineering and construction works as well as completion of the extension of the existing LRT Line 1 to Cavite.

The Cavite extension will increase the span of Line 1 from 20.7 kms to 32.4 kms. Approximately 10.5 kms of the extension project will be elevated.

The existing LRT Line 1 runs from Roosevelt in Quezon City until Baclaran in Pasay City. The extension will involve adding stations to the existing railway in Redemptorist, Manila International Airport Road, Asia World, N. Aquino, Dr. Santos, Manuyo Uno, Las Piñas, Zapote, Talaba, and Niyog in Bacoor.

The DOTC said the bidder must also be able to operate and maintain LRT Line 1. It added that whoever wins will have to replace the train fleet and undertake required rehabilitation works on the railway infrastructure and systems over the life of the concession.

Firms interested in the project can get a copy of the invitation to pre-qualify and bid, information memorandum and instructions to prospective bidders at the DOTC’s office from June 1 to August 21, for a nonrefundable fee of P50,000. Only those who have purchased the invitation documents shall be allowed to participate in the pre-qualification and bidding process.

In maintaining that Manila-Beijing relations continue to be cordial, Vice President Binay, however, said, “No friendship shall ever be perfect. There will be tests and challenges, and our shared path has seen and will continue to encounter twists and turns.”

He was guest speaker at the celebration of Filipino-Chinese Friendship Day and the commemoration of the 37th year of the establishment of diplomatic relations between the Philippines and China at the Century Park Hotel in Manila.

“There are those who would be quick to look at the obstacles along that road and plead with us to abandon the voyage altogether.  But the richness of our past gives us the certainty that all things can be settled not just peacefully but justly between friends,” the Vice President said.

To strengthen the countries’ bilateral relations, he suggested that Manila and Beijing explore other venues for partnership other than trade.

Binay counted among these opportunities the potential for investing in human capital through knowledge and skills-sharing, especially in communication tools that will help conquer the language barrier between the two countries as well as other nations in the world.

“As the golden galleon of economic power sails from West to East, let us widen the scope of our solidarity in the causes of peace and development,” he said.

“We are commemorating the generous gift of friendship between the Filipinos and the Chinese. This gift has brought great joy to all of us and bound by our fraternal concern for each other, we work hard to ensure that nothing but joy shall be shared by our succeeding generations,” Binay added.






Russia-China cooperation on rail has potential

Russia-China cooperation on development of high-speed rail and a trans-Eurasian rail corridor has "huge potential, the president of Russian Railways (RZD) said here Friday.

Under a government strategic plan, Russia will build by 2030 some 20,000 km of new railways, including 5,000 high-speed lines, Vladimir Yakunin told Xinhua on the sidelines of an international railway forum.

"Russia is expected to develop a railway network, including high-speed rail lines, from Kazan and Yekaterinburg (in central Russia) to Khabarovsk and Vladivostok (in the Far East region)," Yakunin said.

"In this field, we are willing to cooperate with China's railways and financial institutions," he added.

"China has rich experience in high-speed rail construction, which creates rooms for further cooperation between the two countries in this field," he added.

Meanwhile, Yakunin admitted that there are some delays in implementing a memorandum of understanding signed by Russia and China in 2009 on joint development of high-speed railway system in Russia.

There is no change in Russia's stance on the construction of high-speed rail, but the state-owned RZD is still seeking suitable finance and profit modes, he explained.

Yakunin, who will soon visit China with a Russian delegation led by President Vladimir Putin next week, said that he would meet with China's railway authorities on further bilateral cooperation.

On the development of a rail corridor from the southwest Chinese city of Chongqing to Germany's Duisburg, Yakunin said that China and Russia have signed cooperation documents and formed joint ventures.

Last July, the new route was officially launched in Chongqing. It offers a major shortcut to traditional sea trade routes and shorten travel time to Europe from about 36 days by container ship to just 13 days by freight train.

"This is the first step of the corridor construction," Yakunin said.

The train services are expected to be increased to once per day in the future as Chongqing's exports to Europe increase. Currently the train leaves Chongqing for Duisburg once a month.

Russia is now pondering the future transit fee policy following the development of the route and will later coordinate with the Chinese side, he said.

Besides, Yakunin said the new trans-Eurasian rail corridor is taking shape, thanks to the joint efforts of Russia, China and Kazakhstan.

Amid global economic uncertainties, such a corridor will boost the global and regional economy and enhance the competitiveness of countries of the railway routes, he said.


China eager to streamline railway infrastructure A high-powered delegation from China has expressed interest to get the Pakistan Railways back on the rails.

Led by Dongfang Electric Corporation (DEC), International, President Mr Luo Zhigang, the Chinese delegation had frank exchange of views with PR authorities in a very congenial atmosphere during a meeting at the railways headquarters, a participant told Dawn on Monday.

Railways General Manager (Operations) Junaid Qureshi informed the Chinese about extreme shortage of locomotives that had disrupted and forced the scaling down of train operations. He sought an earliest assistance by the Chinese to put their locomotives back on track.

The Chinese team suggested that the fastest way to get locomotives might be to speed up the implementation of the 75 locomotives repeat order and go for phase-II and phase-III of a maintenance contract to carry out rehabilitation and overhaul of the existing locomotives as the existing contract was merely for supply of running spares.

However, the Chinese team mentioned that they would not participate in the current tender for 150 locomotives due to restrictive specifications and gave the friendly advice that their exclusion from the bidding process would result in far greater prices to Pakistan Railways.

Dalian Locomotive Works (DLOCO) General Manager Li Depu spoke about the 69 locomotives project and expressed his deep concern over lack of funds and other reasons that had not been permitting the PR to carry out proper maintenance and upkeep of all its locomotives whether of Chinese or other origin.

DEC President Mr Luo reiterated his interest in railways projects like hiring of locomotives, supply of 500 wagons and 40 power vans besides Sino-Pakistan Rail Link.

DEC Vice-President Mr Hu Weidong confirmed DEC/DLOCO’s solidarity with Pakistan Railways in its time of crisis.

The Railways GM thanked the Chinese delegation and expressed his sincere desire to speed up the procurement of new locomotives and rehabilitation of existing ones according to government rules and procedures.

The Chinese delegation also comprised DEC Project Managers Luo Wencheng and Huang Xuehui and DLOCO Project Manager Li Zhidong while the PR was represented by Additional General Manager Asad Ihsan, Chief Mechanical Engineer Locos Mubeen and Deputy Chief Mechanical Engineer (Loco) Salman Sadiq.






Central firms to enter railway projects

Investment in national railway infrastructure reached 33.77 billion yuan ($5.334 billion) in May, reported Economic Information Daily on Thursday, citing a statement published on the Ministry of Railways’ official website.

According to the report, investment saw a year-on-year 20.1 percent drop compared to last year's 42.3 billion yuan. But the figure increased 16 percent month-on-month.

From January to May 2012, railway infrastructure investment achieved a total of 105.48 billion yuan nationwide, the report added.

Projects are currently undergoing a gradual recovery process, and some sites that were originally halted have now resumed work, industry insiders said.

Since the second half of 2011, funding problems for railway construction attracted a lot of attention. Centrally-administrated State-owned enterprises have prepared to enter the field.

The State-owned Assets Supervision and Administration Commission is currently coordinating central enterprises’access to railway infrastructure projects


China rail builders now mining overseas

After a three-year wait, China Railway Construction Corp. Ltd. (CRCC) recently won permission to launch a major copper mining project in Ecuador.

The production agreement signed April 25 by Ecuador’s government and Corriente Resources, a Canadian company jointly controlled by state-owned CRCC (HK:1186) (US:CWYCF)(CN:601186) and the Chinese state mining giant Tongling Nonferrous Metals Group Holdings Co. Ltd. (CN:000630), clears the way for digging to begin at the Mirador pit.

The deal first proposed in 2009 also marks the latest milestone in a quest by CRCC and other Chinese engineering firms to expand beyond domestic construction businesses by investing in mines around the world.

For example, CRCC’s main, state-owned competitor China Railway Group Ltd. (CRG) (HK:390)(CN:601390) (US:CRWOF), declared in a first-quarter 2012 financial report that it invested more than 200 million yuan ($31.5 million) in mineral resources last year and plans to open major mines this year.

“In the future, mining revenues will become a new growth point for the company,” the CRG report said.

In setting sights on the international mining industry, CRCC and CRG are betting that revenues from resource extraction in far-flung lands can make up for a slowdown affecting their domestic track-and-tie business.

Business has cooled since the Chinese government last year decided to cut back on railroad projects. Contributing to the decision was a corruption scandal in the national railways ministry and a deadly collision of two China Railways bullet trains that killed 40 people.

CRCC signed only 137 billion yuan worth of new railway contracts in 2011, down 68% from 2010, while CRG said its new contract orders fell 76% to 97 billion yuan. CRCC’s operating revenues declined 2.7% between 2010 and last year, while CRG’s net profit for the same period fell 9.6%.

“Market expectations are for domestic railway construction investment to slow further over the next few years,” an infrastructure construction analyst told Caixin. “For railway contractors such as CRG and CRCC to further develop, they will have to transform and seek new growth points for their businesses.

“The construction industry is highly impacted by state investment that can’t guarantee a company’s future development path.” he said.

Shifting gears
Market analysts say CRCC and CRG are following a trail blazed several years ago by another state-owned construction conglomerate, China Metallurgical Group Corp.

China Metallurgical shifted focus from its traditional field — domestic steel factory construction — to overseas mining. It now operates a lead and zinc mine in Pakistan, and has invested in nickel, copper and iron ore facilities in Papua New Guinea, Afghanistan, Australia and Argentina.

Its best-known asset is the Aynak copper mine in Afghanistan, which has 690 million tons of proven reserves including 11 million tons of high-grade copper.





Travelers taken for ride in MTR turnstile test

More than 100 MTR passengers who used a faulty turnstile at the Nam Cheong station were overcharged.
An MTR Corp spokeswoman said staff had been testing software on Thursday in preparation for a controversial fares hike later this month and miscommunication resulted in some passengers being overcharged between 10 and 70 HK cents.

The total amount involved was around HK$80.

The spokeswoman said yesterday those using Octopus cards would get refunds.

The toll machine at Exit B of the station malfunctioned from 1pm to 7pm.

The company discovered the overcharging after passengers reported the discrepancy to the station.

The turnstile was closed and a notice posted outside to inform passengers about what had happened.

When asked why the company did not immediately inform the media about the breakdown, the spokeswoman said it "did not want to confuse other passengers."

Those affected may claim their refunds from the MTR at a time convenient to them, the spokeswoman said.

This is not the first case of MTR passengers being overcharged.

In 2007, gates at Kowloon Tong failed to give the proper discounts for passengers transferring from the Kwun Tong Line to the former Kowloon Tong Canton Railway East Rail and Ma On Shan lines. Of 250 journeys made through the wide gates at Kowloon Tong, 91 complaints of overcharging were lodged before they were closed.

In 2009, human error caused about 2,000 Octopus card holders to be overcharged by a total of HK$5,000 while traveling on the MTR West Rail.

MTR Corp found that its automatic fare collection system overcharged some passengers 20 HK cents to HK$2, instead of allowing them to enjoy a cash rebate promotion.

Richard Tsoi Yiu-cheong, a spokesman for the Coalition to Monitor Public Transport and Utilities, said it is "unacceptable" for the company to conduct testing during operating hours.

In addition, it should have immediately informed the media when the overcharging was discovered so that those involved could be better informed.

"Many people may not have realized they were being overcharged," Tsoi said.

"In addition, many people may not remember which turnstile they used."

Tsoi said he will write to the government demanding it monitor the operation of the MTR, not only over unnecessary delays but also for overcharging.

"There should be mechanisms on how the MTR should deal with such cases," Tsoi said.

Penalty systems should also be applied in cases of overcharging, he added.

MTR fares will be increased from June 17.

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