Pakistan Rail sticks with Dong Fang
By Syed Fazl-e-Haider
QUETTA, Pakistan - China's Dong Fang Electric Corp, which was previously
involved in a deal, considered disastrous, to supply Pakistan Railways with
locomotives, has won a new contract to provide engines to the same customer,
this over the objections of General Electric of the United States.
China's EXIM Bank will provide credit amounting to US$110 million for the
purchase of 75 locomotives to be supplied by Dong Fang and $134 million for 205
coaches from China Machinery Import and Export Corporation (CMC). General
Electric had been a leading contender for the locomotives contract.
In 2001, Dong Fang supplied 69 substandard locomotives to Pakistan Railways in
a sale that was viewed as a disaster for the country's railways system, with
the machines' weight proving
excessive for the existing rail network, and cracks in engines and consistent
maintenance requirements proving a heavy burden for the buyer.
Chinese locomotives are not used elsewhere in the world due to their
inefficient energy consumption and high maintenance costs and critics claim
corruption in Pakistan Railways led to the latest contract for 75 locomotives.
Last year, Pakistan had refused to finalize the locomotive deal. Analysts say
the engines will be cheaper only at the time of purchase, but their lifetime
cost will be much higher than those of international quality.
Under the loan agreements, Pakistan Railways will purchase 75 locomotives from
Dong Fang and 205 coaches from CMC, according to Associated Press of Pakistan.
The two loan agreements were signed with EXIM Bank in Beijing, during a visit
by a Pakistani delegation led by Jehangir Aziz of Pakistan Railways.
State-owned Pakistan Railways provides an important mode of transportation in
the farthest corners of the country. It has been a great integrating force and
forms the lifeline of the country by catering to its needs for large-scale
movement of people. Plagued by corruption, it faces a loss of 28 billion rupees
(US$333 million) this financial year, up from 23 billion rupees a year earlier.
Critics say that the rules of the business and the Pakistan Procurement
Regulatory Authority were overlooked while awarding the contract to Dong Fang
in July 2008, which won the deal as the lowest bidder in the international
tender.
The oversight technical committee had rejected Dong Fang's technical proposals
three times in the past, but the committee's membership was changed after
appointment of a new railways secretary, who secured approval of both technical
and financial proposals involved in the purchase.
General Electric had reportedly offered $227 million for the contract as
against the Chinese offer of $107 million. American engineers had asked the
government to reconsider Pakistan Railways' contract with Dong Fang, with some
local media reports claiming that the United States had been pressurizing
Pakistan Railways to cancel the deal and award it to the US company.
China has become increasingly involved in the development and modernization of
cash-starved Pakistan Railways over the past five years.
In 2001, Pakistan Railways signed a $91.9 million agreement with CMC to buy 175
high-speed passenger coaches. The project was funded by China's EXIM Bank on
supplier credit basis.
Pakistan Railways and Dong Fang have also signed an agreement to establish a
750-kilometer rail link between Havelian and Khunjerab, in the country's far
north, taking in the 4,730-meter-high Khunjerab crossing over Mansehra district
and the Karakoram Highway in Pakistan's northern areas, now called
Gilgit-Baltistan.
The Chinese will lay about 350km of track within their own territory from
Kashgar to the Khunjerab Pass, linking Pakistan with China's rail network.
Havelian is already linked with the rest of Pakistan's rail network, which in
turn is intended to be tied more closely with Afghanistan and Central Asia.
Analysts believe that the widening network with Pakistan and its neighbors will
serve Chinese interests in the region, particularly as it is a multi-billion
dollar stakeholder in Pakistan's Saindak copper extraction project and
Afghanistan's Aynak copper mine.
China is also involved in building a railway from Gwadar, in Pakistan's
southern Balochistan province, to Dalbandin, which links to the north with
Rawalpindi. By extending its East-West Railway from the Chinese border city of
Kashi to Peshawar in Pakistan's northwest, Beijing will eventually be able to
send cargo to and from Gwadar, which is well-placed as a terminus for goods and
fuel from the Middle East, along the shortest route, from the southern port
city of Karachi to Peshawar.
Syed Fazl-e-Haider (www.syedfazlehaider.com) is a development
analyst in Pakistan. He is the author of many books, including The
Economic Development of Balochistan (2004). He can be contacted at sfazlehaider05@yahoo.com
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