China’s Built a Railroad to Nowhere in Kenya
bloomberg.com
bloomberg.com
So the reason the railroad wasn't completed was because the Chinese discovered that the debt was unsustainable. Seems like a rational business move. I wonder why they didn't discover this before they started building the railroad.
Because it doesn’t matter to China in any case. The debt these nations take on goes directly back to Chinese firms. If they struggle to pay the money back, even better for China, because that lets them flex more muscle over all of these developing countries they’re investing in.
It seems this is more a response to external pressure than it is to some new revelation that the projects are infeasible.
I'd say no. I've been personally involved with now 4 companies that were directly or indirectly involved in all that OBOR kerfuffle.
It was certainly a genuine miscalculation on Chinese side, and a very grave one.
An average Chinese bureaucrat knows no more of the outside world than a lifelong gated community dweller knows of "the hood." And add to that the natural incompetence of China's "aristocrat-bureaucrat" class.
In talks with many members of political establishment, I heard very much the same sentiment: many genuinely expected OBOR to be "a walk in the park." To a lot of them, their first first hand experience working outside of China is a complete eye opener.
The common line they thought was that "if Kenya's GDP is zillion times smaller than ours, then we can put zillion times less money on an equivalent project, and still get the same result."
Another one after that is "if it is so much cheaper than in China, it must be very easy."
Some times they get messed up with analogies beyond silly, like in the case of one OBOR official who was estimating costs of road projects in Africa by trying to find physically similar roads in China, and copypasting their costing.
A lot of things in China are done with presumption: "if it's abroad, it can't be worse than in China." That presumption is just so wrong.
If any of these countries do start to struggle paying back this debt, I’m sure there will be some bureaucrat stressing over it in his office in Beijing. That tends to be how the accountability model works in central planning committees. But China is acting a lot like a loan shark in most of these deals, and any default just means they get to exert their influence in other strategically meaningful ways.
It’s also very easy to see how all of this makes perfect sense to China. A lot of their internal mega-projects are starting to flop. Deals like this keep parts of their constructing industry busy, while transferring all the risk to ill-prepared developing nations.
Belt and Road is a scheme to gain control of trade routes between China and Europe. The goal for China is to hold those debts and have some measure of influence in the countries they have built transortation infrastructure in. They aren't trying to make money by running a lending business.
Prior to that, I also been to UAE, Kenya and Angola, with a UAV company, trying to sell drones to their respective border services.
To my surprise, I saw DJI sales reps also contending for same orders in both Kenya and UAE. Neither they, nor us got any contracts. In all cases, the tender victors were no name companies, registered few weeks before the start of tenders.
I don't know what this article is trying to say. It dances around calling the initial plan a scam, yet it also implies that their backing off is somehow worse. Much as I hate to say it, it sounds like a "Damned if you do, damned if you don't" situation for China. And perhaps that's the real message that this article is trying to convey, but lacking any evidence to actually support such. Had they gone through it would have been a terrible sunk cost. Had they never oversold the infrastructure, it would have been fine - The line is replacing colonial-era lines, not adding routes that weren't viable before. But instead, they're let off the hook for setting up a hangman's noose and encouraging Kenya to put their head here.
This article mentions at least four others, and I've seen others in other publications (a failed power station in Kazakstan most recently).
Considering the amount of money involved in Belt and Road it makes sense for a financial publication like Bloomberg to publish this article.
It kinda is a scam. If it’s not viable today, then it wasn’t viable when the project started. Now Kenya is left with the worst of both worlds. They have all the debt they took on to get the project this far, without any of the economic benefits of having finished it. They’ve also taken on the opportunity cost of not instead working on improving existing infrastructure, which they’ll now have to do anyway.
These loans are basically foreign government subsidies for Chinese construction firms. China still win even if Kenya default, because most of the debt Kenya took on went directly back to Chinese firms anyway.
China is investing in infrastructure all over the world, and really the message here is you should probably not do business with them.
The high-speed rail project was never viable to build in 2019.
California already has a successful high-speed transit project - it's called Southwest Airlines.
However, the high-speed rail problem is the exact opposite of a central planning issue.
If the state government had enough power, it could fund and eminent domain all the property needed.
Instead, private contractors are in charge of the project, and money comes (and goes) at the whim of the Trump (federal) government.
From a political standpoint, transit projects are just pension rewards for supporters. That a member of the public could actually get from Point A to Point B is irrelevant.
China is not engaging africa out of shrewdness or charity. Its well know to be an area with very weak contracting controls where kickbacks are the norm, not the exception.
China corps are doing this in africa because principals cannot get these kickbacks within china or even south america anymore. I personally know principals at conatruction firms who have told me about projects in cameroon and nigeria that seek nonafrican/nonwestern financiers due to kickback reasons