Sunday, February 26, 2017

Another Silk Road Fiasco? China's Belgrade To Budapest High-speed Rail Line Is Probed By Brussels

Wade Shepard ,  


I travel to emerging markets around Asia and report on what I find.  

China may be hitting another snag in the fulfillment of its Belt and Road ambitions. The much-anticipated Belgrade to Budapest high-speed rail line, which was touted as China’s “express lane” to Europe, is being reviewed by Brussels for potential infringements of the EU’s requirement that public tenders are offered for such large-scale infrastructure projects.

At a 2013 meeting of the 16+1 in Bucharest, China, Serbia, and Hungry signed an MOU to build a $2.89 billion, 350 kilometer high-speed rail line that would go from Belgrade to Budapest, the first stage of a project that would ultimately connect the China-run Piraeus port in Greece with the heart of Europe. This rail line was to be a hallmark project of Beijing’s Belt and Road initiative — a shining example that China could carry out massive infrastructure projects in Europe the right way (i.e. the Brussels way).

In this photo taken on August 13, 2015, Indonesian models look at scale models of Chinese-made bullet trains on exhibition at a shopping mall in Jakarta. Chinese and Indonesian state-owned companies on October 16, 2015 signed a USD 5.5 billion deal to build the first high-speed railway in Southeast Asia's top economy, after Beijing beat Tokyo to win the construction project. AFP PHOTO / BAY ISMOYO 

In September 2016, it was looking as if this international HSR line was gaining momentum, and that construction would soon commence. But now there is a slight bump in the path that may grow into a roadblock.

According to the Financial Times, Brussels is looking into the possibility that the deal to build the Belgrade-Budapest rail line may have broke the EU rules on public tenders. None were offered for this project. This probe is mainly directed at Hungary, being a full-fledged EU member, rather than Serbia, whose “prospective member” status shields it from all of the EU’s regulations. Hungary’s deal with China had the development of the rail line going to China Railway International Corporation with financing coming from China’s Export-Import Bank.

Hungary and Serbia both have track records of engaging in large infrastructure projects without offering public tenders. The former was the recipient of Brussels’s ire in 2014 when it granted a $13 billion Russia-funded nuclear power plant project to a Russian company without making the bidding public, while Serbia has come under a large amount of internal criticism for just giving the Belgrade Waterfront Project to a company from Abu Dhabi without any type of public competition or even input.

While China has proved itself to be the undisputed greatest high-speed rail developer ever, having constructed over 19,000 kilometers of such lines in their own country in under 15 years, actually getting over the legal and political hurdles to take their HSR-building prowess international seems to have been a far more challenging pursuit. The Singapore to Kunming HSR line has been replete with delays and funding conflictsMexico City to Queretaro implodedLos Angeles to Las Vegas didn’t happenMoscow-Kazan is still speculation, and while after many delays Jakarta to Bandung appears to be getting ready to go, construction  has not yet commenced.

While physical development across the broader New Silk Road — the pan-Eurasia mega-project that’s increasing infrastructural, economic, and political connectivity between countries from Europe to China — is currently booming, China’s participation via their Belt and Road initiative hasn’t always been very smoothly implemented.

I'm the author of Ghost Cities of China. I'm currently traveling the New Silk Road doing research for a new book

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