China to build and finance Ethiopian rail construction due to Indian complacency

The Export and Import (EXIM) Bank of China has reached an agreement with the Ethiopian Railway Corporation (ERC) to finance its Light Railway Network project in Addis Ababa.

Speaking on condition of anonymity, a high government official confirmed that the bank had signed an agreement with the Ethiopian Railway Corporation a few months ago, notwithstanding a final approval needed from the Chinese government to finalise the deal. The Commerce and Finance Ministry of China by law has to give its approval to any financial deals made by EXIM bank. And EXIM bank, according to the official, has sent ERC’s request to the Ministry, which is expected to respond within, at least, four weeks.

“The funding deal with the Chinese government is now at a final stage and will hopefully get the approval soon,” the official, who is closely involved in the deal, revealed stating that the project could be launched as early as September given that the Ethiopian government has completed all necessary preparations.

The project’s design has already been drawn, and ERC has awarded the construction tender to the Chinese Railway Engineering Group. ERC also signed a contract with the Chinese Railway Corporation (CRC) two weeks ago in a bid to undertake the Addis Ababa-Me’eso Railway Projects, part of the the Addis Ababa-Djibouti line, pursuant to a condition for a Chinese funding for the project.

Tracks

The railway service has a so-called T-shaped segment. The first track will run from east to west and connect the Ayat roundabout with the Torhailoch ring road. The second track will link Menelik Square Merkato Bus Station. It will pass through Sebategna and Abenet and link up with the east-west line. After that, the combined track will continue towards Meskel Square and make a right turn in the direction of the Akaki roundabout.

The Light Railway Network project is one of ERC’s two ambitious projects to construct a 5,000 kilometer long cargo railway network connecting different parts of the country. ERC has prioritized the construction of the 2,000 kilometer railway line from Addis Ababa to the Port of Djibouti and the Afar and Oromo regions in the next five years. An additional 3,000 kilometer track to the Tigray regional state, the city of Gonder and the south are to follow.

After its completion, the light Railway Network project could transport up to 20,000 passengers per day and observers hope it serves as a solution to Addis Ababa’s stifling transport problems.

Ethiopian Prime Minister, Meles Zanawi

How did India lose out ? Not moving fast enough.

For India, this looked like a done deal. In January this year the Ethiopian Prime Minister, Meles Zanawi, tackled the project with the Indian Minister of State for External Affairs, Shashi Tharoor, at the African Union summit in Addis Ababa. He asked for specific Indian funding for the various projects.

But the charismatic Tharoor is gone – he resigned after the IPL scandal – and India has dithered on funding the construction of railway lines to stretch 5,000 kilometres from Addis Ababa into various regions of Ethiopia. Consequently, China has stepped in and granted the country a multi-million pound loan… And, let’s be clear, the resulting goodwill likely to be shown to China will be vast.

At present (and I went there yesterday) the beautiful century-old railway station in Addis Ababa is covered in weeds after lying inactive for several years, and is also under threat because of a local street project.

So to reach Djibouti from Addis, passengers have to travel more than 470 kilometres on extremely difficult roads to Dire Daoua to pick up the train. Not exactly ideal for international trade. If China can complete this line efficiently, expect other Indian companies to lose out to their Chinese counterparts as the Ethiopian government makes India pay for its complacency. According to Hailemariam Desalegn, the chairman of the Ethiopian Railway Corporation (ERC), the Indian Government too long to respond to the request for funds. So work on the lines will begin in the last quarter of this year.

This is a major setback for the burgeoning trade relations between the two countries and allows China to curry favour with yet another African country as its ongoing strategy of an African land-grab continues.

India has a thriving trade with Ethiopia worth nearly $500 million. The total Indian investment in the country is about $4 billion, of which $1 billion worth of projects has already been implemented.

Indian businessmen can fly directly to Addis Ababa from Mumbai in less than six hours and Ethiopia has nearly 500 Indian companies based in the country. Companies such as the Tata Group and McLeod Russel India, the biggest tea company in the world, are leasing land, the latter citing costs as the major reason for choosing Ethiopia.

Much of India’s flower production is also centred in the country and Sai Ramakrishna Karturi, a Bangalore businessman, has now become the largest rose grower in the world after huge investment in Ethiopia’s rose gardens. Whether relations between the two countries will blossom or wither like the weeds at Addis railway station depends largely on India’s reaction to this colossal diplomatic and economic blunder.

Once again India is outmaneuvered by China. There is a saying that speed kills in Football (America Football that is). It seems India needs to understand what that phrase means because China obviously knows.

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4 comments

  1. When the NSUI anchor invited Shashi Tharoor to speak after mentioning, among other things his academic feat of achieving a PhD degree at 22, the house clapped for a full 18 seconds welcoming him and an overwhelmed Tharoor started his speech with a ‘Thank you’ in his strong, baritone voice: “Positive energy is all here; you are fantastic to be with!”

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