Tuesday, March 22, 2011

Bumpy Track for China's High-Speed Rail?

Massive corruption could shunt the program onto a side track

China's new high-speed rail system, projected to span not just the country but much of Asia by 2020, is being put together at breakneck speed in an orgy of building that is calculated to make it the envy of the world – but it appears to be dogged by high-level corruption including the sacking of top officials.

Already the world's biggest high-speed system, it expected to cost US$300 billion by the end of this decade, and to stretch over 25,000 km. The government vastly stepped up the pace of high-speed rail construction in response to the global financial meltdown, with total spending skyrocketing from US$50 billion in 2008 to US$88 billion in 2009. For 2011, that annual bill is expected to climb to US106 billion

The pace of construction has left the United States, for instance, in the dust. The Acela Express, the US's fastest train, runs the 735 km between Boston, Mass., through New York and to Washington, DC, sometimes hitting top speeds of 240 km per hour but in actual practice averaging only 110 km/hr. By contrast, the Shanghai maglev line reaches speeds of 430 km/hour. Conventional high-speed trains in China reach top speeds of 350 km/hr and many average 310 km/hr for the length of the trip.

Any chances that things will improve in the US are dim. The Republican majority congress elected last November and at least two Republican governors have demanded that the Obama administration's already-modest plans for high-speed rail, so far projected to cost US$53 billion, be whittled down further.

By contrast, China's railway expansion is expected to be more than just a source of national pride. As the US interstate highway system transformed the American economy in the 1950s, China's high-speed rail system is expected to bind together a country characterized for centuries by the aphorism – for tax evaders at least – that the mountains are high and the emperor is far away. *.
What's more, China's system, with help from the Asian Development Bank and the World Bank, is expected to eventually tie together all the mainland Asean countries including Burma, Cambodia, Laos, Vietnam, Thailand, Malaysia and Singapore and give China entrée into Indonesia as well, reshaping the economic landscape of Asia with the Middle Kingdom truly at the center. Other modern transport lines are projected across the so-called ‘Stans of Central Asia, to India, north to Mongolia and into Russia and possibly Europe.. However, according to a report by the country risk firm Pacific Strategies & Assessments, there could well be trouble brewing for China's high-speed rail.

"Where big money is concerned," PSA said in its March 16 report, "the propensity for corruption is also higher." As evidence, the firm cites the February arrest of Liu Ahijun, China's railway minister, who was fired for "severe violation of discipline," a phrase that usually means corruption. Liu is the most senior official to be dismissed since the Shanghai party secretary, Chen Liangyu was dismissed after a high-level probe into alleged misuse of the city's pension fund. Chen was found to have stolen more than RM800 million and was ultimately sentenced to 13 years in prison in 2008.

"It is very likely that Liu's fall from grace was approved by high-level party officials," PSA wrote. "Local media alleged that cases include kickbacks, bribes, illegal contracts and sexual liaisons."

Other media have reported that Zhang Shuguang, the deputy chief engineer and director of the transportation bureau, also was removed from his post under the same catchphrase of "severe violation of discipline." Zhang was a close confederate of Liu Zhijun. The Hong Kong-based Ming Pao Daily reported that Zhjang's wife owns three luxury houses in Los Angeles and has banked as much as US$2.8 billion in the United States and Switzerland.

The dismissal of the two has raised fears that corruption may be a major problem at top levels of the ministry. PSA, in its report, noted that 146,517 officials in various agencies were punished for disciplinary violations in 2010, 5,098 of them at the county level or above, and that 804 were prosecuted for various crimes. The railway ministry itself has a staff of 2.5 million employees.

The depth of the corruption, PSA's report continues, "raises speculation that the ministry must have cut corners to pocket huge amounts of money." Internal investigations appear to have concluded that the ministry may have been sacrificing quality in its rush to lay track.
PSA cites a study by the First Survey and Design Institute of China Railways in 2008, questioning the ability of China's coal-fired plants to produce enough fly ash, a critical substance to be mixed with cement for stable roadbeds.

PSA also cites a groundbreaking South China Morning Post article saying local journalists since 2007 had been following fly ash convoys from power plants to railway construction sites and had watched convoy leaders pocket bribes to bring in low-quality fly ash. The use of low-quality fly ash, the newspaper said, could cut the life of the track foundations by as much as half. Although as much as 1,500 km. of track have been laid each year, the report said, China's coal-fired plants can only provide enough fly ash for a potential 100 km.

Certainly, if other industries are any indication, corruption in construction is rife. According to a 2009 report by the DLA Piper international law firm, "prosecutors have found a high incidence of commercial bribery in infrastructure and real estate projects, in which government officials were often involved. The report quoted Zhang Geng, deputy procurator in the Supreme People's Protectorate, as saying nationwide between January 2006 and June 2009,procurators had filed had investigated 16,830 bribery cases in the sector from January 2006 to June 2009, accounting for 46 percent of all commercial bribery cases during that time. A telephone and internet hotline launched in June of 2009 to attempt to check construction corruption received 17,000 reports in the first week.

In addition, according to the state-owned China Daily, the Banking Regulatory Commission said it had demanded that all mainland banks check possible loan risk related to high-speed rail projects between 2005 and 2010, China invested US$300 billion in railway construction, six times the investment in the previous five years.

All that isn't to say the program will crumble. It is fully expected to become the most advanced railway system on the globe, and it will serve hundreds of millions of people over the decades to come. But it won't be an altogether smooth ride.

*Corrected and sentence removed on Mar.23. Asia Sentinel

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