Saturday, June 11, 2016

Pakistan Launches $8.2 Billion Railway Upgrade Project

Pakistan government has approved an $ 8.2 billion project to upgrade the 1,872 km Karachi - Peshawar rail track, bridges, tunnels, and culverts, according to International Railway Journal.

The new track will support increased axle load of up to 25 tons, up from 22.8 tons which is now the norm in South Asian countries. The higher axle load capacity will allow heavier freight trains carrying more freight per train for greater trade overland.

China will provide 85% of the financing for the project. It will be done in two phases, with the first due for completion in December 2017 and the second in 2021.

It will be part of an international rail link that will connect Pakistan with China,  Russia, Central Asia and Europe. It will extend south from the city of Kashgar in the Xinjiang Uygur autonomous region in Western China to Pakistan's deep-sea Gwadar Port on the Arabian Sea, according to Zhang Chunlin, director of Xinjiang's regional development and reform commission.

Source: China Daily
A study for the plans for this international rail link was first presented in 2014 at a two-day International Seminar on the Silk Road Economic Belt in Urumqi, Xinjiang's capital, according to China Daily.

"The 1,800-kilometer China-Pakistan railway is planned to also pass through Pakistan's capital of Islamabad and Karachi," Zhang Chunlin said. "Although the cost of constructing the railway is expected to be high due to the hostile environment and complicated geographic conditions, the study of the (international rail link) project has already started," Zhang said. "China and Pakistan will co-fund the railway construction. Building oil and gas pipelines between Gwadar Port and China is also on the agenda," Zhang added.

The Pak-China link announcement was part of the discussion on China's broader effort to revive the historic Silk Route by building three main corridors through southern, central and northern Xinjiang to connect China with Russia, Europe and Pakistan. The Silk Road Economic Belt International seminar which concluded on Friday in Urumqi, Xinjinag was jointly sponsored by the State Council Information Office, China International Publishing Group (CIPG), China Academy of Social Sciences (CASS) and Xinjiang Academy of Social Sciences.

In a 2013 report, China's State-owned Xinhua News Agency articulated China's motivation to expand land trade in addition to building its navy to protect its sea trade. Here's what it said:

“As a global economic power, China has a tremendous number of economic sea lanes to protect. China is justified to develop its military capabilities to safeguard its sovereignty and protect its vast interests around the world."

The Xinhua report has for the first time shed light on China's growing concerns with US pivot to Asia which could threaten China's international trade and its economic lifeline of energy and other natural resources it needs to sustain and grow its economy. This concern has been further reinforced by the following:

1. Frequent US statements to "check" China's rise.  For example, former US Defense Secretary Leon Panetta said in a 2011 address to the Naval Postgraduate School in California: "We try everything we can to cooperate with these rising powers and to work with them, but to make sure at the same time that they do not threaten stability in the world, to be able to project our power, to be able to say to the world that we continue to be a force to be reckoned with." He added that "we continue to confront rising powers in the world - China, India, Brazil, Russia, countries that we need to cooperate with. We need to hopefully work with. But in the end, we also need to make sure do not threaten the stability of the world."

Source: The Guardian

2. Chinese strategists see a long chain of islands from Japan in the north, all the way down to Australia, all United States allies, all potential controlling chokepoints that could  block Chinese sea lanes and cripple its economy, business and industry.

Karakoram Highway-World's Highest Paved International Road at 15000 ft.

Chinese Premier's emphasis on "connectivity and maritime sectors" and "China-Pakistan economic corridor project" is mainly driven by their paranoia about the US intentions to "check China's rise" It is intended to establish greater maritime presence at Gwadar, located close to the strategic Strait of Hormuz, and  to build land routes (motorways, rail links, pipelines)  from the Persian Gulf through Pakistan to Western China. This is China's insurance to continue trade with West Asia and the Middle East in case of hostilities with the United States and its allies in Asia.

Pakistan's Gawadar Port- located 400 Km from the Strait of Hormuz

As to the benefits for Pakistanis, expanded trade and the Chinese investment in "connectivity and maritime sectors" and "China-Pakistan economic corridor project" will help build infrastructure, stimulate Pakistan's economy and create millions of badly needed jobs.

Clearly, China-Pakistan ties have now become much more strategic than the US-Pakistan ties, particularly since 2011 because, as American Journalist Mark Mazzetti of New York Times put it, the  Obama administration's heavy handed policies "turned Pakistan against the United States". A similar view is offered by a former State Department official Vali Nasr in his book "The Dispensable Nation".

Related Links:

Haq's Musings 

Comparison of Chabahar and Gwadar

How Strategic Are Pak-China Ties?

Gwadar as Hong Kong West

China-Pakistan Industrial Corridor

US-Pakistan Ties and New Silk Route

Can Pakistan Say No to US Aid?

Post Cold War Shifting Alliances


Ravi Krishna said...

the gauge used in china is standard gauge (4'8in) and the one in Pak is broad (5'6in). How will it work without costly change over of goods and services. #justasking

Riaz Haq said...

RK: " the gauge used in china is standard gauge (4'8in) and the one in Pak is broad (5'6in). How will it work without costly change over of goods and services."

India itself has significant lengths of four different gauges: 5 ft 6 in (1,676 mm) Indian gauge, 1,000 mm (3 ft 3 3⁄8 in) metre gauge, 2 ft 6 in (762 mm) gauge and 2 ft (610 mm) gauge. How do you deal with it?

As to international rail links with China, the country handles them with double-tracking to accommodate more than one gauges at borders. It does so with Mongolia and Russia now.

Ravi Krishna said...

Oh you have not heard of "project unification" of gauge ( and now nearly complete. It was done for precisely the same reason. To avoid costly change of gauge charges. The meter gauge (1000m) has virtually disappeared and converted to predominant broad gauge. Today broad gauge is about 96% of all tracks.

THe other two narrow gauge are primarily left in the mountain areas as heritage trains meant for tourist.

Ravi Krishna said...

Also Russian and Mongolian are 1520mm. India and Pakistan gauge is 1676mm. So obviously cpec trains can't use tracks meant for russian route.

It will be interesting to see how china tackles this gauge difference.

Riaz Haq said...

Excerpt of UNESCAP document "Development of Trans-Asian Railway" re cross-border train service issues in Asia:

Since the attraction of container traffic to the TAR (Trans-Asian Railway) network depends in large measure on
rail being able to deliver a cost effective and reliable service as compared with its
competitors in the corridor, it is essential that any operational impediments to realization of
these goals be removed.
In this context five factors are important:
(i) Compatibility in terms of the type and design of rolling stock employed by
neighbouring railway systems in international traffic would ensure rolling stock
inter-operability when no break-of-gauge is involved. Ideally, systems should
cooperate in the design of exchangeable rolling stock to ensure that only the
most efficient designs (i.e. those which maximize payload to tare ratios or
minimize gross to net ratios, and are capable of running nearly at passenger
speeds) are adopted;
(ii) Compatibility of train assembly and load scheduling practices between neighbouring
railway systems will be essential in order to avoid the necessity of having to readjust
train loads at borders. The desirability of operating fixed formation unit
trains across borders, where track gauge continuity permits, should be
recognized and acted upon by the responsible systems;
(iii) The presence of adequate route capacity on existing links in the TAR corridor will be
essential if the corridor is to meet its objective of providing a cost effective and
competitive means for the international transportation of containers; and
(iv) Breaks-of-gauge while not posing a problem currently, are likely to become a
problem in the future when lines of differing track gauge are connected within the
territory of one country, Bangladesh, and at two borders, China/Myanmar and
Islamic Republic of Iran/Pakistan. Possible re-gauging of the existing metre
gauge network in northeastern India would create two additional breaks-of-gauge
at borders - between India and Myanmar and between Bangladesh and India
(northeast). Provision of modern, high speed container transhipment equipment
at all break-of-gauge points will be essential to minimize delays.
The success of rail in being able to capture additional container traffic for the TAR
network will depend heavily on there being adequate capacity for handling containers at rail
served terminals in the hinterland and at the major sea ports.

Majumdar said...

Prof sb,

Pakiland is going great guns under Shri Nawaz Sharif- power sector, reforms, CPEC and now this. You used to make fun of me when I used to call Shri Nawaz Sharif the vikas purush of Pakiland. But for once, sir, I have delivered a KO blow to you!


Riaz Haq said...

#Pakistan shares end higher ahead of #MSCI announcement to upgrade country to #EmergingMarkets status via @Reuters

Pakistani stocks closed higher on Monday in a volatile trading session ahead of a much-anticipated MSCI announcement on whether the bourse would be reclassified as an emerging market, analysts said.

The benchmark 100-share index of the Pakistan Stock Exchange finished 0.11 percent higher at 36,979.96.

The index clocked in an intraday range of more than 440 points, hitting a low of 36,637.81 in early trading before bouncing back towards the end of the session.

"Market sentiment remained sombre today, in line with sentiment seen in global equities and commodities ahead of central bank meetings in the U.S., U.K. and Japan this week," said Gohar Rasool, head of international sales at Inter Market Securities Pvt Ltd.

MSCI is due to announce whether it will be reclassifying Pakistan as an emerging market on Tuesday.

The stock exchange was dropped from the MSCI Emerging Markets Index in 2008, but Pakistan has in recent months launched a final push to get back in so it can vastly expand its pool of potential investors.

Among index heavyweights that gained on the day were Engro Fertilizers Ltd, MCB Bank Ltd and Fauji Fertilizer Company Ltd.

Oil stocks took a hit as international crude oil prices declined. Oil and Gas Development Company Ltd closed down 0.93 percent while Pakistan Oilfields Ltd was down 0.75 percent.

Traded volume on the day stood at 104.7 million shares, with traded value at 6.67 billion rupees ($63.83 million).

Riaz Haq said...

#Asia's new Great Game. #Modi #Afghanistan #India, #Pakistan #Iran #China #US #Chabahar #CPEC #CentralAsia

By Munir Akram

With a population of only around 50 million, Central Asia will not become a huge market for manufactured goods. It will be twice as expensive for India to send goods to Central Asia through Chabahar than it would be overland across Pakistan. Indian goods are thus unlikely to be competitive against Chinese products shipped overland.

Also read: Lessons from Chabahar

The strategic advantages for India are also questionable. Its influence in Afghanistan will be more dependent on Iran. Pakistan’s cooperation will continue to be essential to restoring peace in Afghanistan. Indian shipping lanes to Chabahar will be vulnerable to disruption. India’s limited influence in Central Asia will not dent that of Russia and China.

The new Great Game will increasingly revolve around China’s One Belt, One Road vision of land and sea connections between Asia, Europe and beyond. The China-Pakistan Economic Corridor (CPEC) is the first component of this ambitious project.

In comparison to the Chabahar route, the strategic and economic implications of CPEC are enormous. It will transform China from a one- to a two-ocean power; enable a part of its $4000 billion annual trade to circumvent the Malacca straits and other potential choke points in the Indian Ocean and shorten China’s supply lines to the Gulf, West Asia and Africa. For these reasons, if no other, China has a vital stake in Pakistan’s strategic stability and socioeconomic development. The Chinese commitment of $46bn for CPEC projects is but the first instalment of the massive capital which China is prepared to deploy in Pakistan.

Instead of being distracted by the moves of its adversaries, Pakistan must remain focused on the implementation of CPEC. This strategic enterprise should not be allowed to be stalled or delayed by external pressure or internal politics, inefficiency or corruption. It would be wise to create a separate and independent CPEC Authority which can be a ‘one-stop-shop’ entrusted with achieving CPEC’s enormous potential for Pakistan’s development. CPEC projects must go beyond infrastructure development to encompass manufacture, consumer goods, housing, health, textiles, finance and other sectors. To this end, the interaction between Pakistani and Chinese private- and public-sector companies must be actively expanded and intensified. Some of the externally imposed limitations on CPEC investment projects, such as restrictions on ‘sovereign guarantees’ for debt finance, need to be removed expeditiously.

CPEC faces threats from Pakistan and China’s adversaries. These will have to be met forcefully.

India’s opposition has been announced openly. New Delhi will continue to utilise Afghanistan as a base to destabilise Pakistan and undermine CPEC. The recent spate of attacks on Chinese workers in Pakistan is no accident. Pakistan will have to further enhance security for them and consider direct action to remove the Afghan-based threat from the Tehreek-i-Taliban Pakistan.

Iran has assured that Chabahar is not designed to compete with Gwadar or CPEC. Pakistan and Iran can cooperate for mutual benefit: to end terrorism in Balochistan, expand trade, and construct the Iranian gas pipeline and a Gwadar-Chabahar economic corridor. However, Tehran often wants to run with the hare and hunt with the hound. Some recent events have sent disturbing signals which Pakistan cannot ignore.

To balance the growing Indo-Iranian relationship, Pakistan must maintain and reinforce its relationship with Saudi Arabia and Turkey. It would be in Pakistan’s interest to help in giving substance and form to the ‘Islamic coalition’ hastily formed by Riyadh. It should also convince the GCC states of the benefits of CPEC as a path to their closer connection with China.

America is and will remain a major player in the new Asian Great Game. ...

Riaz Haq said...

#Pakistan Railways poised to get massive funding from #CPEC and #CAREC. #China #CentralAsia via @ePakistanToday

After decades of neglect, a silver lining is on the horizon for Pakistan Railways as it may be able to attract multi-billion dollar investment for the upgradation as well as deployment of new railway infrastructure across the country under two regional economic unions, the Central Asia Regional Economic Cooperation (CAREC) and China Pakistan Economic Corridor (CPEC), to link Central Asia and China with Pakistani ports of Karachi and Gwadar.

An official source said that the Asian Development Bank (ADB) has started the process to assess the financial needs for upgradation of 461 km main line (ML-1) between Lahore and Peshawar, under its CAREC Railway Connectivity Investment Programme. The financing is likely to start flowing form next year.

The Ministry of Railways has already shared plans, under early harvest projects by 2020, to upgrade Karachi-Peshawar main line (ML-1) and extension of ML-2 from Jacobabad to Gwadar via Basima to both CAREC and CPEC. If financing was available, the projects would be completed in relatively short time as the Pakistan Railways has technical expertise to execute the projects, he added.

ADB will be providing multi-tranche financing facility (MFF) to make the railway system more efficient and competitive. Improved railway corridor of Lahore-Peshawar will improve Pakistan Railways’ institutional efficiency. Financial assistance will also be provided for Railways’ modernization, IT-based accounting system and transforming and migrating accounting data into the new accounting system.

Under the plan, 411 km railway track between Lahore-Peshawar section of ML-1 will be upgraded and dualised together with new signaling and telecommunications system, including power supply for these systems, and upgraded passenger facilities at Lahore, Rawalpindi, and Peshawar stations. A 53-km section in the hilly area from Kaluwal to Pindora will have to be realigned and dualised. Except for realignment sections in the hilly tract, it is likely that all the work for rehabilitation and upgradation of the physical infrastructure will be limited to the PR-owned right of way.

Except for Pakistan, railways in all CAREC countries have more freight carriers than passenger tariff. CAREC railways have increased freight traffic volumes which shows the large potential for PR to freight forward to and from CAREC countries. Domestic market is large in Pakistan, Uzbekistan, Kazakhstan and China.

In the past, the railways infrastructure plans always received a cold shoulder from the government, but now the situation has changed as multilateral institutions are interested in linking Pakistani ports with China and Central Asia. Now the government wants to attract investment in railways infrastructure and China is asked to finance upgradation of strategically located ML-1 which connects major population centers in three provinces.

Under CPEC, Pakistan has shared Phase-I (Early Harvest Projects) upgradation of ML-1 (Karachi-Peshawar and Taxila to Havelian) and construction of New Dryport at Havelian (Buldher). In medium term, Phase-II upgradation of ML-2 and extension of ML-2 (Gwadar to Jacobabad via Basima) is proposed. The long term Phase-III seeks establishment of Havelian-Khunjrab-Kashghar rail link.

The source said Pakistan has shared plans to link the Gwadar port Kandahar, Kabul and Dushanbe. The second plan is to link Gwadar with Quetta and onwards to China. He said Pakistan Railways has prepared plans on rail link between Gwadar port and Mastung, Chaman to Kandahar rail link and rail lines between Kandahar and the Tajik border are also planned.

Michael Laudahn said...

Re the gauge difference problem, there is only one realistic way out, and that is to unify the gauge. As standard gauge is the world's dominating gauge, there is no doubt that this will be the gauge for Asia including the asian parts of Russia. In this latter case and with regard to the length of their existing network it is suggested to divide the network into a home network and and international network, the latter to be built in/converted to standard gauge. Same for CIS states.

Riaz Haq said...

#China to lend $5.5 B and ADB another $2.5 billion for #Pakistan's $8 B #Rail link project. #CPEC via @economictimes

About 75 per cent of the country's (rail) cargo and passenger traffic passes through the 1,687 km-long Peshawar-Karachi rail line.

Earlier, China had agreed to provide $3.7 billion out of the $46-billion CPEC program for the ML-I project and "now it has decided to increase its contribution to $5.5 billion," Iqbal said.

The Asian Development Bank (ADB) would provide $2.5 billion t ..

The Peshawar-Lahore section of the ML-I will be built with the ADB loan.

The rail project would be completed in five to six years after which the rail speed would double to 180 kilometres per hour.