Problems of Japan-backed railway in India can provide lessons for BRI-related projects

By Hu Weijia Source:Global Times Published: 2018/10/17 21:48:41

Infrastructure is a major driver of the development of the Indian economy. The country's infrastructure spending is expected to accelerate between 2018 and 2022, making the sector a giant cake for global infrastructure companies, especially those from China.

But enthusiastic Chinese enterprises need a clear understanding of the risks they may face in the Indian market.

India's bullet train project, which is being built with Japan's technology, risks missing its 2023 completion target. The $15 billion facility, linking Mumbai with Ahmedabad, is facing land acquisition problems. According to Bloomberg, "a year after the project was kicked off, only 0.9 hectares of land have been acquired out of the 1,400 hectares needed."

Land acquisition has been a major bottleneck in the execution of many Indian infrastructure projects such as railways, bridges and airports. Earlier this year, India unveiled a plan to spend $60 billion over the next 15 years to expand its airports, since the South Asian country is experiencing a surge in demand for air travel. Land acquisition problems, however, are likely to be a major obstacle to building new airports in densely populated areas.

It's fine for Chinese companies to be enthusiastic about India's prospects, but they should be fully aware of the risks involved in infrastructure projects.

Chinese firms have been competing fiercely with companies from other countries for business in Asia's infrastructure markets. Some enterprises are under competitive pressure to provide low-interest funding to win more orders. If high acquisition costs further squeeze profits, some small or medium-sized enterprises may have to give up on those projects.

Along with the development and promotion of the Belt and Road initiative (BRI), Chinese companies are carrying out or planning construction projects in more than 60 countries and regions. Land acquisition has been a thorny issue not only in India but also most economies along the BRI routes.

Chinese companies should draw lessons from the Japanese-backed train project and find effective solutions to land acquisition problems regarding BRI projects.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn



Posted in: EYE ON ECONOMY

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