Rail expansion points the way to future prosperity

By Julius Li

Given its leadership in railway building, perhaps it was not by chance that a Chinese firm was chosen to build Kenya’s first standard gauge railway line between Mombasa and Nairobi.

China Road and Bridge Corporation is expected to build the Sh327 billion SGR line and is already on site in Embakasi and Mtito Andei, which will house special facilities for the first phase of the project, a regional enterprise whose end-game is a seamless line stretching to Malaba, with a branch to Kisumu and onward to Kampala and Kigali, and most likely from Kampala to Juba.

China’s ascendancy as an economic powerhouse is already well documented. The country has distinguished itself as a low-cost and efficient producer, a fact that has enabled its firms to compete favourably on the international stage, even trumping competitors from the West.

Today, most of the big name Western transnationals have production units in China. Goods manufactured in China tend to be relatively more affordable than equivalents made in other parts of the world like the US, Europe and the Americas.

The cost of production is eventually down to how much one pays for a mix of several factors of production. A key component of this mix is the cost of transport, which China has managed to consistently keep as low as possible.

What is often forgotten when China is celebrated as a low-cost producer is how the country has leveraged one of the world’s most expansive and modern railway transport networks to build and sustain competitiveness.

Over the last 10 years, China has built over 40,000 kilometres of railroads. When it comes to high speed railway, China is the global leader, with 13,000 kilometres.

A significant 60 per cent of mass freight transport in the country is by rail. In 2012, the overall figure hauled through rail transport was 3.9 billion tonnes of freight, the highest in the world and one billion tonnes higher than the US, which comes a distant second. China’s rail network, which constitutes six per cent of the world’s railroads, conveys about a quarter of the globe’s total freight.

But the most profound story is how the investment in a modern railway infrastructure has spurred economic growth in a country’s whose growth in gross domestic product (GDP) has topped the world in the last 10 years.

As always happens, the introduction of high-speed railways has resulted in the development of cities connected by the bullet trains, which have become known as “second tier” cities. The development is for instance credited with for 59 per cent in average “market potential” of these cities. This measure refers to an area’s access to markets for inputs and outputs.

The improvement in transport spawned by the railways has improved economic integration between the cities, improving market access, expanding the labour market, and encouraging spatial agglomeration.

By creating new settlements, the trains have helped to reduce congestion and pollution within the megacities, making them both cost effective and catalysts for wider economic benefits.

China has also played a major role in the development of the world’s rail network, in what has become known as a new Chinese brand of economic diplomacy, creating new opportunities not just in rail construction, but equipment manufacturing as well.

Among the most notable projects is the construction of a link between the capitals of Hungary and Serbia, Belgrade and Budapest. Similar deals have been signed by China to promote “bullet train” technology in Romania and Thailand. By the end of 2010, China, whose high speed trains trumps other countries on speed and distance, had signed contracts with at least 50 countries,

In East Africa, whose countries have decided to go the SGR way, the bullet train may still be some way off, but the potential advantages of having material improvement on railway infrastructure cannot be gainsaid.

The writer works for China Road and Bridge Corporation