Better management needed for rail system

《铁道部：要融资，先内控》译文

Global Times | November 15, 2011 09:17

By Yang Guoying

The Ministry of Railways, struggling with debts incurred from its high-speed railway construction, recently borrowed 100 billion yuan ($15.73 billion) from China Development Bank and another 100 billion yuan from the issuance of bonds, according to recent reports.

However, this is far from enough to ease the ministry's soaring debt burden. It is estimated the ministry needs to raise almost 1 trillion yuan to resume construction of 10,000 kilometers of railway that was halted after the ministry defaulted on debt repayments, and maintain the 13,000 kilometers of rail construction that is still underway.

The ministry has a debt-to-asset ratio of around 60 percent, while 700 billion yuan of debt is due for repayment over the next three years. The ministry achieved 685.7 billion yuan in revenues last year, up 24.2 percent year-on-year, while its debt grew by around 55 percent.

Halting financing and construction for the rail system is not pragmatic. Firstly, it would waste the money already invested in ongoing rail expansion projects. Also, railway construction does bring tangible benefits, such as boosting economic activity, improving logistics and, in the case of high-speed rail, reducing emissions from coal-powered trains.

At the same time, it is recognized that railways require a sustained, long-term investment before profits are realized; while the focus of the ministry is the public good, rather than maximizing profit.

What need to be addressed are the management and planning of rail construction, which need to be improved before pumping more money into the rail system.

Shortfalls in management procedures at the ministry have been illustrated all too clearly by a number of cases, including that of Liu Zhijun, former railways minister, who was dismissed for accepting bribes and other serious misdemeanors; and the Wenzhou train crash.

Recent issues with the high-speed rail services, such as high ticket prices and poor planning, also show a lack of management and planning, and have contributed to the high vacancy rate of high-speed trains.

Failure by the ministry to govern the behavior of its officers and budget effectively for railway design and construction has pushed up operation costs and lowered revenues in the railways sector, increasing the ministry's debt burdens.

Allowing the ministry to borrow yet more money while this situation persists will only make its debt snowball, while increasing the risk of default.

Rather than throwing more money at the ministry, the government should first work to strengthen its oversight of each stage of railway construction, including planning, budgeting and the selection of contractors.

The author is an economics commentator. ygy7906@sina.com

原文发于《国际金融报》，《环球时报》英文版译后转载  王斐尔译

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