Category Archives: China

Egypt’s Own Train Wreck In The Making?

A week ago, the Egyptian government agreed to terms and conditions for the country’s first high-speed train project.

The project, that would link Alexandria with 6 October City on the outskirts of Cairo, has been tendered out to international and domestic engineering companies.

China is a likely contendor.  Nabil Abdel Hamid, the Egyptian government official in charge of all trade ties between Cairo and Beijing (and the rest of Asia), hinted this could be the case during a recent trip to China in August, alongside president Mohammed Morsi.

Egypt’s trains, though relatively well maintained, could use China’s infrastructure expertise.

Though Cairo’s train station looks conspicuous in the Downtown area, where it is boxed in by markets, decaying buildings and traffic jams, the system is under-developed and work is needed to update tracks and the network that connects cities.

China, the home of the world’s largest, fastest, and newest high-speed railway, could make a big difference.  But there’s a caveat.

Evan Osnos, who opened this New Yorker piece with a colourful description of China’s high-speed railway, exposes the rotten underbelly of China’s corruption practices:

When the passengers for D301 reached the platform, they encountered a vehicle that looked less like a train than a wingless jet: a tube of aluminum alloy, a quarter of a mile from end to end, containing sixteen carriages, painted in high-gloss white with blue racing stripes. The guests were ushered aboard by female attendants in Pan Am-style pillbox hats and pencil skirts; each attendant, according to regulations, had to be at least five feet five inches tall, and was trained to smile with exactly eight teeth visible.

Soon enough the story transformed into a tragedy that shone light on a train accident that cost 40 people their lives and injured 192 back in 2011. The train crashed into another and derailed, falling off a bridge close to Wenzhou in eastern China.

They collided because the signaling system, a technology much older than the new train, failed. But the focus on the broken part “overlooked the likely role of a deeper problem underlying China’s rise,” writes Osnos:

A pervasive corruption and moral disregard that had already led to milk tainted by chemicals reaching the market, and shoddy bridges and highways built hastily in order to meet political targets.  

The Department of Propaganda kept a tight lid on any negative reportage, and safety steps initially announced by the Railway Ministry were soon forgotten and business resumed as normal.

Aside from the risk of technological failure, the Railway ministry has a reputation that is as bad as the corruption that ensued under Egypt’s Mubarak-era regime.

Liu Zhijun, as Railroad Minister, “commanded a bureaucratic empire second in scale and independence only to the military, with its own police force, courts, and judges and with billions of dollars at his disposal. His ministry, a state-within-a-state, was known in China as tie laoda: Boss Rail,” Osnos writes.

Liu Zhijun will go on trial and be forgotten in China’s history, as censors rub his name out of the Web.  But his replacement is likely to maintain the status quo.

While China’s investment in Egypt may be decades old and represent a legacy that is sure to continue through useful infrastructure investments, the North African nation is already struggling to shake itself of its own corrupt image.  China’s never been known to lend Egypt large amounts, but the government may be well advised to consider its options before accepting a much bigger investment from China as the leader of its expensive high-profile high-speed railway project.

As a Chinese magazine Caixin put it (according to Osnos’ article), “since absolute power corrupts absolutely, the key to curbing graft is limiting power.”

Holiday Reading: China Backdoor For Iran, Mubarak’s Corruption, US policy on Egypt

Happy holidays everyone. (It is the Islamic holiday of Eid Al-Adha, for those that don’t follow the Middle East too closely).

Here are some interesting reads.

Iranian sanctions 

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Breakfast Wrap: Made in Asia – China & Japan in North Africa, Saudi-Style Revolution

[caption id="attachment_868" align="aligncenter" width="580"] Japan’s stamp on Cairo’s Subway. By Ed Giles.[/caption]

Egypt is to China and Japan, what Pick ‘n’ Mix is to an eager child.

The North African nation has a diverse selection of attractions for Asia, such as its proximity to Europe and the rest of Africa, its huge labour force and access to the Suez Canal.  All of that comes at a relatively good price and with a favourable tax climate.

That is why, during the revolution, Asian countries (especially China) continued to pour money into the country while others were wary.

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Guest Post: From Tiananmen To Tahrir Square

Guest post by Douglas Johnson, a New York-based investment banker and Islamic finance specialist.  He is chief executive at investment banking firm Codexa Capital.  This post originally appeared in Codexa’s regular newsletter to investors.  

Tahrir Square may be closer to Tiananmen Square than a mapmaker would lead you to believe.

After the 1989 uprising in Beijing, Deng Xiaoping accelerated economic reform. The Chinese have never looked back; their worst annual GDP growth figure since 1990 was 7.6% in 1999.

Explaining China’s growth trajectory is more complicated, of course, than extrapolation from a single event. But one common theme throughout this period has been China’s anxiety over recurring civil unrest—actual and threatened.

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