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Rail financing: Locomotion to a new tune
10 November 2011
Taking a look over some of this year’s major rail deals, John Geddie considers what changes export credit agencies can make to keep their manufacturers competitive and whether the escalating threat of finance from China will be one barrier too high.
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US Ex-Im rail
GE locomotives
Pakistan
China
OECD
railway financing
K-sure
Ukraine
Pivdenna Zaliznytsya
When General Electric (GE) of the United States squared off against Chinese manufacturers over the bid for Pakistan Railways, GE hoped that the final decision would come down to the quality of the product. Existing railcars in Pakistan built by China’s Dong Fang Electric Corp had been heavily criticised after a series of locomotives proved faulty on inclines; GE promised a marginally more expensive but reliable alternative. Yet the Chinese state-owned corporation still had one distinct advantage: attractive subsidies from its export credit agencies (ECAs) unbridled by the tenor and the premium restrictions of the OECD. First blood China.
With rapid industrialisation in the so-called BRIC and next-11 nations, large-scale rail infrastructure projects are starting to be realised. Whether in freight locomotives, high-speed passenger rail or inner city metro, there is fierce competition from global manufacturers accompanied by huge financing requirements. But even if the manufacturers have the capacity...
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