Pacific Railways: Opportunity for Indian companies

July 01, 2021 4:21 PM

The railway, airport, and sea-port nexus together would help in alleviation of the passenger and freight traffic in the region and also help in decreasing friction in regional and international trade that also leads to losses.

The linking of the projected rail with ports seems more than likely, as work has begun on modernization of two ports in the region.

By Dr Aparaajita Pandey

The Central American nation of El Salvador is gearing up to build a new railway along its coastline. Quite aptly named the Pacific Railway, the proposed rail road is being planned as a coastal rail project between the Acajutla port in the north-west of the country and the La Union port in the South. The proposed rail project would also cross through the capital of the country – San Salvador. The proposed project will be a joint venture between the El Salvadoran ports and Airports authority (CEPA) and the Central American Bank for Economic Integration or Cabei.

While the railways sound like a welcome addition to the Salvadoran coastline, they are a long way away from being a reality just yet. CEPA and Cabei together have released the tender for an international tender for a feasibility study. The feasibility study is being funded by the Korean Trust Fund or KTF and KTF and Cabei are presently in negotiations with each other regarding the specifics of the feasibility study.

The region would benefit immensely from the addition of the Pacific railway, and it has been hinted that if the feasibility study suggests, this project might grow into a multifarious project and could extend to the other Central American nations too. The tentative date for the completion of the study is in August 2022. The study would focus on the financial cost of the potential project, technological assessment of the current railways infrastructure, evaluation of the legal formalities involved and most of all the need for a project that would require such a huge investment.

The project will be a public – private partnership and KTF will be investing approximately 450,000 USD. This is not the only project that South Korea has become a part of when it comes to Central America. The South Korean nation is also assisting in regional train studies in Costa Rica and Dominican Republic, and Guatemala. The involved parties are also looking at the possibility of linking these projects and further coordinating with airports, to boost trade and tourism in the region at the same time it would also provide much needed employment in a region that suffers from unemployment which in-turn leads to further social problems.

The linking of the projected rail with ports seems more than likely, as work has begun on modernization of two ports in the region. The railway, airport, and sea-port nexus together would help in alleviation of the passenger and freight traffic in the region and also help in decreasing friction in regional and international trade that also leads to losses.

It would not be the first time that Central America is looking at a project that begins in a central place and then spreads to the entire region, thereby threading all participating countries in one thread. The Central American group of countries has learned the knack of both coordination and collective bargaining, they have also been able to overcome the problem of lack of commonality for infrastructure, laws, and markets. The Central American combined electricity grid is a great example of coordination and collaboration in the sector of infrastructural development.

Since most Central American nations are relatively small countries in context of geographical size and also with limited economies, it is beneficial for them to band together for projects that require heavy investment, technical know-how, and are ultimately aimed at greater collective good. In the past when bigger South American nations like Brazil, Bolivia, Chile, and Argentina have attempted to build common infrastructural projects, they have found themselves facing numerous obstacles that range from resource nationalism to a lack of common legal and economic framework that facilitates coordination between countries. While the Grand Southern Gas Pipeline did see the light of day it was not without the dogged determination of the Brazilian regime that saw it as a part of their greater regional leadership. The sudden nationalization of natural gas by Bolivia as well as the Bolivian – Chile disputes almost halted the project.

Central America however, has been able to find ways of working together whether it is their combined electricity grid or the Central American Integration System or SICA; the region has found ways to work together. This proposed pacific railroad is another opportunity akin to the ones already mentioned. The project has also invited international investors to be a part of the project and bids have been submitted from all over the world including India.

Opportunity for India

It also provides interesting opportunities for Indian firms. India already possesses the technical expertise needed to build railway lines on a treacherous path like that of the Salvadoran coast. It also possesses one of the densest railway networks in the world. For two of India’s government undertakings- IRCON and RITES this could be a huge opportunity to bid for the project. If India does manage to become a part of the project, it would be a step further in the India – Latin America cooperation, in addition to providing economic opportunities to PSUs of the sector. It would be interesting to see the socio- economic impact that such a project has on the region.

(The author is an Asst Professor at the Dept. of Public Policy, Amity University, and has a PhD in Latin American Studies from the Centre for Canadian, US, and Latin American Studies, JNU. Views expressed are personal and do not reflect the official position or policy of Financial Express Online.)

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