These are all good points. They lead to more questions like why is local credit expensive? Why would foreign credit be cheaper than local credit? Why are local economic conditions leading to such high interest rates? There is no major issue with borrowing capital from abroad if it is used efficiently. Concern is we will get a railway, but it will be built, maintained and probably operated by the Chinese. There will be no capacity or knowledge transferred to Kenya(ns). If we want to build another railway line from Nairobi to Namanga or to South Sudan, we will be unable to using domestic knowhow/capacity, we will need another loan/grant/Chinese-like project. Chinese are technically the financiers of the US treasury, but they do not build for the US roads, ports, railway lines. I do not see what is wrong in wanting these mega-projects to be carried out by Kenyans, even when using foreign capital to finance them. Does it mean Kenyans cannot carry out these projects or cannot learn to carry them out?

@Timbosho, very good concerns. Lets start with the idea of technical capacity availability in the local scenario:
1. Most of our engineers are employed by multi nationals as sales, consultants etc and are mostly office based. The men and women to do the spanner works (mind you complex projects) are few and far apart.
2. The government procurement system is so ring fenced to favour foreign companies (crafted by Bretton woods institutions- in an attempt to keep of corruption cartels). Thus we may end up in the same hole.
3. Whatever, few "local" firms with a remote capacity to rival the foreign ones are actually foreign and not local.
3. BTW why do we train so few engineers? To keep the marketability high? by having the supply so low? India and China churn out millions of engineers without regard to their employability. This should be copied and pasted here bila shame.
Either way we end up losers.

@ Timbosho, We do not have capacity since building capacity for this type of work is not a priority for the State right now. In the developed world where this capacity exists, capacity building is largely driven by the private sector and market forces – the government is only the lubricant. Those governments have huge cash at disposal to handle mega state projects and it is easy to attract foreign based experts to immigrate to those countries and even seek citizenship. Not many foreign experts would be willing to seek employment / immigrate to Kenya to handle just one such project, unless they are part of contracting company.

But I know what you are thinking. That the Steel will come from China. That most of the skilled labour and maybe 50% unskilled labour will come from China. That of the 500b, the only cash that will remain in circulation here is the food the Chinese will eat and other consumables. That from the revenue generated by the new SGR, we will re-pay all of the borrowed cash to China. You are also asking how long it will take to generate the 500b in revenue, repay with interest and start earning real profit from this investment. All these are valid questions.

However, the reality is that we do not have resources (material and human) to do this work. Other than China, there is probably no other country in the world that has large state supported construction companies and banks that can offer the kind of support China has offered in the manner it has been done. The best that the West would have done is give a small loan from World Bank – may be a tenth of the cost (using money borrowed from China), ask Kenya to source for the rest, then issue international tender – which would still be won by Chinese contractor. So really we do not have a better option. If you don’t like China and opt to retain status quo, consider the negative effect of continuing to use road transport / lunatic, losing more business to other countries. Under all these circumstances, working with China is a valid and viable investment in the long run. The only thing I find wanting is that the Chinese contractor was allowed to do feasibility study, cost estimates, design and ultimate construction. I also do not think it should cost 0.5b to build a Kilometer of SWG. These concerns have been raised in mainstream media and I hope someone will be made to provide answers at some point.

However, in the final analysis, what we need as a country is to find out where we can take advantage in the global business arena. The first step is to bring down cost of production and improve our global competitiveness – perhaps aim to be at par with Egypt and SA to begin with. We have started with focus on improving transport infrastructure and energy, and this is a step in the right direction.

Agreed! very rare only in kenya do we still operate the lunatic 600VLTS!!! DC-DC but all is not lost,see http://www.emdiesels.com/emdweb/products/jt56ace.jsp for what to expect from china!!! The JT56ACe can pull upto 5000 tones @120kph assuming a 20ft container is 22tones thats approximatesly 230 containers at a GO! or if you wish 115 trucks!! at this rate the NEW BERTH @KPA will be of no use...but again when did leaders of this great nation become better planners?

There was tender floated recently by KRC for design review and construction supervision of the same why didn’t you buy? Otherwise why do you think your advice is important / needed?

The first CORDashian who atleast wants Kenya to develop during this JUBILEE 20 years reign!

I dont see it as a Cordeshian/Jubree thing...Railway is bigger than Uhunye and RAO.

The business daily reports the finance for the project was advanced at 4.1 per cent and the government negotiated for a grace period of 10 years after which the repayment will be spread over 30 to 40 years.

http://www.businessdaily.../-/13ec8ta/-/index.html

We can re-look at the estimates.

First, not all materials will be sourced from China. At the most pessimistic estimate, 50% of workers will be from China.

I think with technological advances, we can have economic life of the railway being 100 years. Maybe 50 years.