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Shi Jiangtao

After attending the Boao Forum in Hainan  last month,   President Hu Jintao  made a low-key visit to Nangang Port,  built for the controversial Guangdong-Hainan cross-sea rail link.

His  visit could not have come at a better time for the Guangdong-Hainan Railway Company, which is under intense media criticism over the line's huge  losses and the  long delay in starting  passenger services.

The  media has reported the company is  unable to pay  interest of more than 300,000 yuan a day because it is earning  only  60,000 yuan a day.

Analysts have even been quoted as saying the 4.8 billion yuan project, joining the island province and Guangdong by way of a 22.5km  ferry link and 345km of railway track, is  already all but  dead.

It  desperately needs passenger services to begin in order to  boost income.

A senior company official denounced the media  reports and other pessimistic predictions as being inaccurate and grossly exaggerated.

While he refused to reveal any details of the company's finances  to counter the accusations, he  said  the losses were within expectations. The company is projecting 11 years of losses before it makes money.  He blamed the long approvals process required by authorities for the line's losses.

For some, that Mr Hu visited the project was confirmation of the central government's support for it.

'President Hu definitely inspects enterprises that have potential,' the company official  said.

Adding weight to his argument, he  quoted  senior government officials, including former railways minister Fu Zhihuan, as saying the project was of strategic significance.

Mr Fu has said the central government wants to accelerate development of the South China Sea and that  Hainan, as the  southernmost province, has a part to play,  a view quoted many times by state media last year.

Various reasons have been advanced for the delay in approving   passenger services.

The company official  attributed it  to the prolonged process of assessing whether safety standards had been met.  However, speculation abounds that the delay is because of disagreement between the ministries of railways and  communications - the latter  administers the  ferry section of the route.

Chi Fulin, director of the China Institute of Reform and Development, said it was bureaucracy that should be blamed for the project's big financial losses.

'Ninety per cent of the project is completed,' he said. 'They [the authorities] should have seized the opportunity to finish the rest of the project.

'The railway project was a big decision, but there appeared to be some problems, including corruption.'

Professor Chi said he was not surprised the company had run into money problems before  passenger services began.

'If  its management methods are not changed and  passenger services are not opened soon, it will encounter more financial difficulties,' he said.

Problems in the railway's decision-making and management could be contributing to its problems,  another scholar agreed. Mao Shoulong, director of the People's University research centre of system analysis and public policy in Beijing, said inadequate  feasibility studies, poor  decision-making and a lack of effective supervision were common problems in government-run infrastructure projects.

In the absence of outside supervision or a transparent public financial system, government-led infrastructure programmes could easily become 'image projects'.

The Guangdong-Hainan railway has  all the characteristics of an image project: it was politically initiated, received huge state investment and has suffered from corruption  and poor performance.

Six former officials of the company that built the railway have been jailed  for accepting bribes and embezzling state assets worth more than seven million yuan.



Image project has run into trouble