10 Oct 2019
Budapest and Beijing Agree to Fast-track BRI Rail-link Investment
Settling finance package for 150km Budapest-Belgrade track upgrade now designated as high-level priority.
Talks between Hungary's Ministry of Finance and the China Exim Bank with regard to financing a major upgrade to the Budapest-Belgrade rail line – a key Belt and Road Initiative (BRI) project – are to be accelerated. The news that the long-delayed rail development was back on track was announced by Peter Szijjarto, the Hungarian Minister of Foreign Affairs and Trade, late last month.
The sudden prioritisation of the project followed a meeting between Szijjarto and Wang Yi, his Chinese counterpart, on the sidelines of a United Nations General Assembly session in New York at the end of September. Speaking in the wake of that informal discussion, the Hungarian minister emphasised that finalising the financing agreement was now the last step before signing off on the initiative and commencing construction work.
As it stands, China has agreed to finance 85% of the cost of the line upgrade. Once completed, the enhanced and expanded rail service will become a key component in the freight-delivery corridor that will collect and convey China-origin goods to the heart of Europe, once they have been shipped to the Port of Piraeus on the southwest coast of Greece.
To date, the project has been persistently beset by delays, while its estimated cost has continued to escalate. Initially, the cost of upgrading the line was put at HUF550 billion (US$1.8 billion). A new tender was called late last year, however, after the estimated costs began to spiral. As a result, the planned date for construction to begin was pushed back from 2019 to 2020.
In April, it was then announced that the CRE Consortium, a Hungarian-Chinese joint-venture vehicle, had been appointed to handle the project, with a budget estimated at about $2.1 billion. The winning consortium is 50% owned by RM International, a division of Opus Global, a Budapest-headquartered conglomerate active in the publishing, construction and real estate sectors. The remainder is jointly held by China Tiejiuju Engineering & Construction and the China Railway Electrification Engineering Group (Hungary), two state-owned rail-development giants.
It is believed that once the final details of the financing package are agreed, it will take about five years to complete the required upgrade to the 150km stretch of track that connects Budapest and Belgrade. Once fully operational, it is estimated that the rail transit time between the two cities will be cut from eight hours to less than four.
Beata Balazs, Budapest Consultant