March 2022

Two infrastructure projects in South Asia were built on the promises of East Asian trading partners and on extensive lines of credit. Though both are characterized by extensive delays, why is one celebrated as an important step forward towards infrastructure modernization, and the other derided as “debt-trap diplomacy”? In Gujarat, India’s preparations for a high-speed train project to connect Ahmedabad and Mumbai are well underway, albeit significantly delayed, based on a debt agreement between Japan and India. Approximately 2,000 miles away, across the Palk Strait, the completion of the Hambantota International Port, financed by commercial loans from Chinese-owned banks, led to consternation when those loans could not be repaid. Much has been written about the Hambantota port – both as a curse and a boon for Sri Lanka. This essay adds to the conversation by comparing and contrasting it with India’s bullet train project. This essay explores the contours of both deals, highlighting the differences in debt terms, political rhetoric surrounding the projects, and their foreign policy implications.  

Debt Terms 

The debt terms of both projects highlight important differences. Japan offered India “a soft loan” of 79,00,00 crore rupees (103 billion USD), approximately 80% of the project, on the favorable interest rate of 0.1%, allowing for a 50-year tenure, and a 15-year moratorium period. The port, however, was built on a “$307 million, 15-year commercial loan with a four-year grace period” and a 6.3% interest rate. The lines of credit for both projects drew both domestic and international attention. The low interest rate that Japan offered to India has been repeatedly highlighted by Prime Minister Modi as a political achievement. In contrast, the high interest rates offered by China are cited as the primary reason for Sri Lanka’s subsequent default on the port, leading to an eventual sale of controlling equity and a 99-year lease on the port. 

Political Rhetoric and Foreign Policy Motivations  

For both countries, the infrastructure projects were, at their inceptions, viewed as straightforward wins. Even when infrastructure projects are delayed and above-budget, as with both the train and port, they serve a different goal: supporting malleable political promises. Politicians are inherently myopic; their promises are characterized by the ebbs and flows of election cycles. In contrast, infrastructure and transportation projects are distinguished by their multi-year plans.

In India, the bullet train was incorporated into Modi’s signature Make In India campaign, and it is unsurprising the line was built to connect Ahmedabad in his native state of Gujarat with Mumbai, India’s biggest financial center. At the inauguration of the train’s construction, he spoke about “his own Ahmedabad.” There are questions too, about whether these projects are needed or essential at all – serving to boost GDP measures and political aspirations, but not contributing to true development. Mahendra Rajapaksa, Prime Minister of Sri Lanka, was born in Hambantota, and building the port there fulfilled his earlier campaign promises about development. In Sri Lanka, the port project outlasted the government that promised to repay the debt. The bullet train may do the same. The next scheduled general election in India (to elect the federal government) is May 2024, and the latest estimate for a fully operational project is October 2028.

Both projects tap into narratives about modernization and economic progress. Speeches made during the inauguration of construction in Ahmedabad spoke about the role trains had played in Japan’s economic progress. The Hambantota port was seen as crucial in terms of both foreign policy and economics, allowing Sri Lanka to more closely align itself with China in opposition to India. The port was also seen as crucial to an image of an advanced maritime economy. Criticisms of both projects point to their lack of commitment to true inclusive development. For example, the India-Japan deal leaves open the question of whether crucial technology transfers are included. Delays in the project can also be attributed to protests by farmers whose lands were appropriated for the project. Similar issues plagued the Hambantota port, which saw frequent violent protests during its construction.  

Conclusion

The story of India’s train and Sri Lanka’s port poses important questions for cross-sovereign-financed infrastructure projects, particularly in low- and middle-income economies. Since the Indian project is far younger than Sri Lanka’s, and is separated by Japan’s comparatively less expansionist foreign policy as compared to China, it remains to be seen whether these differences will lead to success. These projects are particularly ill-suited to the political process because they outlast election cycles, and leave nations holding the bill long after the politicians who promised repayment have moved on. 

Across the country, a number of  transit systems are looking to redefine what it means to take public transportation through facilitating cost-reduction or free transit programs. These programs may contribute to a reduction in pollution and benefit low-income riders by making transportation less expensive and more reliable. Cities in Massachusetts, such as Lawrence, Brockton, and Worcester, have already provided fare-free bus service on certain lines, with Lawrence saying that the trial program is working effectively. 

In Boston’s mayoral race, public transportation was aptly a key issue of interest. Once heralded as the site of the first subway system in the country, Boston’s transportation landscape often equates to lengthy delays, traffic jams, irreplaceably old T cars, and transportation fatigue. Boston’s average city-area driver may spend up to 60 hours in commuter traffic per year. The MBTA has a 7 billion dollar repair backlog, which is unsurprising given the frequency in which reports of fires, the threat of rising seas, and structural issues are found in the news. This figure also mimics the national transit investment backlog of 176 billion dollars predicted by the American Society of Civil Engineers. And this was before the COVID-19 pandemic changed the city’s dynamic. Whether the decline in transportation is due to the booming nature of the city or the lack of investment in infrastructure, it is hard to say. However, it is apparent to many that the current transportation regime is unsustainable. Given the growth of the city, and the increases in the number of jobs that are expected to rise, transportation reform is needed to usher in the city of tomorrow. 

Boston’s situation is not unique. Many big cities in the country are struggling with revitalizing their public transit regimes in a way that is actually viable and efficient for those who need it. While foundational change would likely require a cultural shift towards a great sense of importance for the use of public transportation, the Boston mayoral race provided an interesting occasion to discuss the policies behind free-fare transit, the current financial apparatuses regarding the MBTA, and the question of target ridership. Michelle Wu, the first woman and person of color to be elected mayor of Boston, was inaugurated as mayor on November 16, 2021 following a successful campaign in which she used the catchy slogan “Free the T.” Through this discussion, Wu advocated for starting by making buses free and then incrementally proceeding to make public transportation free in its entirety. Opponents, like former acting mayor Kim Janey, advocated for waiving fares on the line 28 bus, which runs from Mattapan to Roxbury along Dorchester Avenue. Many of the mayoral candidates rightly recognized that access to public transit is an economic justice, racial justice, and social justice issue, but they differ on the way in which this issue can be combated. Anna Essaibi George recommended that essential workers, students, and senior individuals should have free or discounted transit fares, whereas John Barros felt that specific bus lines should be made freely available to low-income passengers. Andrea Campbell supported structural overhaul in the sense that communities should be created where day to day needs can be found within 15 minutes. There was skepticism by residents and political opponents alike about the viability of a free-fare transit program for MBTA buses given that this would equate to a reduction in $60 million in yearly revenue. 

Now that Michelle Wu has won, Boston communities and invested parties are interested in seeing how mass transit is able to change in the city. Until 2021, the Fiscal and Management Control Board controlled transportation reform, with responsibilities including “addressing a lack of long-term vision and strategy, customer focus and accountability to the Government and Legislature.” They have now been replaced by the MBTA, Board of Directors who will be critical in shaping the transportation system of the future. At the beginning of his first term, Governor Charlie Baker brought together a panel of experts who were tasked to provide recommendations on Boston’s public transportation system. While a panel of this nature has not happened since, it may be useful in recruiting outside sources to add to the current MBTA leadership as well as to discuss funding opportunities for improvements. Mayor Wu regularly takes the T herself, noting that it gives her a personal sense of how the systems are operating and their struggles with consistency and regular maintenance. 

If there are to be impactful reforms of the public transportation system in Boston, the critical question is how they will be financed. According to news sources, the MBTA has historically relied on one-time state and federal funds to address maintenance issues. In 2019 and 2020, ticket sales approximately consisted of about a third of the MBTA’s revenue, which begs the question of whether a decrease in this revenue without alternatives would exacerbate the MBTA’s financial concerns. Funding alternatives could include “a local option sales or property tax, or new taxes on fuel providers and ride-hailing services.” However, some scholars suggest that what is really needed is a reliable flow of investment in transportation infrastructure through Congress. This would be similar to infrastructure assistance that States received through the March 2020 CARES Act, but on a consistent basis. 

Representative Ayanna Pressley and Senator Ed Markey of Massachusetts proposed the Freedom to Move Act, explicitly acknowledging the vital nature of public transportation, and the problems with MBTA’s proposed cutbacks on service. This legislation would create a $5 billion dollar grant program to offset fare revenues for transit agencies, but this would likely need to be expanded to effectively mitigate the loss of revenue from free transit. This act is seeking to address transit equity gaps through the goal of improving the quality and safety of transportation service, particularly in low-income and historically underserved communities. This legislation would be impactful but its scope would mean that dollars for cities’ improvements would have to be allocated fairly and hopefully supplemented over time. 

Opponents to a free transit regime argue that attempting to do so would be a fiscal nightmare given the current financial struggles of the public transit system. On the other hand, fare collection and policing is a significant cost for transit systems, which would be completely alleviated if free transit were to exist. However, there is the question of whether free-transit is really an effective solution to the problems of mass transit or rather that the most significant problem is reliable and efficient service, requiring significant system upgrades. This is most pronounced in the sense that if an unreliable bus costs $1.50, and then becomes unreliable but free, the free ticket won’t change the structural concerns with arriving at a particular place at a specific time. This is particularly pertinent for those individuals who rely on public transportation to arrive at their place of employment in a timely fashion. While some opponents to free transit advocate for service improvements and reduced fares for lower-income earners, some supporters of free transit argue for a model with incremental changes, focusing on expanding free transit access gradually over time to defray the costs of improvements.
After analyzing the debates surrounding free public transit, the question becomes how Mayor Wu will strategize to meet one of her campaign goals in freeing the T. As of her first day in office, Mayor Wu launched “a two-year, fare-free program for three popular bus routes  – all of which serve predominantly low-income, nonwhite communities.” This is seemingly to grow momentum for a larger-scale initiative in the future. However, the difficulty is always in the details, and Massachusetts bureaucracy means that the mayor of Boston will not have the necessary power to expand to free-transit without the Commonwealth of Massachusetts’ backing (the state legislature) and the MBTA Board of Directors. In fact, her current program was negotiated as a part of a deal with the MBTA to use COVID-19 relief funding for these efforts. It is hard to say whether cautious optimism is appropriate for Boston with the election of Mayor Wu. While some individuals note that the lack of a consistent stream of income for transportation issues makes significant improvements unlikely, others are more optimistic in the sense that Mayor Wu’s election and catchy slogan may have mobilized voters to be a voice for transportation. What is certain is that transportation reform is necessary, and it is encouraging to see a Boston mayor who recognizes the immediacy of these efforts and strives for a better future for public transit.