Israeli Pact With China May Grease Rails for Eilat Line

Finance Ministry, however, may oppose awarding job to Chinese contractor without public tender.

On a visit to China this week, Transportation Minister Yisrael Katz signed a cooperation agreement with the Chinese government on transportation and infrastructure projects. This has paved the way for initial negotiations over a proposal by the Chinese to build a railway line to Eilat.

Once details of the Chinese proposal for the Eilat line are forthcoming, Katz is expected to present the plans to the cabinet for approval - but the plan may encounter opposition from the Finance Ministry over the construction and maintenance of a railway line by a foreign government without a public tender.

Treasury sources have said in the past that Israel could instead raise capital on the international market and issue a tender for the line's construction.

In February, the cabinet approved the building of a rail line to Eilat and appointed the director general of the Prime Minister's Office, Harel Locker, to head a team to examine the project's funding and implementation. The team was supposed to present its recommendations in May but has yet to do so, and Transportation Ministry sources say a staff of professionals at the ministry is considering three possible approaches to the project.

Within two weeks, a delegation from China is expected arrive in Israel to iron out the details of a proposal that would have the Chinese government build the rail line. The proposal is expected to include financing arrangements through the Export-Import Bank of China, which is owned by the Beijing government.

The Israel National Roads Company, which used to be known by its Hebrew acronym Ma'atz, is to represent the Transportation Ministry as contacts move forward. The Chinese will be represented by the government-owned firm Chinese Communications and Construction, which has a workforce of more than 112,000 and is involved in construction of a range of infrastructure projects.