Top Chinese contractor steps up pace of work on massive projects in Malaysia and Sri Lanka

China Communications Construction Company president addresses ecological and financing concerns over its involvement in huge infrastructure schemes

PUBLISHED : Thursday, 26 October, 2017, 8:30pm
UPDATED : Friday, 27 October, 2017, 10:57am

China Communications Construction Company, China’s largest engineering firm, is firmly on track with its railway project in Malaysia and is stepping up construction of a Sri Lankan port city development that had been suspended for a year.

CCCC president Chen Fenjian told the South China Morning Post in a written response to questions that the US$12.8 billion railway project – the largest ongoing overseas undertaking by a Chinese company – which will connect Malaysia’s east and west coasts, commenced construction in August and was being “actively advanced”. He, however, did not disclose details including the expected completion date.

The $1.4 billion Colombo Port City in Sri Lanka, Chen said, was being built “in an accelerated pace”, after it had been put on hold by the country’s new government between 2015-16. Another CCCC official had told the Post earlier that it would be completed by 2030.

Both projects are located in key nodes of China’s Belt and Road Initiative.

CCCC has secured US$20 billion worth of overseas infrastructure contracts in the first half of 2017, of which $15.3 billion are from Belt and Road regions, according to its financial report for the first half of 2017.

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But the projects have not been without controversy. The Colombo Port City, which will reclaim some 2.7 square kilometres of land, on which will sit flats, offices, shopping centres, hotels and exhibition centres, was suspended for about a year after the new administration took office and put on hold for re-examination most accords that had been signed by the previous administration. CCCC had complained of hefty losses because of the work stoppage.

As a result of this project and other infrastructure schemes, the South Asian nation owes US$8 billion of debt to China. Although 70 per cent of the Colombo development has been funded by China Development Bank, a state policy bank – a common arrangement for China’s Belt and Road infrastructure projects, it has been accused of lax environmental and social impact scrutiny compared to institutions such as the World Bank.

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The Malaysian railway project has also sparked similar concerns, as some worry it may lead to habitat loss and fragmentation in the peninsula’s forested heart.

Chen did not reply to the Post’s query about such concerns on specific projects. But he said CCCC in general attaches great importance to “ecological impact”. He cited the example of the Nairobi-Mombasa railway line in Kenya, saying that CCCC built more than 100 tunnels to allow wild animals to pass. For the Colombo project, he said the company is dredging sand 5 kilometres off the coast to avoid disruption to fishing areas.

He also defended the way the projects have been financed, saying Chinese banks’ lending is reliable in terms of size, price and maturity, and come with no strings attached.

Chen cited the example of his experience with South African officials when bidding for projects there in his reply to the Post. “CCCC has projects in 148 nations all over the world. You can ask your neighbour countries to see if our projects are good enough.”

Alex Zhu, power and utilities market segment leader at consultants E&Y, who has led project financing, feasibility and valuation service for many large infrastructure projects, said China’s engineering firms have largely succeeded under the “engineering, procurement, and construction” contracts, in which contractors just have to ensure on-time delivery. But increasingly they are being asked to operate projects for a while before handing over, or take a stake in these projects.

Both the Malaysia and Sri Lanka projects involve a period of operation.

“Such model involved more time, and more operational risks. Chinese firms increasingly have to accept it,” said Zhu.

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