Engineering and construction hotbed of corruption

PUBLISHED : Friday, 27 September, 2013, 2:02pm
UPDATED : Saturday, 28 September, 2013, 2:42am

In March last year, after getting government approval to go ahead with a US$900 million refinery expansion in Fujian province, state-run oil giant Sinopec Corp warned the team handling the project against taking bribes.

"Project engineering and construction has been a main area for corruption at Sinopec," the Fujian unit of Asia's largest refiner said in a blunt memorandum, according to a Sinopec source. "All members, especially those in key posts, must treasure their positions, stay guarded and resist temptation."

The memorandum underscores what experts say is one of the biggest challenges facing President Xi Jinping and his drive to tackle corruption - rampant graft in engineering, procurement and construction contracts awarded by state firms.

Graft in the state sector has been acknowledged before but shot to the headlines recently when authorities stunned the energy industry with an investigation into five former senior executives at state-run oil and gas behemoth PetroChina and its parent firm, China National Petroleum Corp.

That investigation has raised questions about how far Xi will go to root out graft in an industry that ranks as one of the most powerful corners of the state-owned corporate sector.

Virtually all senior officials at state firms are members of the ruling Communist Party, whose power is largely unchecked.

And there is a lot of money on the table. According to the European Union Chamber of Commerce in China, state enterprises issued tenders for goods and services worth 9.26 trillion yuan (HK$11.7 trillion) in 2011.

"It's inevitable to have the corruption problem because of the high concentration of power at the top," Chen Weidong, chief energy researcher at CNOOC Group, parent of offshore oil giant CNOOC, said of graft in tenders for engineering, procurement, and construction contracts in the energy sector on the mainland.

"They hold public tenders for projects but the process of choosing winning bids is not open."

Despite measures taken by Beijing, industry officials and analysts say the process is still riddled with graft.

They say officials at state firms involved in tendering often accept bribes to award contracts or select companies run by relatives or friends. Irregularities include splitting a major project into pieces to dodge the tender process, they add.

The party's top graft buster, the Central Commission for Discipline Inspection, last week called for an overhaul of how transactions take place for public resources. It gave no details and did not explain what prompted the commentary on its website, although it referred to the anti-corruption campaign launched by Xi.