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NewsChina

Spotty record for Chinese executive Wang Jing with Nicaragua canal dream

PUBLISHED : Friday, 30 August, 2013, 9:30pm
UPDATED : Friday, 30 August, 2013, 9:34pm

When President Daniel Ortega granted a Chinese telecommunications executive exclusive rights to develop a US$40 billion canal through Nicaragua and operate it for 100 years, his administration touted the CEO’s record of success heading a wireless communications firm with projects in 20 countries.

Wang Jing’s company, Xinwei, boasted that it had orchestrated an array of deals worth more than US$5 billion over the last three years, in places as far-flung as Cameroon, Zimbabwe and Ukraine. Its own literature describes the company as possessing “huge strength and sublime eminence in the global communications industry.”

But an examination of those claims around the world paints a different picture. While at least some of Xinwei’s domestic enterprises appear to be successful, outside of China, Wang’s company has participated in a series of troubled minor ventures. Promises to build revolutionary new telecom networks have yet to materialize. And deals with local partners have been marred by false starts and poor performance.

In 12 of the 20 countries where Wang’s Xinwei Telecom Enterprise Group and associated companies say they’ve done business, there was no evidence of a successful, large-scale project up and running. Rather:

In Cambodia, a promised high-tech new wireless network has yet to launch nationwide after unexplained delays.

In Zimbabwe, officials say Xinwei’s partner had its licence pulled by regulators and assets seized by a local bank.

In Cameroon, a partner that Xinwei says runs the largest national broadband network is described by the government as smaller than three competitors and under investigation for false performance claims.

And in Nicaragua, where Wang has formed a new company to build a waterway that could be three times the length of the Panama Canal, there is no sign of a promised US$700 million national wireless network more than a year after he announced his intent to build it.

In the other eight countries where Xinwei operates, either analysts and major telecom firms said they had not heard of the company, or Xinwei did not provide enough details about its partners or projects to allow its record to be examined.

That track record is raising doubts among local businessmen, political opposition leaders and outside experts about the ability of Wang’s new company to build the canal – a gargantuan project that has been considered and abandoned for centuries.

He’s got very deep pockets and wants to invest money in order to leave a mark on the world. He’s not an expert in canal-building
Ronald MacLean Abaroa

“This is just orders of magnitude beyond anything that they’re capable of,” said Derek Scissors, a senior research fellow who monitors Chinese overseas investment for the Heritage Foundation. “At this point it’s just a stunt.”

Beijing-based Xinwei said in written statements that its global telecom plans were moving forward in at least five countries outside China and it is working with investors to fund what it expects to be billions of dollars of new networks in Russia and Ukraine. It acknowledged that it had run into challenges in several countries, problems that ranged, it said, from malicious underpricing by competitors to delays in receiving government licences.

“The company is fast-growing. It plans to become a first-class global company within the industry in years. We are making good progress toward the goal and understand there is much work to do,” Xinwei said. “Historically, Xinwei has been a supplier of telecom equipment committed to working with clients helping them with network building and operations, but the progress of each project depends on our clients’ plans.”

Xinwei was founded in 1995 under the control of state-owned China Datang Corporation. It developed wireless telecommunications technology that is supposed to function as an alternative to better-known standards that are ubiquitous in much of the world. The company appears to have successfully marketed the equipment to Chinese state and private firms. But elsewhere, the technology didn’t take root, contributing to Xinwei’s financial struggles before Wang took it over in 2010.

Little is known about the 40-year-old Wang, how he got into a position to buy Xinwei, or how much he paid for it. According to a Hong Kong database, he has been a director of about a dozen other companies, some current, others dissolved. Even Chinese state-run financial news organisations have noted that they have been unable to uncover much about him prior to 2010. Yet Xinwei’s website shows national leaders including President Xi Jinping and Premier Li Keqiang visiting the company, an indication of solid government connections. What’s more, analysts say Xinwei has a US$2 billion line of credit from the state-owned China Development Bank.

Ronald MacLean Abaroa, a former World Bank official and Bolivian mayor who’s become a spokesman for Wang, has described him as “a successful businessman in his country and other parts of the world.”

“He’s got very deep pockets and wants to invest money in order to leave a mark on the world. He’s not an expert in canal-building,” Abaroa recently told reporters. “He’s an expert in making investments that result in development.”

Xinwei’s website describes its core markets as public telecommunications operation, public security, oil fields, power grids, water conservation and transportation and emergency communications, among others. In most countries, the firm appears to have acted as the wholesaler of wireless equipment. But in Nicaragua, as well as Cambodia, its goals are more ambitious and it has been trying to build and operate wireless voice and data networks itself.

“If it has launched in any of its markets, it has yet to make even a small difference to the market,” said Laura Holland, the head of telecommunications research at private corporate research consultants Business Monitor International. “Xinwei has no experience as a commercial telecoms operator as far as BMI is aware.”

The Nicaraguan government has declined to release any details of its request for proposals for a new wireless voice and broadband system last year, but the initial asking price for the concession was US$90 million, according to an official with one of Xinwei’s competitors, who spoke on condition of anonymity for fear that it would hurt his relations with the Nicaraguan government. Wang paid just US$20 million in January after three of the region’s major cellular service providers – Claro, Movistar and the Costa Rican Institute of Electricity – dropped out of the bidding despite expressions of initial interest, the official said.

Ortega’s political opponents allege that Xinwei ended up the only bidder because the Nicaraguan government tailored the technical aspects of the process so specifically that only the Chinese company met the requirements.

“It was cut to measure so that Xinwei would win,” said Agustin Jarquin, a former ally of President Ortega and ex-national comptroller.

Orlando Jose Castillo, head of Nicaragua’s Institute of Mail and Telecommunications, gave assurances that the network would arrive by this month, and said it had only been delayed by the need to build antennas and other equipment. But there is no evidence that Xinwei has installed equipment, marketed equipment to customers or made any other progress toward launching a national network.

We can’t believe that an inter-ocean canal will be built by this business when it hasn’t done anything that it announced it would
Eliseo Nunez, Nicaraguan opposition congressman

Xinwei said that in Nicaragua “Xinwei has a team working on network planning and building” and it described that work, as well as projects in Russia, Ukraine, Cambodia, as “going on very smoothly.”

But the company appears to have faced obstacles across the globe.

In Ukraine, Xinwei says it inked a US$1 billion deal with a local provider last year to build public and private communications network across the country. Analysts there said there is no sign that any project involving Xinwei is close to becoming reality. In Russia, Xinwei says it signed a 2011 deal to build US$4 billion worth of networks. Xinwei said that it has launched what it called “first-phase investment” in Russia and completed the initial phase of financing in Ukraine.

“This is definitely not a major player in Russia,” said Anna Lepeutkhina, a telecoms analyst at Moscow-based investment bank Sberbank CIB. “No one has written or talked about it.”

In Cambodia, the company was supposed to launch a 4G network in August but its local office said it had been delayed for unspecified reasons. Likewise, Panamanian authorities say a project Xinwei described as enabling the “digitalisation of the government and Panama Canal” never went past the test phase. Xinwei said its equipment was operating in the Cambodian capital and a national network was under construction. In Panama, the company said, a small initial project is under expansion.

In Cameroon, Xinwei says its equipment is used in the nation’s largest broadband mobile network. But an official with the Cameroon telecommunications ministry said that Xinwei’s local partner had made a series of false claims about its download speed and size, and was not the largest national network. And in nearby Gabon, where Xinwei boasts it helped a new company become the nation’s largest “data operator,” the company said it had switched vendors after two years because it needed faster equipment than Xinwei could provide.

Xinwei said that its Cameroonian partner had once had the most users and best service in the country, and in Gabon, Xinwei’s partner had been undercut by “low-price malicious competition from competitors.”

Many in Nicaragua see Xinwei’s track record as a poor omen for Wang Jing’s goal of building the canal, a centuries-old dream for global traders. The project was repeatedly considered by the US in the 19th century, before Washington decided to put its money on the shorter Panama option, itself considered one of the greatest engineering feats of modern history. Wang and other proponents of a Nicaraguan canal say it will be able to handle bigger ships than its rival, and benefit from rising Asia-US trade that will outstrip the capacity of the existing canal.

“We can’t believe that an inter-ocean canal will be built by this business when it hasn’t done anything that it announced it would,” Nicaraguan opposition congressman Eliseo Nunez said recently.

Nonetheless, in June, the country’s Sandinista government rushed through congress a law giving Wang a century-long concession to build and run the waterway, despite a lack of public bidding and less than a week of congressional debate. Wang was given the green light in exchange for US$10 million a year once the canal begins operation, plus a 1 per cent stake that grows by 10 per cent each decade after that. That’s a far smaller cut than many private companies give up for the right to build big projects in other developing nations, said Noel Maurer, a Harvard Business School professor who studies business practices in unstable countries, particularly in Latin America.

“It’s a terrible deal for Nicaragua,” said Maurer, author of the 2010 book The Big Ditch: How America Took, Built, Ran, and Ultimately Gave Away the Panama Canal.

Nicaraguan officials have leapt to Wang’s and their own defence, stressing that Chinese companies are involved in some of the most ambitious construction projects around the globe.

“Those who doubt it oppose the project for political reasons more than realistic ones,” Manuel Coronel, Nicaragua’s deputy foreign minister, said recently.

Bob Prieto, a senior vice president and expert on massive infrastructure projects at Fluor, one of the world’s largest engineering and construction firms, said that he estimated that the project would have to earn around US$1 billion a year to turn a profit, meaning it would have to draw half as much traffic as the shorter, more established Panama Canal.

“That’s a very aggressive stretch,” Prieto said. “If these cost numbers are accurate I don’t see it penciling out.”

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