Chinese companies should learn from ZTE and Huawei and get local partners to insulate them from controversies like the one raging over the US$1.4 billion Colombo Port City project, says Sri Lanka-China Business Council president Navindra Abeyesekera. "Local partners instil confidence in the regulator and the government. Not tying up with local companies is one of the biggest mistakes Chinese companies made," said Abeyesekera. He cited the example of Dialog Axiata, which operates Dialog Mobile, the country's largest mobile network. With a market capitalisation of more than US$1 billion, the subsidiary of Malaysia's Axiata Group is among the biggest listed firms in Sri Lanka. "They came in with a local partner, then went for a local listing. That's how you make locals stakeholders in your company's success. But the Chinese do not know this model. The Port City company has no local partners, Avic (Aviation Industry Corp of China, whose subsidiaries are building highways and luxury apartment blocks in Sri Lanka) has no local joint venture," said Abeyesekera. "On the other hand, look at ZTE and Huawei. They have local partners and they are doing very well. State-owned enterprises (SOEs) should learn from them." Promoted by state-owned and Hong Kong-listed China Communications Construction, Colombo Port City has become a bone of contention between China and Sri Lanka ever since the new government suspended it this month over corruption allegations. A high-end real estate project on land reclaimed off the capital, Colombo Port City is the most prominent of the Chinese-backed mega infrastructure projects that have come under the scrutiny of the government of President Maithripala Sirisena, who defeated pro-China Mahinda Rajapaksa in January. Because of their close association with the corruption-tainted Rajapaksa regime, Chinese SOEs have gained notoriety in Sri Lanka for securing contracts under dubious terms. Most infrastructure projects executed by SOEs were alleged to have been overinflated to line the pockets of the last regime, and funded at exorbitant interest rates, benefiting Chinese lenders but adding to Sri Lanka's debt burden. The allegedly secretive nature of these fast-tracked deals has also led to charges of Chinese exclusivity, alienating locals. The United Lanka Container Operators Association last month charged China Merchants Holdings (International), which is driving the US$500 million Colombo South Container Terminal project, did not allow it to hoist the national flag on Independence Day. When the container terminal was opened in 2013, parliamentarians alleged the firm prevented the national anthem from being played to mark the occasion. Incidents like these have contributed to public anger at such projects. With their poor outreach skills, Chinese SOEs have not helped matters either. "At home, they are not used to dealing with either a questioning media or stakeholders other than the government, so failed to adapt to the demands of the business environment in a multiparty democracy like Sri Lanka," said Faizal Samath, consultant editor at The Sunday Times . The media-shy and elusive nature of SOEs has only added to the air of mystery about them, deepening the general suspicion of their operation and motives, a problem private Chinese companies do not seem to have. "Perhaps we should shift to attracting investment from the true private sector in China, with less emphasis on SOEs," said Dumith Fernando, the former Asia-Pacific managing director of Credit Suisse. He recently left Hong Kong to return to his native Sri Lanka, is assisting in the government's investment promotion agenda. "Sri Lanka is a democracy and purely depending on one person or family is not adequate in maintaining a stronghold on influence. Broad political and social acceptance under good governance principles will be important for foreign companies in the future," Fernando said.