China Communications Construction debarment row brews as concerns grow over Malaysia’s award of $12.3bn rail project

05 January 2017 00:00

Public evidence from the World Bank contradicts claims by Malaysian minister Abdul Rahman Dahlan that China Communications Construction Co, or CCCC, has not been debarred by the multilateral lender, as concerns grow that the Chinese state-owned firm is the prime contractor for Malaysia’s 55 billion ringgit ($12.3 billion) East Coast Rail Link.

“A debarred company cannot be engaged in World Bank-financed projects until it is released off the debarment list,” a World Bank spokeswoman told MLex.

The World Bank’s website indicates that CCCC was debarred from Jan. 12, 2009 to Jan. 11 2017, for fraudulent practices — specifically, misrepresenting facts to influence procurement or contracts, including anticompetitive collusion in pricing. Initially, the World Bank had debarred CCCC subsidiary China Road & Bridge Corp over an infrastructure project in the Philippines, but the eight-year ban extends to CCCC and all the companies it controls, the bank said.

On Dec. 8, 2016, in the upper house of the Malaysian parliament, Rahman, a minister in the Prime Minister’s Department, said the World Bank had debarred China Road & Bridge Corp but not CCCC, adding that claims of CCCC having been debarred were designed to “confuse people.”

CCCC is one of the world’s biggest infrastructure construction firms. It is listed on the Hong Kong Stock Exchange and the Shanghai Stock Exchange, and its American depositary receipts are traded in the US.

On Nov. 1, 2016, in Bejing, Malaysian Prime Minister Najib Razak and Chinese Prime Minister Li Keqiang witnessed the award of the 55 billion ringgit East Coast Rail Link contract to CCCC and other companies. CCCC told MLex that its share of the deal to build the 620 kilometer railway in Malaysia was worth 46 billion ringgit. It is one of the biggest contracts Malaysia has ever granted to a single company, and it was awarded without a competitive tender.

Sivarasa Rasiah, a Malaysian opposition member of parliament, said he intended to raise questions about the contract in the next parliamentary session in March.

“Of course it is a serious problem that a blacklisted company can win such a huge contract,” he said. “This is in my opinion a grossly inflated price.”

Sivarasa and analysts say similar rail projects typically cost far less than 55 billion ringgit, with some brought in for half that sum.

Sivarasa and a London-based whistleblower website Sarawak Report say the hefty price tag for the rail project has raised questions over whether some of the funds have been earmarked to offset the heavy financing obligations of 1Malaysia Development Berhad, a Malaysian state fund that is accused by US and Swiss authorities of having billions of dollars laundered. In the London Court of International Arbitration, International Petroleum Investment Co, an Abu Dhabi sovereign wealth fund, is seeking $6.5 billion from 1MDB.

CCCC’s 46 billion ringgit contract is based on market prices, the company told MLex. “As a world-renowned international contractor, CCCC is dedicated to provide the highest-quality services, while maintaining our commitment to integrity, business ethics and social responsibility,” it said.

Sarawak Report alleged that as part of the rail deal, a company nominated by, but unrelated to, CCCC would acquire majority stakes in two Malaysian companies — Putrajaya Perdana Berhad and Loh & Loh Corp — for a total of $315 million. Both companies are controlled by Malaysian businessman Low Taek Jho, widely known as Jho Low, Sarawak Report alleged. The US Department of Justice has alleged that Jho Low is one of the key players involved in laundering billions of dollars of 1MDB funds. He is also a person of interest in investigations of 1MDB by authorities of Singapore and other jurisdictions, as MLex has reported.

Putrajaya Perdana Berhad was involved in the transfer of 70 million ringgit from SRC International, a former subsidiary of 1MDB, to Najib’s personal bank accounts, according to charts displayed by Malaysian Attorney General Mohamed Apandi Ali at a press conference in January last year.

To prove its case, Sarawak Report displayed photographs of documents that it said were parts of contracts agreed between CCCC and Malaysian parties.

In an emailed reply to MLex’s enquiries, CCCC said: “We have no knowledge of the claims in those articles. The documents shown in the article are not CCCC documents, we don’t know who created them or where they originated. As far as we know, none of our employees related to the project have seen these documents and we are not aware of the transactions set out in the documents.”

Jho Low did not reply to questions put to him by MLex via email.

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