On 4 November, Malaysian newspaper Sin Chew Daily reported that, at a meeting of the House of Representatives (Dewan Rakyat), Malaysia’s opposition Democratic Action Party (DAP) Member of Parliament Nga Kor Ming questioned the Ministry of Transport on its awarding of the 600km East Coast Rail Line (ECRL) project to the China Communications Construction Company Ltd (CCCC), despite the fact that the latter is on the list of companies “debarred from engaging in business dealings.”
During the meeting, Deputy Transport Minister Datuk Abdul Aziz Kaprawi refused to provide a response, saying that the project in question is under the purview of the Economic Planning Unit of the Prime Minister’s Department (EPU). He then added that he would arrange for the related persons to provide an explanation to the Members of Parliament.
Nga Kor Ming’s question to the Ministry of Transport mainly refers to China’s SINA Finance’s report that states that in total, there are 12 Chinese companies that have been blacklisted by the World Bank due to suspected overseas fraud and corruption, including CCCC. These companies are ineligible to engage in any projects financed by the World Bank Group for a certain period of time.
The information collected on this issue by the Malaysia-China think tank, Anbound, reveals that the 5 May 2015 report published by SINA Finance is an old piece of news. Should closer attention have been paid to the content of the report, one will have read a paragraph citing a statement from Mr. Wang Zhile, the director of the Research Centre on Transnational Corporations of the Chinese Academy of International Trade & Economic Cooperation (CAITEC) under the Ministry of Commerce (MOFCOM), P. R. C. In his statement, Wang Zhile pointed out that 12 State-owned Enterprises (SOEs) were blacklisted by the World Bank due to suspected fraud and corruption. This statement first appeared in a news article published on 28 September 2015 that also quoted Wang Zhile, and the CCCC was among the 12 blacklisted SOEs that were mentioned. In reality, however, the CCCC was actually blacklisted even earlier, on 12 January 2009, and today, it is already closing in on the expiry date of its blacklisting (the sanction is implemented for an 8-year period).
It is worth noting that CCCC was not actually blacklisted directly. In 2003, the World Bank conducted an investigation on a construction project in the Philippines and found that there was unfair competition between the parties bidding for the project. One of the companies in charge of the bidding at that time, the China Road and Bridge Corporation (CRBC), was consequently blacklisted by the World Bank. Two years later, the CRBC and China Harbour Engineering Co Ltd (CHEC) merged to form CCCC, and CCCC thus ‘inherited’ its blacklist status. Therefore, it is fair to say that CCCC ended up on the blacklist indirectly.
More importantly, subsequent action from CCCC received praise from Wang Zhile, and while this praise was noted in the 2012 news article, it was not in the one published in 2015. In his praise, Wang Zhile pointed out that in comparison with the silence or defences of other companies, CCCC demonstrated great compliance to anti-corruption standards and even specialised in the development of compliance guidelines for companies planning to invest overseas. Therefore, Wang Zhile thinks, CCCC’s actions can better adapt to international demand by placing more importance on compliance, anti-corruption, honour, and quality in the process of going global.
Also because of CCCC’s anti-corruption efforts, the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council of China gave greater recognition to CCCC during its active reduction of the number of central enterprises, and subsequently placed the China National Real Estate Development Group Corporation (CRED) under the wing of CCCC. This allowed CCCC to obtain a business license easily as a central enterprise under the SASAC.
A further analysis of the data by Anbound Think Tank shows that being blacklisted by the World Bank did not have much of an impact on CCCC’s business. After all, as a result of being blacklisted, CCCC was debarred from engaging in any projects financed by the World Bank Group only for a limited period of time. Before this, when CCCC was involved in the World Bank’s projects, it generally only had a stake of less than 1% in the projects. Between 2009 and 2014, which was still early on in the period of its debarment, CCCC’s revenue from international business transactions increased significantly, by 185%. In 2014, CCCC’s profits were 13.9 billion RMB (about 8 billion USD), and it achieved even more growth during its anti-corruption efforts. Therefore, there should be no doubt about the company’s integrity and capability of undertaking the ECRL project.
Even more importantly, before CCCC was awarded the ECRL project, it had already undertaken other projects in the country, including the Seri Tanjung Pinang Phase 2 (STP2) land reclamation project in Penang a year ago. This project is part of the Penang state government’s development programme, and it is also under the purview of Nga Kor Ming’s DAP party. CCCC was awarded the contract for the land reclamation project by the Penang government on 29 October 2015, but in the past year, the honourable MP Nga has not once expressed any doubts about CCCC’s role in this project.
Anbound Think Tank is of the opinion that Malaysian citizens should not be misled by the so-called “blacklisting” of CCCC, and should instead gain a clearer understanding of the rules behind the blacklisting of companies. In total, there are 910 companies on the World Bank’s blacklist, among which 44 are Chinese companies. As the US is the largest shareholder in the World Bank Group, the rules are naturally in its favour. In order to look out for its own interests, an economy will draw up more and more “blacklists” to deal with companies that do not advance its own interests. Recently, we saw that the drafting of new regulations by the European Supervisory Authorities was aimed at regulating the behaviour of US Internet companies. Among the companies blacklisted by the EU are Apple, Google, Amazon, Facebook, and other large companies. The EU even ruled that Apple owed USD 14.5 billion in taxes that needed to be repaid to avoid damaging the economic environment of the EU. Following the line of thought of the MP, should we then ban the sale of Apple products in Malaysia simply because Apple has been blacklisted by the EU? As an emerging economy, if Malaysia were to blindly follow these blacklists and neglect its own developmental needs, instead of evaluate prospective business partner organisations from other angles, it will miss out on many more opportunities for collaboration.
Anbound is an independent economic think tank with research centres in Kuala Lumpur and Beijing.
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