New Yangon City Chief Grilled Over Chinese Contractor’s Reputation

By Kyaw Phyo Tha 8 March 2019

YANGON—The CEO of the company developing the controversial New City project on the west bank of the Yangon River has defended the involvement of a Chinese firm with an international reputation for engaging in bribery and corruption.

The Yangon government-backed New Yangon Development Company (NYDC) last year signed a US$1.5-billion (about 2.3 trillion kyats) framework agreement with Beijing-based China Communications Construction Company, Ltd. (CCCC) under which the latter will build infrastructure for the new city. The project, slated to be developed on 20,000 acres of land, is part of China’s ambitious Belt and Road Initiative in Myanmar.

However, the project has been a source of controversy due to its flood-prone location as well as CCCC’s involvement. The Hong Kong-listed, Chinese state-owned company has been accused of engaging in corruption and bribery relating to development deals in at least 10 countries in Africa and Asia, from the Philippines to Bangladesh to Tanzania, according to international media reports.

At a public consultation meeting about the project in Yangon on Wednesday, NYDC’s CEO Serge Pun was bombarded with questions on topics including the project’s location, financial model, environmental feasibility, job creation and the controversial Chinese firm’s involvement, among others. Audience members wondered aloud whether the New City project would have a negative impact on Yangon and expressed concerns over Chinese influence over the New City once it is completed.

When asked if NYDC had done a background check on CCCC before signing the framework agreement, the CEO said it had. He acknowledged that the Chinese company had once been blacklisted by the World Bank along with internationally known U.S. and Canadian companies, but insisted that “the situation has changed”.

“I don’t want to comment on CCCC’s past. But they have to stay on the right track when working with us,” he said, adding that if it didn’t the outcome would be poor.

“My responsibility is to keep it on the right track,” he said.

Serge Pun told the audience that since the formation of NYDC last year, many international firms had approached it about investing in the New City, but they had failed to meet NYDC’s basic conditions for the project, under which it will provide the land while its partners must bankroll all the infrastructure projects.

“So in the end only one was left: CCCC,” he said.

Though CCCC has yet to be given the green light to proceed with the project, the framework agreement between NYDC and the Chinese company says NYDC will provide 28 sq.km of land for use by CCCC, which will invest $1.5 billion in building six infrastructure works including bridges, roads and power and water treatment plants.

During the town hall meeting, U Win Myo Thu, the chairman of the Advancing Life and Regenerating Motherland (ALARM) group, said the agreement was “too good to be true”.

“Other investors have turned their backs [due to the huge investment required], but CCCC is still around. Why? Do they have a hidden agenda?” he asked.

U Win Myo Thu cited examples in other countries where Chinese state banks have poured huge amount of cash into projects. Not only do the subcontracts all go to Chinese companies, he said, but when the project fails to generate sufficient profit to repay the loans, the Chinese developers seize the land.

“China is known for playing this trick all over the world,” he said.

“If something goes wrong [with the New Yangon City project], we won’t have much bargaining power with China either,” he warned, while questioning whether the new city would become a Chinese enclave.

Serge Pun’s audience and co-panelists appeared less than impressed by his failure to provide concrete answers to some of their questions relating to the project.

When the moderator asked why a flood-prone location was chosen for the project he replied, “It’s difficult to answer.”

“I was assigned to take care of the project after they [the government] chose the location. I wasn’t involved in the location selection process,” he said.

When another member of the audience asked whether the project had been submitted to the Myanmar Investment Commission (any project with an investment value larger than $5 million requires the investment body’s approval), the CEO said simply that they were awaiting permission “from Naypyitaw”.

“People ‘upstairs’ are now in discussions. The Union Attorney General’s Office is reviewing the Pre-Project Document [a set of documents including technical specifications, a financial proposal and a business model] submitted by CCCC. I think it will happen soon,” Serge Pun said.