China’s foreign infrastructure development projects, a key element of Beijing’s strategy for increasing its regional and global might, have not been going well. The FCPA (Foreign Corrupt Practices Act) Blog reports that some of the trouble may be tied to China’s weakness for graft:
Sri Lanka this month became the latest of at least five countries to shut down huge China-backed infrastructure and telecoms projects tainted by allegations of corruption.The new government in Colombo suspended a $1.5 billion construction project for a port upgrade awarded to China Harbor Engineering Co Ltd, a subsidiary of state-owned China Communications Construction Company, or CCC. […]Last year, Tanzania accused CCC of corruption in connection to another port project. Prosecutors charged the former head of the Tanzania Ports Authority and his deputy with fraudulently awarding a bloated contract worth more than $523 million to CCC for a port expansion.Tanzania abandoned the project after officials said costs billed by CCC were double those for similar port projects.Prosecutors said the Ports Authority awarded the the mega-contract in December 2011 without obtaining competitive bids.
The post goes on to discuss similar issues with Chinese projects in Zambia, Uganda, and Algeria as well.It was a big win for Beijing when seemingly half the world signed up for its new World Bank competitor, the AIIB—and a big loss of face for Washington, which went public with its pleas for allies to snub China’s bank. But it’s no secret that America’s main concerns with the new institution were with its governance. Now, of course graft may be just one reason why Beijing doesn’t always find success with its development projects (or, as we have covered, mining and energy investments). For example, the “will they/won’t they” drama over the now-suspended Sri Lanka project (a key potential asset for China’s maritime strategy) has a lot to do with the regional affiliations of the new government, which is much less anti-India than its predecessor.But the stories above, taken as a whole, demonstrate that China’s graft problems are real enough—and certainly will not improve in the near term, especially since Xi’s anti-corruption drive is really an old-fashioned Party purge in disguise. If countries with comparatively weak state institutions like Tanzania, Uganda, and Zambia are balking at doing business with China because its development princelings skim money off the top and egregiously inflate project costs, the outlook for Chinese soft power may not be as rosy as people are currently predicting.