Paper Warns of Problems with Chinese Company’s Involvement in Infrastructure Projects
On January 14, Civic idea, a local CSO working on China-related issues in Georgia, released a report raising alarm about another Chinese company working on a strategically important infrastructure project in Georgia. The report details the problems with the infrastructure projects implemented by the company in various countries, such as Poland and Israel, as well as issues with its ongoing involvement in projects in Georgia. It notes that similar partnerships with Chinese companies have often been fraught with security risks, violations of the law and allegations of corruption. It concludes that based on the track record of the CTRG, there is reason to fear that the Stepantsminda-Larsi project also runs the risk of possible delays in implementation, rising costs and deteriorating quality, as well as environmental and security concerns.
The report concerns the China Railway Tunnel Group, an engineering giant that has already implemented one project in Georgia and is currently working on another. Both are part of the larger North-South Corridor, a route connecting Russia to its southern countries, including Iran, via Georgia.
What is China Railway Tunnel Group ?
China Railway Tunnel Group Co., Ltd. (CRTG), founded in 1984, is a the largest engineering contractor in the tunnel and underground engineering in China. It is a subsidiary of the China Railway Engineering Corporation and “thus enjoys important state subsidies in China and its partner countries,” says the report. The report also notes that “the majority of the company’s shares are owned by the Chinese government, which is confirmed by the fact that the company is registered in the list of state-owned enterprises of China (SOE)”.
The company has apparently a controversial track record. In 2019, the World Bank debarred CRTG and its two subsidies for nine months over misconduct in a project in Georgia. In 2020, CRTG was named on a U.S. Pentagon blacklist of of Chinese companies for having close ties to the Chinese state and its armed forces. CRTG was also contracted for projects in Singapore, Zambia, Kenya, Israel, and Poland, and faced multiple allegations of corruption, fraud, violations of labor rights, safety standards, environmental violations, etc.
Company’s Activities in Georgia
The CRTG first entered the Georgian market in 2018, but failed to win a tender for the Rikoti pass project in central Georgia, which was awarded to another Chinese company.
The CRTG has been contracted for two infrastructure projects in Georgia: the Kvesheti-Kobi and the Stepantsminda-Gveleti highways, both of which are part of a larger North-South Corridor, a route connecting Russia with Armenia, Azerbaijan, Iran, and other countries through Georgia.
The Kvesheti-Kobi highway construction project started in 2019. It should have been completed in 2023, but construction of the highway is still ongoing. However, the CRTG, which has been contracted to dig a nine-kilometer tunnel in 2022, has already completed its work. Notably, the other parts of the highway are also being built by a Chinese company: China Railway 23rd Bureau Group Co. Ltd.
Local experts speak of the risks involved in the construction of the North-South Corridor, of which the Kvesheti-Kobi highway in Georgia is only a small part.
“Today, this project holds more military and geopolitical risks for Georgia than commercial, economic or financial benefits,” Vano Machavariani, former deputy secretary of the Security Council, told Civic Idea.
The route is also used to transport cargo from Russia to Armenia, where it can be re-exported to Georgia, notes economist Gia Jandieri, adding, “It is precisely this road that supplies the Russian military base in Gyumri [in Armenia].”
Currently, the CRTG is working on the construction of a 4.5-kilometer Stepantsminda-Gveleti road, which is part of a larger Mtskheta-Stepantsminda-Larsi road connecting Georgia to Russia. The first state tender for this project was announced in 2022, and five companies participated in it. All were rejected without an explanation.
Furthermore, a second call for tenders was issued in May 2024 and only one company, CRTG, expressed interest in the contract and won with a bid that was GEL 33 million lower than the initial one. It’s still not known why the first round of bids was rejected or why there were no other bidders in the second tender.
The paper says that the CRTG’s work has raised environmental concerns. As a result, the Green Alternative CSO has complained to the donors – the World Bank and the Asian Development Bank – about the violation of environmental regulations, the incomplete scoping procedures, the lack of an environmental impact assessment, and the misleading information in the project documentation about the permits obtained.
Georgia’s Roads Department says Stepantsminda-Larsi road will be the main “artery” of the North-South Corridor.
“The project is politically risky and dangerous because Georgia should be spending its already scarce resources on improving the infrastructure connecting the East with the West, while this particular project will make it easier in the long run to connect two sanctioned countries – Iran and Russia,” Civil Idea notes.
Conclusion
Civic Idea notes that the Georgian government’s decision to work with CRTG and to create a non-competitive climate for it, echoes the problematic Georgian experience with Chinese companies to date. The paper says that similar partnerships with Chinese companies have often been fraught with security risks, violations of the law and allegations of corruption. It says there is reason to fear that the Stepantsminda-Larsi project also runs the risk of possible delays in implementation, rising costs and deteriorating quality.
Civic Idea notes that despite a series of major scandals surrounding the CRTG, the Georgian government does not appear to be taking a more cautious approach. Worryingly, there is no thorough investigation of the company, its reputation and business practices before contracts are signed, the paper says. Such a superficial approach threatens not only the country’s infrastructure development, but also national security and the environment, the organization argues. Given the risks associated with CRTG-related activities, there is a need for strict oversight of companies and frequent infrastructure assessments. “This is particularly relevant in the case of the Stepantsminda Highway project, where the government should put the interests of citizens first and safety standards should be strictly adhered to,” Civil Idea stresses.
Also Read:
- 06/06/2024 – TI Georgia: Chinese Company with ‘Questionable Reputation’ to Build Anaklia Port
- 29/05/2024 – Minister of Economy Announces Sino-Singaporean Consortium Winner in Anaklia Port Selection Competition
- 22/01/2024 – Chinese Companies in Georgia: Sanctions, Delays and Concerns
- 19/01/2024 – PM Garibashvili Talks Middle Corridor, Relations with China and Infrastructure Projects on Davos Panel
- 31/07/2023 – Georgia and China Issue Joint Statement on Strategic Partnership
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