Record paltry for Chinese canal exec

MANAGUA, Nicaragua - When President Daniel Ortega granted a Chinese telecommunications executive exclusive rights to develop a $40 billion canal through Nicaragua and operate it for 100 years, his administration touted the businessman’s record of success leading a wireless communications firm with projects in 20 countries.

Wang Jing’s company, Xinwei, boasted that it had orchestrated an array of deals worth more than $5 billion over the last three years, in places as far-flung as Zimbabwe and Ukraine. The company says it possesses “huge strength and sublime eminence in the global communications industry.”

But an examination of those claims paints a different picture. While at least some of Xinwei’s domestic enterprises appear to be successful, outside of China, promises to build revolutionarynew telecom networks have yet to materialize. And deals with local partners have been marred by false starts and poor performance.

In 12 of the 20 countries where Wang’s Xinwei Telecom Enterprise Group and associated companies say they’ve done business, The Associated Press found no evidence of a successful, largescale project up and running.

In the other eight, either analysts and major telecommunications firms said they had not heard of the company, or Xinwei did not provide enough details about its partners or projects to allow their record to be examined.

In Nicaragua, where Wang has formed a new company to build a waterway that could be three times the length of the Panama Canal, there is no sign of a promised $700 million national wireless network more than a year after he announced his intent to build it. That record is raising doubts among local businessmen, political opposition leaders and outside experts about the ability of Wang’s company to build the canal, a project that has been considered and abandoned for centuries.

“This is just orders of magnitude beyond anything that they’re capable of,” said Derek Scissors, a senior research fellow who monitors Chinese overseas investment for the Heritage Foundation. “At this point it’s just a stunt.”

Beijing-based Xinwei said its global telecommunications plans were moving forward in at least five countries outside China and it is working with investors to fund what it expects to be billions of dollars of new networks in Russia and Ukraine. It acknowledged that it had run into challenges in several countries, includingunderpricing by competitors and delays in receiving government licenses.

Xinwei was founded in 1995 under the control of state-owned China Datang Corp. It developed wireless telecommunications technology that is supposed tofunction as an alternative to better-known standards that are ubiquitous in much of the world. The company appears to have successfully marketed the equipment to Chinese state and private firms. But elsewhere, the technology didn’t take root, contributing to Xinwei’s financial struggles before Wang took over in 2010.

Xinwei’s website says its core markets include public telecommunications operation, public security, oil fields, power grids, water conservation and transportation and emergency communications. In most countries, the firm appears to have acted as the wholesaler of wireless equipment. In Nicaragua, it has been trying to build and operate wireless voice and data networks itself.

But the company appears to have faced obstacles around the world.

In Ukraine, Xinwei says it inked a $1 billion deal with a local provider last year to build public and private communications network, and says it has completed the initial phase of financing. Analysts there said there is no sign that any project involving Xinwei is close to becoming reality.

In Russia, Xinwei says it signed a 2011 deal to build $4 billion worth of networks. Xinwei said it has launched what it called “first-phase investment” in Russia.

Many in Nicaragua see Xinwei’s track record as a poor omen for Wang Jing’s goal of building the canal, a centuries-old dream for global traders. The project was repeatedly considered by the U.S. in the 19th century before Washington decided to put its money on the shorter Panama option. Wang and other proponents of a Nicaraguan canal say it will be able to handle bigger ships than its rival and that rising Asia-U.S. trade will outstrip the capacity of the existing canal.

Nonetheless, in June, the country’s Sandinista government rushed through congress a law giving Wang a century-long concession to build and run the waterway, despite a lack of public bidding and less than a week of congressional debate. Wang was given the green light in exchange for $10 million a year once the canal begins operation, plus a 1 percent stake that grows by 10 percent each decade after that. That’s a far smaller cut than many private companies give up for the right to build big projects in other developing nations, said Noel Maurer, a Harvard Business School professor who studies business practices in unstable countries, particularly in Latin America.

“It’s a terrible deal for Nicaragua,” Maurer said. Wang said critics were ignoring the project’s benefits for Nicaragua, and what he called ample evidence that the canal would be a success.

Information for this article was contributed by Didi Tang, Divine Ntaryike, Maria Danilova, Nataliya Vasilyeva, Angus Shaw,Yves-Laurent Goma, Sopheng Cheang, Mark Thiessen and Juan Zamorano of The Associated Press.

Front Section, Pages 14 on 09/01/2013

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