The Majalla: The Leading Arab Magazine
on : Friday, 17 Dec, 2010
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The East-West Highway

A Tale of Chinese bribery and non-payments

Chinese enterprises building the East-West Highway in Algeria have not paid their subcontracted Algerian enterprises for 16 months, tarnishing China's image in the Algerian press. This is one of several instances of corruption involving the highway, which threatens to weaken a deeply rooted strategic partnership between the two developing nations.
A bridge under construction, built as part of the highway linking the eastern and western part of Algeria. Construction companies have yet to be paid for their work.

A bridge under construction, built as part of the highway linking the eastern and western part of Algeria. Construction companies have yet to be paid for their work.

Chinese construction giants charged with realizing Algeria’s project to create the longest highway in Africa have yet to pay Algerian construction companies in their employ.

CITIC and China Railway Construction Company (CRCC) delivered bounced checks to their small Algerian subsidiary enterprises involved in constructing Algeria’s East-West highway earlier this year. The project is nearing completion, and some Algerian construction workers say CITIC-CRCC have not paid them in nearly 16 months.

In Sidi Bel-Abbes, a major epicenter of construction, 16 companies counted 302,933,667.65 Algerian dinars in unpaid wages. That’s only a fraction of the total amount due to what Algerian daily Liberté reports is over 30 enterprises.

“There is no way to contact the Chinese enterprises. Their checks were found without provisions,” said one staff member at the Sidi Bel-Abbes branch of Algeria’s Bank of Agriculture and Rural Development, the bank that issued Chinese enterprises’ checks.

“The payments will be settled,” another bank employee said. When asked when and how that would happen, he said, “I am not sure about that part yet.”

The highway is part of a multi-pronged strategy to reduce Algeria’s unemployment and poverty. Official figures put unemployment at around 10 percent, but analysts say the figure is more likely double that.

Acknowledged by the Algerian government as President Abdelaziz Bouteflika’s “challenge of the century,” the mega-project was designed to create jobs for Algerians and act as a “platform for sustainable development,” as described by Andy Xie Guozhong, an independent economist and analyst of China’s own economic development. Xie explained that roads are necessary for transmitting exports, and they attract foreign direct investment by facilitating travel for international enterprises.

Algeria is one of the region’s major oil exporters. Of the total 1,216km, the Algerian Ministry of Public Works contracted China’s CITIC-CRCC to construct 528km, the longest stretch of highway, in 2006. Their contract was worth $6.2 billion of an overall $11.4 billion projected cost. Japanese consortium COJAAL was allotted 399km, and the rest was contracted to local enterprises.

The project was originally slated to create 100,000 jobs, according to Algeria’s Ministry of Public Works. Official reports say the highway has employed some 75,400 Algerian workers and engineers to date, and Algerian daily El-Khabar counts roughly 12,000 Chinese staff.

Once hailed as a harbinger of prosperity by the Algerian government, the project has meant hard times for some locals.

One Algerian construction worker refused to reveal the details of his particular circumstances, fearing retribution from his bosses, but he confirmed that Chinese companies had not paid him for his work for around 16 months, and said Chinese employers subjected him to poor working conditions. He recently left the project site to find work elsewhere.

And the Algerian authorities haven’t been responsive.

A 2009 article by Zouheir Ait Mouhoub for independent Algerian daily El Watan recounts how highway workers employed by CITIC-CRCC in Bouira lamented underpayment, unsafe working conditions and abuse from Chinese employers. After alerting local authorities, the local union submitted a letter to President Bouteflika that went unanswered.

“The French denied you your rights for 130 years,” a speaker for the union told workers. “It’s not for the Chinese to accord you [your rights] today.”

 

Allegations of corruption

CITIC-CRCC have also been implicated in a network of bribes and illegal commissions involving their contract.

CITIC’s one-time representative in Algeria, Chani Medjdoub, and six other persons, including Algeria’s secretary general of the Ministry of Public Works, were detained after third-party intelligence alerted Algerian officials to irregular activity in Algerian accounts at Spanish banks. Trials are underway.

Chinese ambassador to Algeria, Liu Yuhe, confronted the press regarding the unnamed foreign intelligence involved in the allegations, saying, “The people behind this campaign against China and its enterprises and who wish to tarnish their image are nostalgic of the bitter wars and a colonialist mentality.”

 

The post-colonial card: A partnership of underdogs

The highway and Algeria’s business relationship with China have their roots in a shared post-colonial experience.

Chinese news media often cites the similarities of contemporary Chinese and Algerian history in what analysts say is an attempt to solidify their relationship with the country.

Colonized by the French for 130 years, Algeria fought a bitter war for independence starting in 1954, just five years after Chairman Mao Zedong declared the New China, free of foreign domination from Japan and the West.

“Algeria and China have comparable histories. The Chinese government and people gave strong support to Algeria during its war for independence,” said one economic attaché at the Chinese embassy in Algeria.

The promise is that the nations’ parallel histories won’t stop at a bloody end to imperialism and the poverty and disillusionment of its aftermath. Analysts say projects like the East-West highway are modeled after large-scale infrastructural projects that boosted economic growth after China’s Reforms and Opening up policy in 1978.

“In the past 30 years of open up and reform, we have had great achievements in economic and social development, and have reduced poverty. This kind of achievement is a good example for African countries,” the attaché said.

Algeria has long developed a business partnership with its post-colonial ally. According to Chinese embassy figures, mutual trade between the two countries reached $5.13 billion in 2009, a 11.4 percent increase from the previous year; and by the end of last year, China had invested nearly $1 billion in the country. For example, last year, the China National Petroleum Corp built a large oil refinery in Algeria’s Skikda industrial zone at a cost of $385 million.

Despite the strong close relationship, some Algerians’ perceptions of Chinese enterprises have been soured by recent media coverage of the highway. Nourredine BenAbbou, one Liberté reporter who reported CITIC-CRCC’s nonpayment of wages, said Algerians now feel that, “the Chinese are replacing the Europeans in Africa.” BenAbbou believes that the fact that no major contracts have been assigned to large Chinese firms this year indicates that the highway has weakened Algeria’s political relationship with China.

Still, others aren’t convinced this will affect the nations’ partnership. “The relationship between Algerians and the Chinese is so strong, it can’t be touched by corruption,” explained Adlène Meddi, editor in chief of the weekend edition of independent Algerian daily El-Watan. “We have a strategic partnership with China, so we don’t dare say anything about them.”

 

What’s in a highway?

Many Algerians still hope mimicking China’s domestic infrastructural development, with the engineering know-how and cheap construction China is known for, will encourage the foreign investment that continues to breathe life into the Chinese economy.

“We are, in fact, developing the basic infrastructure, essential to all future investments, and potentially the Algeria of tomorrow,” said Aziz Naffa, economic researcher at Algeria’s Center of Research in Applied Economics for Development, explaining that Algeria needs roads.

But infrastructural development may not be enough to promote Algeria’s sustainable development. “Most developing countries need to deal with institutional weakness to welcome foreign development,” said economist Andy Xie, referring to the kind of bribes and illegal operational costs that have led to the ongoing trials.

For China, the long-term benefits are clearer.

Economists note that, as a major investor in Algeria, facilitating transportation in Algeria will cut China’s own transaction costs. And, as its 2009 investment in Algerian oil illustrates, Algeria has a lot to offer China’s thirst for fuel.

Sources say CITIC originally requested to be paid for its participation in the East-West highway in oil.

Nafa is positive that the highway is necessary for Algeria’s development but also cautious in measuring China’s role in Algeria’s development. “I would say, effectively, certain services will generate a durable added value. But to say that the Chinese enterprises by virtue of the East-West highway will contribute to durable development in Algeria is pretentious.”

Nafa is even more cautious in discussing the allegations of corruption. “I often don’t respond to these questions at all,” he said. “I will say that in our time, the notoriety of an enterprise, its global image, is not only created by a mastery of production. Another capital element in a globalized and segmented word is ethics.”

CRCC and Algeria’s Ministry of Public Works failed to comment by the time of publication. CITIC initially offered to comment, but after discussing the sensitive nature of the questions asked, said the concerned authorities were on a business trip. The Algerian bureau of the United Nations’ International Labor Organization also declined to comment.

 

Michael Martin – Journalist working for “South China Morning Post,” Hong Kong’s leading English-language newspaper, and recent graduate of Columbia’s Graduate School of Journalism.

The Majalla: The Leading Arab Magazine

The Majalla: The Leading Arab Magazine

Since it was first published in 1980 from its head office in London, The Majalla has been considered one of the leading political affairs magazines in the Arab world. We offer a wide array of articles addressing the most significant political, economic and social issues facing the Middle East today, as well as the evolving cultural scene in the region. The Majalla prides itself in being an ideas-driven publication that goes beyond reporting and headlines to provide original analysis.

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