Kyrgyzstan was shaken by a major corruption scandal involving a Chinese company while the country’s capital Bishkek was hosting a ministerial meeting of the five Central Asian countries earlier this month. EU officials told EURACTIV this experience should serve as a lesson.
The foreign affairs chiefs of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan, as well as EU High-Representative Federica Mogherini, met in Bishkek on 7 July for the 15th EU-Central Asia Ministerial Meeting.
The scandal, involving a $386 million contract handed to a Chinese company in 2013, has led to the arrest of two former prime ministers, Sapar Isakov and Jantoro Satybaldiev, highlighting the potential hazards facing Beijing’s ambitious Belt and Road Initiative.
Prosecutors investigating the scandal allege that officials awarded a contract to refurbish the Soviet-built Bishkek Thermal Power Station to Tebian Electric Apparatus (TBEA), a Chinese company active across Central Asia, without a proper tender.
The government chose the Chinese TBEA company for the thermal powerplant project and did not consider other options which offered to do the same work more cheaply. Former Prime Minister Isakov argued that the choice of TBEA was the official position from Bejing and they could not change it.
Reportedly, the Chinese company failed to refurbish the plant and, as a result, last winter the local population experienced a bitter chill. The accident at the Bishkek Thermal Power Station occurred on 26 January, just as temperatures outside were steadily sinking to around -27 degrees Celsius.
New revelations have provided shocking details, such as fire extinguishers billed in the thousands of dollars, or pliers billed in the hundreds, according to the contract.
An EU official who spoke to EURACTIV said the scandal had to a certain extent eclipsed the official agenda of the ministerial, but didn’t appear to regret it. He said it was high time the countries in the region – and beyond – understood that Chinese investment often turns out to be problematic.
Emerging corruption scandals in the Belt and Road Initiative are becoming a cause of concern for EU member states, but also for Bejing.
The Chinese government announced the Belt and Road Initiative in 2013 as a global trade strategy based on the ancient trading route. It promotes economic cooperation across Asia, Africa and Europe. Some analysts see behind the project a geopolitically motivated push to extend China’s influence. Kyrgyzstan was one of the first countries that supported the initiative and took part in it.
Nevertheless, its success is relative.
“All these infrastructure projects have been implemented by Chinese companies which use almost exclusively Chinese labour force. Most machinery, equipment and materials have also been imported from China,” writes Roman Mogilevskii, an associate director at the University of Central Asia.
China is also involved in geological explorations in Kyrgyzstan and operates mines which produce a gold-copper concentrate. The material is subsequently exported to China.
The biggest concern is the Kyrgyz government’s debt to Eximbank of China, caused by the loans granted for infrastructure projects, which burdened the country but did not result in Kyrgystan’s higher economic growth. Kyrgyzstan will be repaying an excessively large debt for 20 years due to the power plant modernisation loan.
According to Brussels-based think tank, Bruegel, among the twenty countries seen as being the most in danger of falling into the Chinese debt trap are Kyrgyzstan and three Balkan countries – Montenegro, Albania and Bosnia.
“Infrastructure projects are expensive, and the lack of rigorous evaluation and cost-benefit analysis jeopardises the success of such projects. The cases of China’s ‘never-to-be-recovered’ infrastructure investments are well documented,” said Kemel Toktomushev, a Research Fellow at the University of Central Asia.
Anti-graft probes also found corruption in motorway projects associated with then Prime Minister Isakov.
At the end of June, Kyrgyz parliament lifted former President Almazbek Atambayev’s immunity from prosecution. He is suspected of embezzlement in the modernisation of the power plant and complicity in illegal coal deliveries to the power plant.
Atambayev told journalists he would “stand to the end” against the charges, which he dismissed as politically motivated “witch hunt”.
Asked by EURACTIV to comment, the Mission of China to the EU said it had little knowledge of the project mentioned, but regarding the Belt and Road cooperation, the country’s government required companies to strictly observe the relevant laws and regulations in project bidding, tendering, construction and operation.
“Policy transparency has been improved. A sound market order is fostered. The Chinese government has introduced laws and a host of regulatory documents to manage businesses engaging in external economic and trade cooperation. We exercise dynamic supervision over key BRI projects, thus creating a clean business environment. In addition, a blacklist regime for overseas investment will be established to punish non-compliant investors”, the written answer reads.
[Edited by Zoran Radosavljevic]