Railway Deal Winner Banned By World Bank Over Graft

China Harbour Engineering Company (CHEC), the Chinese firm set to construct the eastern route standard gauge railway is on a World Bank blacklist of 2009, it has emerged.

According to the Cayman news service website, (www.caymannewsservice.comworld-news20120605world-bank-banned-chec), CHEC was blacklisted for its involvement in fraud and corruption related to construction projects in the Cayman islands.

The report was posted on June 5, 2012. The islands are a British overseas territory neighbouring Jamaica. The bank, which did not provide further details about the nature of the fraud, said the ban would stay in force until 2017.

The bank said that during this period, CHEC would not be eligible to take part in any World Bank financed contracts related to roads and bridges. The news report said the ban was announced under the bank’s fraud and corruption sanctioning policy.

While the World Bank ban tarnishes the image of the firm, it does not affect the memorandum of understanding the company signed, which clearly stipulated that funding for the railway project would be got from China.

The deal:

John Byabagambi, the minister of state for Works, said he doubted the credibility of the reports about CHEC being blacklisted.

“I don’t have that information because on the World Bank website, whoever is banned is hung there and CHEC is not there,” Byabagambi said yesterday.

Byabagambi said such information could have been peddled by CHEC’s business rivals.

“That is a creation of their [CHEC] rivals and anyway, Uganda’s procurement regulations are not encumbered by World Bank,” he said.

These revelations come against a backdrop of allegations by another Chinese firm, China Civil Engineering Construction Corporation (CCECC), that it was treated unfairly in the standard gauge railway deal. A day before it inked the deal with CHEC, government cancelled the MOU it had signed with CCECC in 2012 giving it rights over the eastern and northern railway routes (Tororo – Gulu – Nimule). These routes were allocated to CHEC in the new MOU.

The decision has already attracted rage from CCECC and its lawyers said last week that they would proceed with legal action. The August 27 MOU that handed CHEC the $8.5bn (Shs 21.2 trillion) railway deal was signed in defiance of a court order issued on July 23, 2014.

The order issued by Justice Lydia Mugambe, among other things, prohibited the government from entering into any contract regarding the eastern route until outstanding matters are resolved to the satisfaction of every party. Such a contract, Mugambe ruled, would only be entered into “if CCECC had lost interest in the same route.”

But Byabagambi insists that no court orders were defied because the same orders came with an option of negotiations.

“I engaged them [CCECC] because they had convinced court that they had incurred costs when they did a feasibility study but it was later proved that they hadn’t done any feasibility studies,” Byabagambi said.

The controversy surrounding the railway deal has already caused uproar in Parliament. Two legislators Theodore Ssekikubo (Lwemiyaga) and Abdu Katuntu (Bugweri) are preparing to move a motion urging Parliament to institute an investigation.

How CHEC came into Uganda:

CHEC was introduced to Museveni way back in 2009 by Rosa Whitaker, the former US Trade representative for Africa who has since been retained as a lobbyist by Kampala. According to Museveni’s September 9, 2012 letter to Works and Transport minister Abraham Byandala, CHEC came with Whitaker’s assurance that they didn’t have to ‘bribe Ugandan officials.’

The money that CHEC had hoped to use in bribing government officials, Museveni directed, would be used to equip and train UPDF’s engineering brigade. In his letter, Museveni does not indicate how much money was earmarked for this end, but he is evidently furious that some government officials were out to fail his interests.

“These officials are damaging Uganda’s interests in three ways: damaging Uganda by portraying it as a bribes-taking country diverting the Chinese money that would have supported the engineering brigade of the UPDF to bribing corrupt [government officials],” Museveni wrote.

In an August 28 press statement following the signing of the railway MOU with government, CHEC described itself as a “global infrastructure company that ranks in the top five international Chinese contractors currently undertaking projects valued at $13 billion.”

Source : The Observer

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