World Bank ban damages Chinese suitor’s chances

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The recent signing of a free-trade agreement between China and Australia has made investing in Australian companies more attractive to Chinese buyers. But one Chinese construction company faces significant challenges as it tries to purchase one of Australia’s largest contracting businesses.

China Communications Construction Company (CCCC) is believed to be the front runner to purchase Leighton Holding’s John Holland Group. But CCCC is the successor to China Road and Bridge Corporation (CRBC), which was debarred by the World Bank in 2009 after an investigation suggested it had engaged in fraudulent conduct concerning road tenders in the Philippines. CCCC was itself banned in 2011 due to its relationship with CRBC.

CCCC’s ban from World Bank projects raises concerns for Australian government bodies seeking to award infrastructure projects. Amar Flora, Chief Operating Officer at the University of Sydney’s John Grill Centre for Project Leadership, has argued that Australian governments should be wary of foreign investors with chequered pasts in the industry.

According to the Financial Review, Mr Flora has asked, “Is the Australian government willing and capable of providing quality assurance on Chinese investment, and in ensuring that the Chinese investment complies with Australian regulatory frameworks?”

If CCCC wins its bid for John Holland, it is unlikely that the scrutiny of its past will stop any time soon. The case highlights the significant financial and reputational damage that can result from allegations of bribery and corruption, even if unproven.

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Source: Australian Financial Review