MANAGUA, Nicaragua (AP) — 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 CEO’s record of success heading 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. Its own literature describes the company as possessing “huge strength and sublime eminence in the global communications industry.”
But an examination of those claims by The Associated Press around the world paints a different picture. While at least some of Xinwei’s domestic enterprises appear to be successful, outside of China, promises to build revolutionary new 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 AP found no evidence of a successful, large-scale project up and running.
In the other eight, either analysts and major telecom firms said they had not heard of the company, or Xinwei did not provide enough details about its partners or projects to allow its record to be examined.
In Cambodia, a promised high-tech new wireless network has yet to launch nationwide after unexplained delays.
In Zimbabwe, officials say Xinwei’s partner had its license pulled by regulators and assets seized by a local bank.
And 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 new company to build the canal, a gargantuan 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 told AP that its global telecom 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, problems that ranged, it said, from malicious underpricing by competitors to delays in receiving government licenses.
“The company is fast-growing. It plans to become a first-class global company within the industry in years. We are making good progress toward the goal and understand there is much work to do,” Xinwei said. “The progress of each project depends on our clients’ plans.”
Xinwei was founded in 1995 under the control of state-owned China Datang Corp. It developed wireless telecommunications technology that is supposed to function 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 it over in 2010.
Wang, 40, told The Associated Press that he bought 37 percent of Xinwei for $16 million of his personal funds and quickly turned it around, to the point where the company made a $300 million profit last year.
He said that after the 1995 failure of his first business venture, a school of traditional Chinese medicine, he went to Hong Kong and became involved in finance and investment management. Wang said he began to invest in mining in 2007 and is full or part owner of gold mines in Cambodia and Thailand.
According to a Hong Kong database, he has been a director of about a dozen companies, some current, others dissolved. But even Chinese state-run financial news organizations have said they were unable to uncover much about him prior to 2010.
Still, Xinwei’s website shows national leaders including President Xi Jinping and Premier Li Keqiang visiting the company, an indication of solid government connections.
Ronald MacLean Abaroa, a former World Bank official and Bolivian mayor who’s become a spokesman for Wang, has described him as “a successful businessman in his country and other parts of the world.”
“He’s got very deep pockets and wants to invest money in order to leave a mark on the world. He’s not an expert in canal-building,” Abaroa recently told reporters. “He’s an expert in making investments that result in development.”
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. But in Nicaragua, as well as Cambodia, it has been trying to build and operate wireless voice and data networks itself.
“If it has launched in any of its markets, it has yet to make even a small difference to the market,” said Laura Holland, the head of telecommunications research at private corporate research consultants Business Monitor International. “Xinwei has no experience as a commercial telecoms operator as far as BMI is aware.”
Wang said Xinwei’s pre-2010 record did not reflect his abilities as a manager, and he said there was no question in his mind that the Nicaraguan canal would be built.
“With my hand over my heart, I can guarantee it will succeed,” he told the AP.
The Nicaraguan government has declined to release any details of its request for proposals for a new wireless voice and broadband system last year, but the initial asking price for the concession was $90 million, according to an official with one of Xinwei’s competitors, who spoke on condition of anonymity for fear that it would hurt his relations with the Nicaraguan government. Wang paid just $20 million in January after three of the region’s major cellular service providers — Claro, Movistar and the Costa Rican Institute of Electricity — dropped out of the bidding, the official said.
Ortega’s political opponents allege that the Nicaraguan government tailored the technical aspects of the process so that only the Chinese company met the requirements.
“It was cut to measure so that Xinwei would win,” said Agustin Jarquin, a former ally of President Ortega and ex-national comptroller.
Orlando Jose Castillo, head of Nicaragua’s Institute of Mail and Telecommunications, gave assurances that the network would arrive by this month, and said it had been delayed only by the need to build antennas and other equipment. But there is no evidence that Xinwei has installed equipment, marketed equipment to customers or made any other progress toward launching a national network.
Wang said Xinwei won the contract on its merits alone and the company described that work, as well as projects in Russia, Ukraine, Cambodia, as “going on very smoothly.”
But the company appears to have faced obstacles across the globe.
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 told the AP that it has launched what it called “first-phase investment” in Russia.
“This is definitely not a major player in Russia,” said Anna Lepeutkhina, a telecoms analyst at Moscow-based investment bank Sberbank CIB. “No one has written or talked about it.”
In Cambodia, the company was supposed to launch a 4G network in August, but its local office said it had been delayed for unspecified reasons. Likewise, Panamanian authorities say a project Xinwei described as enabling the “digitalization of the government and Panama Canal” never went past the test phase. Xinwei told the AP its equipment was operating in the Cambodian capital and a national network was under construction. In Panama, the company said, a small initial project is under expansion.
In Cameroon, Xinwei says its equipment was used in the nation’s largest broadband mobile network after it won a 2008 bidding process. But an official with the Cameroon telecommunications ministry told the AP that Xinwei’s local partner had made a series of false claims about its download speed and size, and was not the largest national network. And in nearby Gabon, where Xinwei boasts it helped a new company become the nation’s largest “data operator,” the company told AP it had switched vendors after two years because it needed faster equipment than Xinwei could provide.
Xinwei told the AP that its Cameroonian partner once had the most users and best service in the country, and in Gabon, Xinwei’s partner had been undercut by “low-price malicious competition from competitors.”
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, itself considered one of the greatest engineering feats of modern history. 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 that will outstrip the capacity of the existing canal.
“We can’t believe that an inter-ocean canal will be built by this business when it hasn’t done anything that it announced it would,” Nicaraguan opposition congressman Eliseo Nunez said recently.
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,” said Maurer, author of the 2010 book “The Big Ditch: How America Took, Built, Ran, and Ultimately Gave Away the Panama Canal.”
Wang said critics were ignoring the project’s clear benefits for Nicaragua, and what he called ample evidence that the canal would be a success.
“Have they done any work to study the project before they speak?” Wang said. “The canal will transform the country.”
Bob Prieto, a senior vice president and expert on massive infrastructure projects at Fluor, one of the world’s largest engineering and construction firms, said that he estimated that the project would have to earn around $1 billion a year to turn a profit, meaning it would have to draw half as much traffic as the shorter, more established Panama Canal.
“That’s a very aggressive stretch,” Prieto said. “If these cost numbers are accurate I don’t see it penciling out.”
Wang said he hoped to raise $8 billion by year’s end from European, Chinese and U.S. investors and every one of his firm’s projections, from best- to worst-case, showed the project could earn more than $1 billion a year.
“I am very confident we will make that goal,” Wang said.
Weissenstein reported from Mexico City. Contributing to this story were Didi Tang in Beijing, Divine Ntaryike in Douala, Cameroon, Maria Danilova in Kiev, Ukraine, Nataliya Vasilyeva in Moscow, Angus Shaw in Harare, Zimbabwe, Yves-Laurent Goma in Libreville, Gabon, Sopheng Cheang in Phnom Penh, Cambodia, Mark Thiessen in Anchorage, Alaska and Juan Zamorano in Panama City.
Filed Under: Aerospace + defense