The Chinese company Xinjiang Communications Construction Group Co, Ltd. was set to make a breakthrough in road construction in Ukraine, implementing two projects worth $ 95 million. However, in 18 months, the Chinese completed a mere 1% of the planned amount of work and lost both contracts.
In the fall of 2017, the State Agency of Automobile Roads of Ukraine (Ukravtodor) signed two contracts with Xinjiang Communications Construction Group Co., Ltd. to repair two Ukrainian roads. For $ 38.485 million, the company agreed to repair a section of the M-12 highway, Stryi-Ternopil-Kirovohrad-Znamyanka. The second contract provided for the reconstruction and major overhaul of the M-03 Kyiv-Kharkiv Dovzhansky highway, amounting to $ 57.3 million.
The projects are funded by International Bank for Reconstruction and Development and World Bank loans. The contractor was selected through tenders.
After the contracts were signed, Ukrainian officials expected great results.
“I hope that the presence of Chinese partners in the Ukrainian market will be a success. The company Xinjiang is responsible not only for its reputation but also the reputation of all Chinese companies,” said Ukravtodor Chairman Slavomir Nowak during the signing of the contract.
Shen Jinsheng, Chairman of Xinjiang Communications Construction Group Co., Ltd also expressed his hope for success.
“We are very pleased that we signed the contract. Our company uses the most advanced technologies, we have built roads in China, Mongolia, Kazakhstan, South Sudan, Cameroon, Tajikistan. We believe that we will do our best in Ukraine. We will try to make our best professionals work here,” he said.
Moreover, the Chinese were set to eliminate the shortcomings left after the repair of the M-03 line by their predecessor, Todini Costruzioni Generali SpA. In August 2016, Ukravtodor terminated its contract with the Italians to conduct overhaul and reconstruction of the Kyiv-Kharkiv Dovzhanskiy road section Lubny-Poltava “due to a large number of defects and serious mistakes”.
But the Chinese met the same fate.
In December 2018, Ukravtodor announced the termination of the contract for the repair of highway M-03, and highway M-12 another 6 months later.
Ukravtodor used these tough measures due to “a systematic and substantial breach of contract”.
“At the date of the termination of the contract, the contractor performed only certain types of works, which is less than 1% of the total amount. At the same time, the contractor had to perform 70% of the works on the date of termination of the contract.
This contractor’s attitude to its contractual obligations jeopardized the timely implementation of the project financed jointly with the World Bank and resulted in increased danger to drivers on this road of national importance, one of Ukraine’s crucial transport corridors,” Ukravtodor reported on the repair the M-12 route.
In addition, Ukravtodor noted, key personnel had no adequate experience and knowledge in the implementation of road works required by FIDIC contracts, which hindered works and adversely affected their progress.
In April 2018, Xiao Jun, Xinjiang’s deputy Chairman, explained the company’s problems to a local TV channel.
“We were not able to find suitable soil, a quarry for construction in Ukraine, the government has not helped us in any way,” he said
Xiao Jun also noted that the Ukrainian authorities didn’t trust the contractor. “They don’t trust us in Ukraine, we can work only on advance payment. We have very substantial financial losses”.
Xinjiang didn`t respond to our request.
Local State Administration stated that the Chinese failure cost $ 20 million.
Ukravtodor is now seeking to refund a $ 3.8 million advance payment to Xinjiang for the construction of the M-12 highway. In February 2020, the company appealed to the Kyiv Commercial Court to seize movable property of Xinjiang Communications Construction Group Co., Ltd because the contractor had refused to pay the refund voluntarily. “No money was refunded by either the defendant or the issuer of the bank guarantee on demand. On 15/08/2019, The Bank of China, the guarantor bank, informed the Urumqi People’s Court of the Xinjiang Uyghur Autonomous Region that any payments under the said bank guarantee are prohibited,” the court said.
The court rejected Ukravtodor’s claim. In a response to our request Ukravtodor said it had initiated the creation of an interagency working group to resolve the dispute.
Xinjiang Communications Construction Group Co., Ltd. is an infrastructure construction business. The Company designs and constructs highways, bridges, traffic safety facilities, municipal engineering, and other projects. Xinjiang Communications Construction Group also provides engineering, testing, logistics, machinery leasing, equipment procurement, etc.
XCCG has expanded its business from Xinjiang to Sichuan, Hunan, Tibet, Guizhou and overseas markets in South Sudan, Cameroon, Mongolia, etc., and has also carried out municipal works, water resource and railway construction and became the first contractor to participate in subway works in Xinjiang.
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