Sen. Webb Welcomes Development Contracts for U.S. Companies, Renews Call for Scrutiny of Funding to Chinese Firms

Senator Jim Webb today said that the awarding of two major construction contracts to U.S. firms by the Millennium Challenge Corporation (MCC) is a positive step forward but does not eliminate the need for a thorough examination of the MCC’s process for awarding contracts. In an August 2 letter to the MCC, Senator Webb expressed concern that, at that time, Chinese companies were the largest recipients of its contracts, which are funded with U.S. tax dollars.

“As I wrote to the MCC last month, the partnership of U.S. businesses with U.S.-funded MCC development contracts can help speed America’s economic recovery while strengthening U.S. business ties with developing countries,” said Senator Webb. “I remain concerned that hundreds of millions of U.S. tax dollars continue to fund contracts with Chinese state-owned companies.  Chinese state-owned companies are actors of the Chinese government, designed to carry-out that government’s economic and political interests, and I do not believe that the U.S. government should be financing such activity.  This issue demands oversight for both financial and strategic reasons.

“While I look forward to the conclusion of the MCC’s internal review on the participation of foreign state-owned companies, I will continue to press the MCC to terminate its policy of contracting with state-owned and state-subsidized companies. This policy is inherently against the spirit of private markets and fair competition and harms American business, foreign policy and development interests.”

According to an updated list of contracts provided by the MCC, Chinese firms are now the second largest recipients of its contracts after the U.S.

A full copy of Senator Webb’s original letter to the MCC follows.

August 2, 2010

Daniel W. Yohannes
Chief Executive Officer
Millennium Challenge Corporation
875 Fifteenth Street NW
Washington, DC 20005

Dear Mr. Yohannes:

I am writing to express my concern that the Millennium Challenge Corporation (MCC) is enabling Chinese state-owned enterprises to expand their operations—and Chinese influence—in Africa with tens of millions in American taxpayer dollars.  I was alerted to this problem by a recent Reuters report that Sinohydro Corporation, a Chinese state-owned company, was awarded a $71.6 million contract in Mali to build a new airport for the capital, Bamako.  I have been informed by your staff that in addition to the Bamako airport project, Sinohydro was awarded a contract for the Main Canal Conveyance System in Mali and two contracts for the construction of roads in Tanzania.

Sinohydro Corporation is one of China’s largest state-owned infrastructure companies, ranking 89th among China’s 500 largest companies and 56th among the 225 largest international contractors in 2009.  Sinohydro is well-known for its work on the Three Gorges Dam in China.  Additionally, it has operations all over the world, including Angola, Burma, Cambodia, Laos, Malaysia, Sudan and Tanzania. Some of these projects include financing from the China Development Bank, China’s state-owned development lending organization.

Many of Sinohydro’s projects have been controversial due to their environmental or human impacts, such as the displacement of thousands of people in Sudan with the construction of the Merowe Dam.  Sinohydro also has been reprimanded by the Chinese government for substandard work and breaches in safety and environmental pollution.

At a time when our economy is struggling to recover, I am concerned that the funding of Chinese state-owned companies with U.S. taxpayer dollars harms American business, foreign policy, and development interests abroad.  If this situation is unchanged, we risk the entrenchment of Chinese companies in Africa at the expense of U.S. companies, which cannot compete because of the cost of establishing new operations in Africa.  Additionally, this action tacitly supports the Chinese government’s “going abroad” strategy to expand political influence through business and development ties. 

I believe that there should be a natural marriage in the partnering of U.S. businesses with U.S.-funded MCC contracts in Africa and other regions. This partnership can aid the U.S. economic recovery, provide American jobs, and strengthen U.S. business ties with developing countries. 

Consequently, I am asking that you immediately cease action on these and any other projects not awarded to U.S. companies.

As Chairman of the East Asian and Pacific Affairs Subcommittee, I intend to conduct vigorous oversight on this issue to ensure that our development assistance properly uses American taxpayer funds to advance U.S. interests abroad and not to enhance the spread of Chinese influence. 

Thank you for your attention to this matter.

Sincerely,

Jim Webb