201006018
allafrica

Chinese companies are caught in the political crossfire between President Abdelaziz Bouteflika and his opponents in the military and intelligence services led by General Mohammed 'Tewfik' Mediene.

The main point of contention is the conduct of the government's promised anti-corruption campaign, which is targeting some of Boutflika's 'grands projets', seen as his legacy to the country and which others regard as a lucrative source of revenue.

Many Algerians took seriously the government's pledge to combat corruption. Indeed, some of the anti-graft officials working under Tewfik Mediene have shown little consideration for those business people claiming special privileges from President Bouteflika's circle. Political insiders in Algiers say Beijing's troubles can be traced back to its unwise choice of business partners and a general lack of enthusiasm for diplomatic and commercial relations with China. During Algeria's liberation war in the 1950s, the Front de Libération Nationale's main foreign ally was the Soviet Union, not China.

The latest target in the corruption purge is the China Railway Construction Corporation, which has lost two contracts worth over US$2 billion following investigations by the Defence Ministry's Département du Renseignement et de la Securité. The DRS is under the control of its Director General, Tewfik Mediene. CRCC had also been involved in building a branch of the East-West Highway which had earlier come under scrutiny from Mediene's investigators (AAC Vol 3 No 5). Then, eight people were arrested and investigations into the contracts are continuing.

Now the intelligence and judicial services have turned to the management of contracts under the $80 bn. railway rehabilitation programme, and their investigations appear to be threatening some of Bouteflika's allies. Bouteflika has tried to curb the power of DRS Director General Mediene, with little success.

This clan battle between Bouteflika and Mediene is playing out against a backdrop of fin de règne. 'Boutef' is now in his third, five-year term in office and a younger generation of politicians and military is plotting to take power. For now, neither the presidency nor the military elite seem to have the capacity to score a decisive victory against the other. Instead, running battles between the two sides are being fought, battles which often involve government officials and foreign companies.

Sackings and a Reshuffle

The President and Chief Executive Officer of state oil company Sonatrach, Mohamed Meziane, sacked in January, was the first major casualty of the increasingly bitter confrontations. The leadership of Sonatrach, the lynchpin in the management of Algeria's massive oil and gas wealth, is being restructured as former executives face the prospect of long trials.

President Bouteflika signalled further changes in the oversight of the oil and gas sector with the sacking of Minister of Energy and Mines Chakib Khelil, a former Sonatrach employee and World Bank economist, who had held the portfolio since December 1999. A 28 May government reshuffle left most posts intact, but replaced Khelil with former Sonatrach Director Youcef Yousfi. Amar Ghoul, Public Works Minister and close friend of Boutef's son Saïd Bouteflika, has been another target for the DRS and his ministry has been involved with the road and rail contracts that have been cancelled or which have associated cases before the courts.

The DRS's new investigations into the railway projects have important implications for Chinese companies. The Agence Nationale d'Etudes et de Suivi de la Réalisation des Investissements Ferroviaires (Anesrif), which is charged with awarding contracts for Algeria's massive $80-bn. rail improvement programme, cancelled two of CRCC's contracts after a DRS probe.

CRCC, with Algerian state-owned company Infrafer, was provisionally awarded the contract for a railway line linking Relizane, Tiaret and Tissemsilt in July 2009, at a cost of $1.2 bn. On 7 May, Algiers announced that the contract had instead been given to a consortium of Spanish construction company FCC Construcción and Algeria's ETRHB Haddad. A week later, CRCC lost a second contract. This contract, to link the towns of Tiaret and Saida, was worth $870 million.
Contracts are awarded provisionally and then must be approved by the Commission Nationale des Marchés Publics. CRCC did not win a favourable decision from the CNMP; the remaining bids were examined and the contract was given to the Spanish and Algerian consortium. The frequent cancellation of contract awards is slowing down the ambitious modernisation projects for Algeria's railways.

CRCC Appeals

CRCC executives have appealed to Transport Minister Amar Tou for a new hearing on the cancelled deals. In a 5 May letter, CRCC sought a meeting with the Ministry to explain its case and to find out why a consortium that 'had officially been declared ineligible' had won the contract after the provisional award to CRCC. The company said that Algerian press reports of corruption in the award of the contract were 'scandalously unqualified rumours which are unacceptable and totally without foundation.'

It is not the first time that a Chinese company has lost to those rival companies from Spain and Algeria. In July 2009, China Metallurgical Group Corporation wrote to the CNMP denouncing 'favouritism' and 'irregularities' in the awarding of contracts for Tizi Ouzou stadium. MCC, which worked on the construction of the 'Bird's Nest' stadium in Beijing for the 2008 Olympics, accused the government of trying to disqualify its bid and instead hand the contract to a consortium that did not meet the technical requirements of the bid. Their complaints fell on deaf ears.

The cancellation of the CRCC contracts follows months of investigations by the DRS. Initially, their efforts were focused on corruption in the East-West Highway project but then extended to the railway contracts. Algeria's corruption-busters are gathering steam and targeting some previously powerful interests. A DRS investigation into false documents provided by Turkish company Aska Insaat showed that Anesrif managers were offered millions of euros to ignore irregularities in contract agreements. The affair came to light when a new management team was installed and Anesrif brought the case to court in 2009. As of late May, the Chambre d'Accusation de Boumerdès was handling the criminal case.

A dozen Anesrif workers are now wanted by the justice department on various charges including the embezzlement of public funds, violation of the public contracting law and illegal tendering practices. Anesrif managers say that there was no wrongdoing, but the judicial authorities are now sifting through a dossier on contract irregularities. In the meantime, Anesrif's Interim President Ahmed Kellou says that experts have been hired to audit the agency and identify corrupt officials.

The courts issued arrest warrants for Chief Executive Hassane Saïdi and two other Anesrif executives, and at least seven others are now in custody. Investigations show that Saïdi was Chief Executive of Anesrif at the same time as he was Chief Executive of the state-owned company Infrafer. During his time as CEO, Infrafer was involved in several complex financial relationships with successful bidders.

The latest setback for Chinese construction companies came in May when the Algiers government made objections to the award of contracts to Sinohydro in 2009. This would jeopardise Sinohydro's contracts for the building of a new city at Boughezoul.