ADB blacklists top Chinese construction firms – The Kathmandu Post

The Asian Development Bank (ADB) has blacklisted three top Chinese construction firms for violating integrity rules, and barred them from participating in Nepal’s key airport infrastructure development project, multiple sources privy to the matter said.

The ADB’s Office of Anticorruption and Integrity threw the book at the three state-backed companies—China CMC engineering Company, Northwest Civil Aviation Airport Construction Group and China Harbour Engineering Company—for varied offences.
Nearly two dozen firms had purchased bid documents to vie for the Rs10 billion Tribhuvan International Airport ultimate development project in Kathmandu, but only four Chinese companies submitted them.
Among the four hopefuls are two of the firms blacklisted by the Manila-based multilateral funding agency—China CMC Engineering Company and a joint venture of Northwest Civil Aviation Airport Construction Group and China Harbour Engineering Company, a top official at the Civil Aviation Authority of Nepal, told the Post.
China CMC Engineering Company, which is currently constructing Pokhara International Airport, has been put on the ADB’s Sanctions List until April 2022. The firm has been blacklisted in an ADB-funded project in Pakistan.
China CMC Engineering won the construction contract for the Pokhara airport project in May 2014, and work started in July 2017. The government signed a $215.96 million soft loan agreement with China EXIM Bank in March 2016 to finance the airport built on an engineering procurement and construction model.
Northwest Civil Aviation Airport Construction Group, which is currently working on Gautam Buddha International Airport in Bhairahawa, has been put on an open-ended sanctions list, which means no sanction release date has been mentioned, the unnamed official said.
Northwest was blacklisted for submitting “fraudulent” documents in 2015 while constructing the airport, the official said. The Civil Aviation Authority of Nepal had awarded the Rs6.22 billion civil works component, the first package, to Northwest in November 2013.
China Harbour Engineering Company has been put on the Sanctions List until 2023. The Bangladesh government had blacklisted China Harbour in 2018 for trying to bribe a roads secretary.
“These companies are blacklisted under the ADB’s integrity guideline, and have been put on the sanctions list for ADB-funded projects,” said the official of the Civil Aviation Authority of Nepal.
The sanctions, however, will not be applied to ongoing projects the companies are currently undertaking, officials say.
The other shortlisted Chinese companies are a joint venture of KDN Airport Engineering Co and China Civil Engineering Construction Corporation and China Overseas Engineering Group or COVEC, a subsidiary of China Railway Group.
With the potential builders being surrounded by controversy, the planned infrastructure development at Kathmandu’s Tribhuvan International Airport has been pushed back.
As part of the ultimate development of Tribhuvan International Airport by 2028, the ADB is investing Rs10 billion under the “airport capacity enhancement sector development programme”, which includes extending the parallel taxiway towards Runway 02 or the Koteshwor side, and building two hangar aprons to relocate Nepal Airlines and Nepal Army hangars from the western side of the runway.
“The ADB had written about the development to Nepal’s civil aviation body in October-end and made a correspondence for the same in November,” said the official. The ADB and the Nepal government signed a $150 million concessional loan to improve the capacity of Tribhuvan International Airport and Gautam Buddha Airport in Nepal in December 2020.
“After the latest development, the Civil Aviation Authority of Nepal will seek permission from the ADB to begin the process of appointing a project developer from among the remaining two candidates under its guideline,” said the official. “After the ADB sends a no-objection letter, the aviation body will appoint the lowest bidder. The project, planned to begin by October 2021, will be delayed.”
According to a government procurement expert who wished to remain anonymous, the companies have been blacklisted only for ADB-funded projects.
“But if the ADB informs Nepal’s public procurement monitoring office about their misconduct and the manner in which they were put on the sanctions list, it will be easy for Nepal to blacklist them too. The integrity rules in the project are universal rules.”
Under Nepal’s procurement laws, at least three companies are required to participate in the tender. But the aviation authority said the ADB rules stipulate that two companies can be eligible in a competitive bidding process.
Nepal plans to upgrade Kathmandu’s airport which is currently functioning as the sole international airport.
ADB documents say that taking into account the planned infrastructures for ultimate development, the maximum runway capacity of Tribhuvan International Airport will accommodate 42 aircraft movements per hour in mixed mode operation on Runway 02, enabling 187,000 aircraft movements per year.
To enable capacity enhancement of the runway and create space for additional international aprons, the Airport Capacity Enhancement Sector Development Programme has envisaged extending the taxiway and relocating the Nepal Airlines and Nepal Army hangars.
The construction and relocation of the two hangers will cost $75 million while $65 million has been estimated for the construction of a dedicated domestic apron.
As there is no taxiway on the southern part of the runway, aircraft need to occupy the runway for 2–3 additional minutes for takeoff and landing, particularly during peak hours. The number of parking spots at aprons (international: 11 and domestic: 17) is not sufficient to handle peak-hour parking demand, causing unnecessary waiting time for spot allocation, the document reads.
Combined with limited airspace in Kathmandu Valley, the insufficient capacity of airside facilities forces aeroplanes to remain on hold in the sky, leading to frequent flight delays. For landside facilities, the current international terminal building handled 4.3 million passengers in 2018, beyond its annual capacity of 3.2 million.
Heavy congestion and lower quality of services are observed during peak hours; the international terminal building handled more than 2,200 passengers per hour, about 70 percent more than its per-hour capacity of 1,350. The number of international passengers is projected to further increase to 6.1 million by 2028.
The Civil Aviation Authority said that it would initiate the construction of a new international terminal building after relocation of the hangars and domestic aprons to clear the planned construction site which will require about $400 million in financing.
In April 2019, Nepal had submitted a request to the ADB to finance construction of the new international terminal building. The ADB said the new project was being prepared as a separate project, for consideration in 2021 or later. 
Sangam Prasain is Business Editor at The Kathmandu Post, covering tourism, agriculture, mountaineering, aviation, infrastructure and other economic affairs. He joined The Kathmandu Post in October 2009.

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