Jun 27th, 2013
Wang Jing, the Chinese billionaire behind a $40 billion plan to cut a canal through Nicaragua, said he’s successfully attracted global investors for a project that has been on the drawing board for more than 150 years.
Work on the waterway should start by the end of 2014 and be completed within six years, Wang, chairman of Hong Kong-based HKND Group, a privately-held infrastructure development company he wholly owns, said at a press briefing in Beijing yesterday. He didn’t identify any of the investors.
“To realize this dream there have to be a lot of conditions met, and today the conditions are at their most mature, including mankind’s need for seaborne commerce,” Wang said in an interview following the event. “Country to country and industry to industry interactions have been transformed.”
The project has political, financing and engineering risks, Wang said, without elaborating. Nicaragua’s government estimates the cost will be $40 billion, or more than four times the country’s 2011 gross domestic product. It would compete with Panama’s century-old canal, which is undergoing a $5.25 billion expansion, and with a plan by Honduras to build a railway with Chinese help to link its Atlantic and Pacific coasts.
‘Plenty of Obstacles’
Nicaragua’s Congress earlier this month granted a 50-year concession to Wang for rights to build the canal. The Central American country has attempted to construct an inter-oceanic channel on several occasions since the mid-1800s without success.
“There are plenty of obstacles,” said Margaret Myers, director of the China and Latin American program for the Washington-based Inter-American Dialogue. “First of all, is there any need for a canal? Attracting sufficient investment is likely to be a major obstacle.”
Another barrier: China and Nicaragua don’t have diplomatic ties — Nicaragua recognizes rival Taiwan — which may present a hurdle for some Chinese companies entering the country. HKND’s solution is to handle all government contacts through a wholly-owned subsidiary in the Netherlands, Wang said in the interview.
“The concession was given to what is basically an unknown company,” said Esteban Polidura, a Latin America analyst at Deutsche Bank AG in Mexico City. “Given what we have seen thus far, the probability of this project becoming a reality, in my opinion, is very low.”
The 40-year-old CEO said he is “very optimistic” that HKND would be able to attract enough investors to pay for the project. They include international banks and other financial companies, investment firms as well as shipping, logistics and energy companies, he said.
Nicaragua’s government gave HKND “a lot of guarantees and a lot of benefits” in areas including land use and tax incentives, Wang said, adding that there is no relationship between HKND Group and the Chinese government.
“Facing unprecedented challenges, we confidently head forward,” Wang said at a June 14 ceremony in Managua with President Daniel Ortega, according to a transcript on Xinwei’s website. “Let us join hands to the great trumpet sound of human self-improvement.”
The benefits granted to HKND have led Ortega opponents, including former presidential candidate Fabio Gadea, to say it violates national sovereignty. In a phone interview from Managua, Gadea called for a referendum on the canal once environmental studies have been completed, citing the vote that Panama held in 2006 on its canal expansion.
“We have to do a referendum like they did in Panama, like any democratic government would do,” he said. “No one knows anything about this enormous megaproject that threatens our sovereignty and environment.”
Wang said he made his fortune mining gold, iron ore and precious stones in Cambodia and Thailand and other countries in Southeast Asia before turning his attention to the telecommunications industry. He said that while in Nicaragua, he encountered a sixty-something “ordinary Nicaraguan” woman who asked if she could give him a hug, telling him that the agreement brought a “day of hope for the poor of Nicaragua.”
“It is no longer a pure investment, it has become a historical milestone,” Wang told reporters. “So I don’t want it to become a joke or an example of a failed overseas Chinese enterprise.”
When asked about the environmental impact he said they would take steps to protect the environment.
“Neither I nor the investor group wants our names dragged through the mud of history,” Wang said.
History of Plans
Other companies may benefit more from the canal project than his, said Wang, a Beijing native. The idea to construct the canal did not originate from him, he said, without elaborating. In 1850, the U.S. and Great Britain negotiated a treaty over a proposed canal through Nicaragua, according to the U.S. State’s Department website. The plan failed and, backed by President Theodore Roosevelt, the Panama Canal was later completed as a shipping route through Central America.
Wang has business interests in infrastructure, mining, aviation and telecommunications, according to HKND’s website. He controls or serves as board chairman of more than 20 companies in 35 countries around the world, the website shows.
Wang is the chairman and biggest shareholder of closely held Beijing Xinwei Telecom Technology Co., which owns core technology used in China’s homegrown standard for third-generation mobile services. Wang said the company’s goal is to become one of the world’s top three telecommunications companies in five to 10 years, according to the company’s website. Xinwei signed a contract last year worth as much as $300 million to set up a phone network in Nicaragua.
His 37 percent stake in the company is worth about $1.1 billion, according to the Bloomberg Billionaires Index. A coterie of China’s top leaders, including President Xi Jinping, Premier Li Keqiang, Vice Premier Zhang Dejiang and top anti-corruption official Wang Qishan have visited the company, according to its website.
Wang, in the interview, said that Xinwei’s investors did not have “a political background.”
Responding to questions about his background, Wang said that he had no government connections and had studied traditional Chinese medicine in Beijing.
“I am a very ordinary Chinese person,” he said. “I can’t be any more ordinary.”