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July 1, 2013 12:29 pm
It is one of the largest proposed infrastructure projects in the world. The feasibility study alone is set to cost $900m. And when complete, the Nicaragua Canal, should lower transport costs for shipping oil from Latin America to China.
The $40bn project certainly does not lack for ambition. Neither, it seems, does Wang Jing, the public face of the newly-registered Hong Kong company, HKND Group, which this month won approval from Nicaragua’s Congress to build and operate the 50-year concession to link the country’s Atlantic and Pacific coasts.
The approval came despite environmentalist opposition and widespread scepticism about the economic viability of the proposed interoceanic canal. It has also raised questions about the role of the Chinese state in the project.
As the low-key investor steps into the global limelight, Mr Wang denies any association with the Chinese authorities. “I’m actually not a [Communist] party member,” he told the Financial Times with a quick laugh.
“This is an entirely private business undertaking, and there is no link to the Chinese government,” he says, sitting in his meeting room under a larger-than life painting of Mao Zedong, the man who led China’s Communist revolution.
A floor-to-ceiling red board next to the entrance of his company Xinwei Telecom carries the Chinese Communist party’s oath in shiny golden characters.
Mr Wang acquired a 40 per cent stake in Xinwei in 2009 from Datang, the company’s state-owned parent. People close to Xinwei say they believe Mr Wang enjoys the backing of senior Communist party leaders, but do not know the exact nature of his links.
Asked about the omnipresent references to state and party at the Xinwei offices, the 40-year-old Chinese businessman says he uses the party oath and other propaganda displayed on the company premises to motivate and inspire his staff.
“We need something that holds everyone together. Paying your staff well will go a long way but it is not enough. People need a sense of accomplishment, a source of satisfaction, ” Mr Wang explains his management philosophy. “I want them to ardently love the motherland and every other human being, to be good citizens.”
Mr Wang says he will apply the same ideals to the Nicaragua Canal too, and claims that he will pick co-investors and other partners in the project depending on whether they share his values.
“Just meeting legal standards is not enough,” he says. “I don’t want you to protect the environment because the law forces you to do so, I want you to do it because you wish to do so in your heart.”
Mr Wang has raised extremely high expectations for the commercial returns of the project, which he has forecast could earn annual revenues of $5.5bn when at full capacity. By comparison, the Panama Canal, which is undergoing a $5bn expansion, earned $1.6bn in pre-tax profit last year on revenues of $2.4bn.
Such putative returns from a project in a country that is subinvestment grade, combined with the engineering difficulties of a canal that will be three times longer than the 48-mile Panama transit, has made many sceptical about Mr Wang’s plans.
Nonetheless, he has assembled an impressive roster of potential partners, including China Railway Construction, which has long experience in global civil engineering projects, plus the country’s state-owned oil groups, which have an interest in lowering transport costs of oil and coal from Latin America. He also pledges to involve financial institutions from around the world.
Right now, 4,000 people including staff from McKinsey, the British environmental consultancy ERC, the US law firm Kirkland, and research institutes belonging to CRC are working on the feasibility study. Mr Wang says HKND could cover the operational cost before the start of construction, scheduled for late 2014, with its own funds. The Nicaraguan government has said it estimates the project could increase growth of the country’s $10bn economy by 15 per cent a year.
Historical experience however, weighs against the plan’s success. A canal across Nicaragua, linking up its natural lakes, came close to being built in the early 20th century, before the US decided to concentrate on Panama. In 2006, Enrique Bolaños, then president of Nicaragua, also sought to revive the plan when the Panama Canal was close to capacity.
Mr Wang is fully aware that many view his latest plans for a canal as a strategic move by the Chinese government to boost its geopolitical clout in the US’s backyard. Xi Jinping, the Chinese premier, visited the region in June, with stops in Trinidad, Costa Rica and Mexico before meeting Barack Obama, the US president, in California.
“People may associate [the project] with politics and with competition among governments because the scale of this project is quite large and its impact will be big,” Mr Wang says. “But that is not true. Business is business.”
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