Swedish Tenders Awarded to Chinese Corporation

15 October 2019

After the award of the EU-financed Pelješac Bridge project by the Croatian Road Authority to a consortium of Chinese state-owned enterprises in January 2018, the Swedish contracting entity Region Stockholm has awarded at the beginning of October 2019 three public tenders for worker access tunnels to a subsidiary of China Railway Group, which is ranked as the second largest construction company in the world. Companies who also bid for the tenders in question are reported to have noted that the winning prices were unrealistically low.

EIC is critical of such dubious awards by European contracting authorities in the light of the fact that China has declined over the past two decades to become a participant of the WTO’s Government Procurement Agreement (GPA). Still today, non-Chinese construction companies are excluded from participation in domestically-financed public tenders in China. According to the commitments made by the Chinese government in the context of the General Agreement on Trade in Services (GATS), foreign construction companies may well register as a “wholly-foreign owned enterprise” which, however, have to limit their operation to tenders financed by non-Chinese authorities, such as foreign investors and multilateral institutions. Participation in the domestic Chinese government procurement market is only possible in the form of Sino-Foreign Joint Ventures, which have not proven to be sustainable because they are subject to a rigid qualification regime that puts them at a disadvantage compared to domestic companies.

Against that background, the European Construction Industry Federation (FIEC), the European Dredging Association (EuDA) and European International contractors (EIC) have jointly published a press release in which they once again call upon the EU to foster a level playing-field for construction services. With a view to the renewed discussion on the so-called “International Procurement Instrument” (IPI), currently being negotiated between the EU Commission, the Parliament and the Council, the three federations warn that the IPI, as currently drafted, will not help opening third country procurement markets for European companies. This is why EuDA, EIC and FIEC hold the view that the principle of reciprocity, which is enshrined the GPA and in Article 25 of the European Procurement Directive (2014/24/EU), needs to be written also into the proposed EU International Procurement Instrument.