- HMN Tech’s offering priced more than 20% below rivals – sources
- The World Bank said all offers were deemed non-compliant
- US warns Chinese companies pose a security threat
- Submarine cables have become a sensitive area of Pacific diplomacy
SYDNEY / BEIJING, June 18 (Reuters) – A World Bank-led project has refused to award a contract to lay sensitive submarine communications cables after Pacific island governments heeded US warnings, according to which the participation of a Chinese company posed a security threat, two sources told Reuters.
Former Huawei Marine Networks, now known as HMN Technologies and majority-owned by Shanghai-listed Hengtong Optic-Electric Co Ltd, submitted a bid for the $ 72.6 million project at a price of more than 20% below that of its rivals Alcatel Submarine Networks (ASN), which is part of the Finnish group. Nokia and NEC of Japan, the sources said.
The East Micronesia Cable system was designed to improve communications in the island nations of Nauru, Kiribati, and the Federated States of Micronesia (FSM), providing an undersea infrastructure with much greater data capacity than satellites.
Two sources with direct knowledge of the tender told Reuters the project was at an impasse due to security concerns raised in island countries over HMN Tech’s bid. The project’s planned connection to a sensitive cable leading to Guam, a US territory with significant military resources, has increased these security concerns.
“Since there was no tangible way to remove Huawei from any of the bidders, all three bids were deemed non-compliant,” one of those sources said.
The source said HMN Tech was in a good position to win the bid due to conditions overseen by development agencies, prompting those wary of Chinese involvement to find a quick fix to end the call for ‘offers.
The World Bank said in a statement to Reuters that it is working with respective governments to define next steps.
“The process ended without an award due to non-compliance with the requirements of the tender documents,” the Washington-based multilateral lender said.
A spokesperson for China’s Foreign Ministry said in a statement to Reuters that all parties should provide a non-discriminatory business environment in which businesses in all countries, including China, can participate.
“As a matter of principle, I would like to stress that Chinese companies have always maintained an excellent record in cybersecurity,” the spokesperson said.
“The Chinese government has always encouraged Chinese enterprises to engage in foreign investment and cooperation in accordance with market principles, international regulations and local laws.
The three island nations involved in the project were represented on the tender evaluation committee. Development agencies typically review the committee’s recommendations to ensure that the successful bidder complies with agency policies and procedures.
A second development bank involved in the project, the Asian Development Bank, referred Reuters questions to the World Bank as the lead agency.
HMN Tech and Hengtong Group, the parent company, did not respond to questions sent by email. A representative who answered the phone at HMN Tech declined to comment.
A spokesperson for Nokia-owned ASN told Reuters the company was not allowed to comment on confidential information. NEC did not respond to questions.
UNITED STATES CONCERNS
During last year’s bidding process, Washington detailed its concerns in a diplomatic note sent to the WSFs, which have military defense deals with the United States under an age-old deal. several decades.
The note says Chinese companies pose a security threat because they are required to cooperate with Beijing’s intelligence and security services, a claim that China rejects.
In separate correspondence, prominent US lawmakers have warned that the Chinese government subsidizes companies, compromising tenders like those run by development agencies.
The US State Department did not immediately respond to questions on Thursday.
Although the warnings were issued under the Trump administration, there has been no apparent change in the United States’ stance on the issue under the new administration.
The project was designed to connect to the HANTRU-1 submarine cable, a line primarily used by the US government that connects to Guam.
Washington has urged governments around the world to block Chinese telecommunications equipment maker Huawei Technologies from providing critical infrastructure, alleging the company is handing over data to the Chinese government for spying, a charge the company still denies.
The US Department of Commerce publicly lists Huawei Marine on its so-called “entity list” – known as the blacklist – which restricts the sale of US products and technology to the company. The Department did not immediately respond to questions about whether the change in ownership of Huawei Marine altered that status.
Nauru, which has close ties to Australia and is a Pacific ally in Taiwan, initially raised concerns about the offer filed by the Chinese company.
The third island nation involved in the project, Kiribati, has built strong bilateral ties with Beijing in recent years, including making plans to upgrade a remote airstrip.
A spokesperson for FSM said the government was unable to comment on the project. Representatives from Nauru and Kiribati did not respond to questions.
Reporting by Jonathan Barrett and Yew Lun Tian; Editing by Simon Cameron-Moore
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