Exclusive-Pacific undersea cable project sinks after U.S. warns against
Chinese participation
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[June 18, 2021] By
Jonathan Barrett and Yew Lun Tian
SYDNEY/BEIJING (Reuters) - A World Bank-led
project declined to award a contract to lay sensitive undersea
communications cables after Pacific island governments heeded U.S.
warnings that participation of a Chinese company posed a security
threat, two sources told Reuters.
The former Huawei Marine Networks, now called HMN Technologies and
majority owned by Shanghai-listed Hengtong Optic-Electric Co Ltd,
submitted a bid for the $72.6 million project priced at more than 20%
below rivals Alcatel Submarine Networks (ASN), part of Finland's Nokia,
and Japan's NEC, the sources said.
The East Micronesia Cable system was designed to improve communications
in the island nations of Nauru, Kiribati and Federated States of
Micronesia (FSM), by providing underwater infrastructure with a far
greater data capacity than satellites.
![](http://archives.lincolndailynews.com/2021/Jun/18/images/ads/current/castlemanor_sda_FINANCIAL_2017.png)
Two sources with direct knowledge of the tender told Reuters that the
project reached a stalemate due to security concerns raised within the
island nations over HMN Tech's bid. The project's planned connection to
a sensitive cable leading to Guam, a U.S. territory with substantial
military assets, heightened those security concerns.
"Given there was no tangible way to remove Huawei as one of the bidders,
all three bids were deemed non-compliant," one of those sources said.
The source said that HMN Tech was in a strong position to win the bid
due to the terms overseen by the development agencies, prompting those
wary of Chinese involvement to find an expedient solution to end the
tender.
The World Bank said in a statement to Reuters that it was working with
the respective governments to map out the next steps.
"The process has concluded without an award due to non-responsiveness to
the requirements of the bidding documents," the Washington-based
multilateral lender said.
A Chinese foreign ministry spokesperson said in a statement to Reuters
that all parties should provide a non-discriminatory business
environment that companies from all countries, including China, can
participate in.
"As a matter of principle, I want to emphasise that Chinese companies
have always maintained an excellent record in cyber security," the
spokesperson said.
"The Chinese government has always encouraged Chinese companies to
engage in foreign investment and cooperation according to market
principles, international regulations and local laws."
The three island nations involved in the project were represented on the
bid assessment committee. Development agencies typically review the
committee's recommendations to ensure the selected bidder complies with
the agencies' policies and procedures.
A second development bank involved in the project, the Asian Development
Bank, referred questions from Reuters to the World Bank as the lead
agency.
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![](../images/061821PIX/busine29.jpg)
Plane carrying then U.S. Secretary of State Mike Pompeo makes its
landing approach on Pohnpei International Airport in Kolonia,
Federated States of Micronesia August 5, 2019. REUTERS/Jonathan
Ernst
![](http://archives.lincolndailynews.com/2021/Jun/18/images/ads/current/graue_preowned_061421.png)
HMN Tech and Hengtong Group, the parent company, did not respond to emailed
questions. A representative who answered the phone at HMN Tech declined to
comment.
A spokesman for Nokia-owned ASN told Reuters the company was not authorised to
comment on confidential information. NEC did not respond to questions. (Graphic:
Submarine Cables in the Pacific, https://graphics.reuters.com/CHINA-PACIFIC/dgkvlqbmmpb/SUBMARINE-CABLES.jpg)
U.S. CONCERNS
During the bidding process last year, Washington detailed its concerns in a
diplomatic note sent to FSM, which has military defence arrangements with the
United States under a decades-old agreement.
The note said Chinese firms posed a security threat because they are required to
co-operate with Beijing's intelligence and security services, an assertion
rejected by China.
In separate correspondence, prominent U.S. lawmakers warned that the Chinese
government subsidises companies, undermining tenders like those run by
development agencies.
The U.S. State Department did not immediately respond to questions on Thursday.
While the warnings were issued during the Trump administration, there's been no
apparent change to the U.S. position on the issue under the new government.
The project was designed to connect to the HANTRU-1 undersea cable, a line
primarily used by the U.S. government that connects to Guam.
Washington has pressed governments around the world to squeeze Chinese telecoms
equipment maker Huawei Technologies out of supplying critical infrastructure,
alleging the company would hand over data to the Chinese government for spying,
a charge consistently denied by the company.
The U.S. Commerce Department publicly lists Huawei Marine on its so-called
"Entity List" - known as a blacklist - which restricts the sale of U.S. goods
and technology to the company. The Department did not immediately respond to
questions on whether the change in Huawei Marine's ownership changed this
status.
Nauru, which has strong ties to Australia and is a Pacific ally to Taiwan,
initially raised concerns over the bid lodged by the Chinese company.
The third island nation involved in the project, Kiribati, has forged strong
bilateral ties with Beijing in recent years, which includes drawing up plans to
upgrade a remote airstrip.
A spokesman for FSM said the government was unable to comment on the project.
Representatives of 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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