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Colombia pushes ahead with ambitious infrastructure plan

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In most countries, 4G and 5G refer to advances in mobile telephony. In Colombia the terms are synonymous with roads, airports, railways, rivers and canals.

Ever since the 1990s, Colombia has unveiled its forthcoming infrastructure projects in great packages, each described as “a new generation”.

The most recent was the fourth generation (4G) programme, launched in 2014. It was the biggest investment initiative in the country’s history: 29 projects to build or renovate 5,000km of roads, 775 bridges and 41 tunnels at a cost of about $13bn.

The programme was to end in 2022 but has faced serious delays, due partly to flaws in the design of contracts and partly to the fallout of Latin America’s Odebrecht corruption scandal, in which the Brazilian construction company paid bribes across the region to win contracts, including in Colombia. (The scandal led to a review of all 4G infrastructure projects, some of which were modified while work was halted.)

Street repair in Medellín: Colombia’s road network is ranked 104 in a global index of quality © Alexandre Laprise/Shutterstock

When the current government of Iván Duque picked up the 4G baton following his election in 2018, the programme was only 16 per cent complete. It is now more than 40 per cent done, but there is more to do.

That is bad news for Colombians, who are crying out for better infrastructure and were hoping it would be finished by now. But it is good news for foreign investors: the 4G projects still offer opportunities.

“The door is not closed. Quite the opposite,” says transport minister Ángela María Orozco. “There are opportunities to finance ongoing projects but there’s also scope for companies to come in, buy an asset that’s already been built — where the primary risk has already been taken — and then operate it.”

Many foreign companies have already jumped into 4G. The China Harbour Engineering Company, Portugal’s Mota-Engil, Spain’s Grupo Ortiz, Israel’s Shikun & Bunui and the UK’s John Laing are all busy building Colombian roads. Over half the projects have foreign funding, mostly from the US but also Japan, Brazil, France and Spain.

“It’s becoming quite cosmopolitan,” says Manuel Felipe Gutiérrez, director of the national infrastructure agency ANI. “Colombia is attracting funds like Ashmore, BlackRock and Morgan Stanley, as well as foreign construction firms.”

Alex Yew, managing director for Latin America at John Laing, describes his company’s experience of expanding and improving the Ruta del Cacao — a 152 km road in northern Colombia, as “generally positive”.

A winding road: construction on the 152km Ruta del Cacao in northern Colombia

“We’ve found it to be a very open and welcoming environment for foreign investors. We have a great team and great partners and we’re definitely committed to the country.”

As the 4G projects move towards completion (expected sometime around 2027) attention is turning to what comes next: the 5G programme. The government has been outlining its plans in recent weeks.

The programme will be split in two. The first will consist of 12 projects to be tendered over the next year with a combined capital expenditure of more than $5bn. Unlike the 4G programme, which focused on road-building, these schemes cover road, rail, air and river transport.

Perhaps the most eye-catching of the 5G projects are on water: the dredging of the mighty Magdalena River and the renovation of the Canal del Dique, constructed by the Spanish in the late 16th century.

Magdalena River: a plan to dredge a now mostly impassable artery aims to triple the flow of cargo © Juan Jose Horta/AFP via Getty Images

The Magdalena used to be the main transport link between the coast and Colombia’s mountainous interior. In its heyday, great triple-decker steamboats plied its waters. Gabriel García Márquez, the Nobel Prize-winning novelist, immortalised the river in Love in the Time of Cholera and The General in his Labyrinth.

Today, much of the river is silted up and impassable for all but the smallest boats. Engineers will be tasked with dredging 657km of it — the distance from London to central Scotland — while rebuilding levees around Barranquilla, where the Magdalena meets the sea. The project is expected to triple the flow of cargo on the river.

Renovating the Canal del Dique is an equally daunting prospect. The Spanish built it to link the colonial port of Cartagena to the Magdalena. The canal was plagued with problems throughout its history. It silted up and became severely eroded. In 2010 it burst its banks, killing livestock and ruining crops.

Flooded houses in Santa Lucia, Atlántico © Jose Torres/AFP via Getty Images

The project, like the Magdalena dredging plan, will be a public-private partnership.

Once the first 12 projects are up and running, the state will embark on phase II of 5G, although most of that will fall to the next government after 2022. These projects include an upgrade to Bogotá’s main airport and the expansion of the highway linking the southern cities of Popayán and Pasto.

Colombia desperately needs these upgrades. Poor infrastructure has long stopped it from realising its potential, despite a strong business culture.


104


Colombia’s global ranking in quality of road network infrastructure

When the World Economic Forum produced its most recent Global Competitiveness Index, it ranked Colombia 57th among 141 countries, but when it came to the quality of its road infrastructure, it was 104th.

This is partly due to formidable geography. Colombia is cut through by three big mountain ranges. Elsewhere there are swamps and dense jungle. For civil engineers, the country is either a headache or a fabulous challenge, depending on how they look at it.

But despite the challenges, the government and the ANI are confident they cannot only shepherd the 4G projects towards completion but also get the 5G projects off to a good start.”

“They’re incredibly important to us Colombians,” Mr Gutiérrez says.



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Toyota faces Thai bribery probe over tax dispute

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Toyota is under investigation in Thailand over allegations that consultants hired by the world’s largest carmaker tried to bribe local officials in a tax dispute, according to Thai authorities, court documents and a person with knowledge of the matter.

The probe followed a filing last month in which Toyota revealed that it had reported “possible anti-bribery violations” related to its Thai subsidiary to the US Department of Justice and Securities Exchange Commission.

Toyota is one of the biggest foreign investors in Thailand, where it makes a large range of cars, vans and pick-up trucks for the local market and for export. The country is Toyota’s biggest manufacturing hub in south-east Asia. Prior to the Covid-19 pandemic, car sales had been strong in a market, where it has a 31 per cent share.

This month, Thailand’s Court of Justice said in a statement that it would take action against any of its judges found to have taken bribes. The statement, which the court described as a move to “clarify facts” in a news report on a foreign website, directly referenced a tax dispute involving Toyota.

“If the Court of Justice has received information or explicitly found that any judge committed an act of corruption to their duty, whether it is about bribery or not, the Court of Justice will resolutely investigate and punish any action which dishonours judges, undermines the neutrality of the court, or causes society [to] lose faith in the Thai justice system,” it said.

According to the court, the case involved a tax dispute worth Bt10bn ($320m) between Toyota Motor Thailand and tax authorities over imports of parts for its Prius hybrid model. 

The affair dates back to 2015, when Toyota’s Thai subsidiary was accused by local customs authorities of understating taxes by claiming that the imported Prius vehicles were assembled from completely knocked down kits, or imported parts that were later assembled in Thailand.

CKDs would have been subject to a discounted tax rate under a Japanese-Thai free trade agreement, but if the cars were fully assembled before being imported they would have attracted a much higher rate. 

Toyota appealed against a decision by customs authorities to impose a higher duty in 2015, but lost. 

Thailand’s Court of Justice has said that it had accepted a petition to review the case, but had not yet begun hearing it.

In its regulatory filing last month, Toyota warned that the US investigations regarding its Thai subsidiary could result in civil or criminal penalties, but the company has not disclosed any detail on the allegations.

In a statement, Toyota said it was co-operating with the investigations and declined to comment on the tax dispute in Thailand. “We take any allegations of wrongdoing seriously and are committed to ensuring that our business practices comply with all applicable government regulations,” it said.

The SEC and the DOJ declined to comment.



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Boris Johnson cancels India trip after Covid cases surge in country

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UK prime minister Boris Johnson’s trip to India this month has been cancelled as the country battles a new variant and a surge in coronavirus cases that is overwhelming hospitals.

A joint statement by the British and Indian governments said the decision to scrap the visit scheduled for next week was prompted by the “current coronavirus situation”.

The trip, during which Johnson had hoped to discuss the prospects of a closer trading partnership with India, was initially planned to run for four days but had been scaled back. The two leaders will speak remotely instead, with plans to meet in person later this year.

The cancellation came as India’s capital city region has been put under lockdown and authorities have prohibited the use of oxygen except for essential services, as the country battles a surge in coronavirus cases that is overwhelming hospitals.

India continues to set single-day records of coronavirus cases, reporting more than 273,000 new infections and 1,619 deaths on Monday, with the number of new cases growing by an average of 7 per cent a day, one of the fastest rates in any big country.

The surge is believed to be linked to a new B.1.617 variant that was first discovered in the country.

British health officials are investigating whether the variant should be reclassified from a “variant under investigation” to a “variant of concern” following the discovery of 77 cases in the UK.

“To escalate it up the ranking we need to know that it’s increased transmissibility, increased severity, or vaccine-evading, and we just don’t have that yet, but we’re looking at the data on a daily basis”, Dr Susan Hopkins, a senior medical adviser at Public Health England, said on Sunday.

Officials in Delhi announced it would impose a strict lockdown for a week, following Mumbai and other cities that have already placed curbs on movement.

States are running short of beds, drugs and oxygen, leading the central government to restrict use of the gas. “The supply of oxygen for industrial purposes by manufacturers and suppliers is prohibited forthwith from 22/04/2021 till further orders,” the central government said.

Arvind Kejriwal, chief minister of Delhi, said “oxygen has become an emergency” in the region because its quota had been diverted to other states. He warned there were “less than 100 ICU beds” available.

The new restrictions have been imposed even as Prime Minister Narendra Modi and his ruling Bharatiya Janata party have hosted huge political rallies and allowed religious festivals attended by tens of thousands of maskless people in recent weeks.

Amit Shah, India’s home minister, told the Indian Express newspaper that he was “concerned” about the variant and the “surge is mainly because of the new mutants of the virus”. But he was “confident we will win” over the disease and said there was not yet a need to impose a national lockdown.

Bed shortages in India have forced authorities to re-establish emergency coronavirus hospitals in banquet halls, train stations and hotels that had been shut down following the previous peak in September. Crematoriums in the state of Gujarat and Delhi are running 24 hours a day, while cemeteries are running out of burial spaces.

Coronavirus patients have also been struggling to access medicines. More than 800 injections of remdesivir, an antiviral drug commonly used in India as part of Covid-19 treatment, were stolen from a hospital in Bhopal, Madhya Pradesh, at the weekend.

India is also facing a vaccine supply crunch and has frozen international exports of jabs to meet domestic demand. New Delhi pledged on Friday to increase monthly production of Covaxin, a vaccine made by Indian manufacturer Bharat Biotech, to 100m from 10m by September. The government also said last week that it would fast-track the approval of foreign vaccines in an attempt to boost supply and cleared Russia’s Sputnik V for use in the country.

The majority of the more than 120m Indians that have been vaccinated have received the Oxford/AstraZeneca jab manufactured by Serum Institute of India, the world’s largest manufacturer. The Serum Institute has struggled to increase its monthly capacity of more than 60m doses a month due to a fire at its plant earlier in the year and equipment supply shortages from the US.

Additional reporting by John Burn-Murdoch in London





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The limits of China’s taming of tech

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The record fine handed out this month to Alibaba, the Chinese ecommerce giant, was a welcome step toward combating anti-competitive behaviour. The $2.8bn penalty put Alibaba and other tech companies on notice that creating siloed fiefdoms designed to trap customers and merchants within their ecosystems will not be tolerated.

It was addressing a longstanding problem. Many of China’s ecommerce companies operate “walled gardens” that prevent interactions with rival platforms. For example, Alibaba’s Taobao ecommerce app keeps users from paying for goods using the payment app of rival Tencent. Tencent’s social media app, WeChat, prevents clips from being shared directly from ByteDance’s video-sharing app. 

Last week China’s internet and market regulators signalled the seriousness of their intent. They gave tech companies one month to fix anti-competitive practices, telling them to conduct “comprehensive self-inspections” and “completely rectify” problems, following which they would need to publicly promise to abide by the rules. The aim is create a commercially open and competitive internet.

It is tempting to argue that regulators in the west could take a leaf out of China’s book. But to hold China up as an example of competitive best practice would be to ignore the elephant in the room. Although Beijing is giving its monopolistically-minded internet companies — which are almost all private enterprises — a rap on the knuckles, it shows no sign of applying the same standards to vast swaths of the economy that have been dominated by state-owned giants for decades. 

The market dominance of these behemoths of state capitalism is an issue that affects not only domestic competitors but also foreign multinationals that operate in China. A trenchant joint paper last week from the European Council on Foreign Relations, a think-tank, and the Rhodium Group, a consultancy, took aim at the increasingly unfair advantages that this system gives China.

While it is true that China has opened up sectors such as financial services to foreign capital in recent years and allowed foreign brands to win market share in luxury goods and pharmaceuticals, broad sectors of the economy remain fully or partially closed or to overseas investors. 

Often the barriers erected to block or stymie competition are informal. Authorities can deliberately favour domestic companies in public procurement, are more ready to grant approval for licenses, subject foreign firms to arbitrary inspections or require them to re-engineer products to meet idiosyncratic domestic standards.

Such drawbacks are not new. But they are taking on an extra urgency as Chinese companies become leaders in an increasing number of industries and the country’s technological prowess draws level with the US and Europe in a list of industries. The key problem now, says the ECFR/Rhodium report, is that Chinese multinationals are using the advantage of a protected home market to build up resources that they then deploy in competition with western counterparts abroad.

This sets the scene for friction. China should extend its anti-monopolistic scrutiny from its own privately owned internet companies to several state-dominated sectors of its economy, taking care to open to foreign multinationals as much as domestic competitors. If it decides against doing this — as is likely — it will be furnishing Europeans and Americans with ammunition to argue against extending access to Chinese corporations in their own markets.



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