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Gov't sued for failed deal
By Qin Yuding & Hu Meidong (China Daily)
Updated: 2004-07-14 01:53

A bridge in Fuzhou is at the core of a 900 million yuan (US$108.7 million) arbitration appeal against the local government.

The dispute stems from a promise made by Fuzhou Municipal Government seven years ago to boost the city's transportation development, the China Youth Daily reported Tuesday.

The China International Economic and Trade Arbitration Commission accepted the case early this month but, claiming confidentiality reasons, did not release any details.

The case dates back to 1997 when the Fuzhou Government was attracting foreign investment for the construction of the city's fourth bridge over the Minjiang River, which winds its way across the city of Fuzhou.

The rosy future of the bridge attracted the Hong Kong Xiuming International Investment Company, which entered in a co-operative relationship with the Fuzhou Urban and Rural Construction Development Company.

According to the blueprint drawn by the government, the total investment of the project would be 1.2 billion yuan (US$145 million).

The Fuzhou side would hold 30 per cent of the shares in the form of tangible assets including a toll gate at Baihuting, the only entry point from the south.

Meanwhile, the Hong Kong investor was to keep a 70 per cent stake after an investment of 840 million yuan (US$102 million), of which 400 million yuan (US$48 million) was for the construction and the rest for the Fuzhou government.

The Fuzhou Xinyuan City Bridge, as a joint-venture company, would get exclusive operating rights over the bridge for 28 years.

The investors and the government signed an agreement in 1997.

According to the agreement every vehicles going in and out of the city's south gate would have to pass through the Baihuting toll gate.

Several major cities in Fujian Province, including the centuries-old port city of Quanzhou and the Xiamen Special Economic Zone, are all in the south to Fuzhou. Road travel is the major means of transportation among these cities.

The agreement also said that, should unforeseen events stop the gathering of fees, the government would pay back the investment as well as the 18 per cent net income planned by the company for the duration of the contract.

Then in May this year, the second ring road around Fuzhou was completed.

Since no tolls are collected along the ring road, a great number of vehicles have began going around the toll station.

The income of the joint-venture company decreased dramatically. Making the situation worse, the company could not keep up with bank loans.

The Hong Kong investor believes that, while urban development is important, the local government has a responsibility to ensure profits for the foreign investor, reported China Youth Daily.

He called on the Fuzhou municipal government to stand by the original agreement and compensate him for all financial losses.

But the Fuzhou government rebutted the claim, saying that both sides are to blame in this unsuccessful co-operative project and the company should face the reality and not demand too much.

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