€36Bn contracts to China’s CRRC puts Lisbon’s Violet line competition on ice

An investigation by the European Union into a competition for the concession of the new light rail overground Violet metro between Loures and Odivelas has put the project temporarily on ice.

The EC is investigating a tax reduction and a transfer of funds to the supplier of rolling stock subcontracted by the consortium Mota-Engil the latter being part-owned by the China Communications Construction Company (CCCC)(32.41%).

In November last year, the EC opened an investigation into the competition to construct the Violet Line and has since discovered three cases of foreign subsidies which it considers sufficient proof that Portugal CRRC – a supplier of rolling stock from the consortium Mota-Engil, “indirectly benefitted” according to a report from Jornal de Negócios.

According to Brussels, goods and services were supplied in the form of public contracts awarded to the parent company, the Chinese CRRC Tangshan, “with a value potentially exceeding €36Bn in the three years prior to the notification”, and “it is not possible to confirm that these public contracts were awarded following competitive, transparent and non-discriminatory tender procedures”.

For this reason, it concludes, “it cannot be ruled out that these have conferred a specific direct advantage to CRRC and a specific indirect advantage to Portugal CRRC”.

The EC points to the same advantages regarding a “transfer of funds in the form of state subsidies, granted to CRRC in China, amounting to approximately €471 million in the three years preceding the notification,” as well as regarding the “loss of revenue in the form of a tax reduction of 10% relative to the normal corporate income tax rate of 25% applicable to resident companies” in China, granted to CRRC in that country, “continuously in the three years preceding the notification.”

Source: Negócios

Image: Metropolitana de Lisboa