China-backed Polish infrastructure project collapses

Poland’s road construction authority cancelled a contract with China Overseas Engineering Group (Covec) due to the group’s financial difficulties with a high-profile infrastructure project, the Financial Times reported. Covec won the contract in 2009 to build a 50 kilometer highway between Warsaw and the German border, making it the first Chinese firm to win a large European highway contract. Its initial bid was so low that it prompted allegations of dumping. However, the firm later attempted to renegotiate the contract on the basis of alleged unfair treatment and higher-than-expected raw material prices. Covec later began delaying payments to subcontractors. While the company said on Monday that it would resume work on a renegotiated contract, the Polish government agency has begun talks with 16 other firms, and is seeking US$272 million in damages from Covec.