China Railway Number 10 (Thailand)’s boss under arrest

Zhang Chuanling, named as one of the two executives of the company, was intercepted and placed under custody by the Department of Special Investigation (DSI) this late afternoon before being brought to the DSI’s office for further interrogation

Justice Minister Pol. Col. Thawee Sodsong held the press conference along with the DSI’s directors in the evening to give more details about the arrest. The minister revealed that the department had asked for arrest warrants from the court today for four persons, including Mr. Zhang, also representing a legal entity, which is China Railway Number 10 (Thailand) or CREC.

They are accused of being involved in the use of nominees to run businesses in the company, an act which violates the Foreign Business Act B.E. 2542 (1999). Foreigners who wish to run a business in Thailand must hold fewer shares than their Thai counterparts, 49% at most.

The DSI has uncovered fresh evidence to support the accusation that the three Thai shareholders are nominees as they have untrustworthy financial statuses while having loan contracts worth more than Bt 2,000 million with “a Chinese executive”. The DSI earlier found that the three hold the company’s shares at 51% when combined, but these are disproportionate, as little as 0.0003% among them. The largest shareholder was named by the DSI as China Railway No.10 Engineering Group Co., Ltd. (CREC No.10), a subsidiary of China Railway Group Limited (CREC), the same abbreviation used by China Railway Number 10 (Thailand), based in Beijing, China, which is China’s state-owned enterprise in the construction of mega projects worldwide. (Read the background below)

Such use of nominees had prompted the company to become eligible for taking part in a joint venture (with ITD) (ITD-CREC Joint Venture) and signing a contract with the State Audit Office to build the collapsed building, Pol Col. Thawee said.

Pol Col. Thawee said this could link to another offence concerning bid rigging if it’s proved that China Railway Number 10 (Thailand) is actually a foreign business entity, but has covered itself by using nominees. This will breach Article 7 under the Concerning Offences Relating to the Submission of Bids to Government Agencies Act B.E. 2542 (1999), which prohibits the use of tactics to trick the state into granting contracts. So, the DSI needs to prove whether the use of nominees falls under this article or not.

“We are also expediting our investigation to see whether or not the case also involves bid rigging. Whether the ITD (Italian-Thai Development Plc.) could proceed with the project without its Chinese counterpart is something we are also looking into,” said Pol. Col. Thawee.

The DSI is also looking into relevant contracts, including the construction design contract, the consultant contract, contract amendments and others, as fraudulent acts, including forgeries of several signatures of engineers, have been found. Some of the claimed engineers have reported themselves to the DSI and denied any involvement with the project.

At this point, Mr. Zhang is the accused, and he has every right to defend himself. The DSI will be opened for his explanations, said the justice minister, adding the company also has a high reputation.

China Railway Number 10 (Thailand) has been found to be a joint venture with 10 other Thai companies, which altogether have obtained 28 state contracts, worth over Bt 13,424 million. Pol. Col. Thawee said the DSI is now focusing on the case of the SAO building first, but it has asked other concerned agencies to look for any irregularities that may arise in those projects.

“The government has urged the investigators to investigate the case straightforwardly because it wants to fix any irregularities that have arisen. Conspiracy is not a trust issue of any particular government, but of every government,” said Pol. Col. Thawee, the justice minister.

As checked by Bangkok Tribune, Mr. Zhang Chuanling has a relationship with CREC No. 10. In mid-2023, he had represented CREC No.10 in a contract signing ceremony of Contract 3-1, part of the High-Speed Railway Development for Regional Connectivity Project, Phase 1 (Bangkok-Nakhon Ratchasima). It’s claimed to be a collaboration project between the Thai government and China’s, and is part of China’s ambitious Belt and Road Initiative (BRI).

The joint venture of ITD and CREC No.10 won the contract from the Thai government worth more than Bt 9,000 million.

The background

The 30-storey under-construction building was first expected by the State Audit Office (SAO) to be the face of the country, but it had collapsed almost immediately following the major earthquake on March 28. (Read: Design of collapsed under-construction SAO building “not in line” with regulation/ Govt-appointed panel focuses its probe on design of collapsed SAO building)

So far, it is the only building that has completely collapsed in the country, and earthquake experts said it has made a new record of being the tallest high-rise building that is located farthest from the epicenter of an earthquake but collapsed as a result.

Since its collapse, investigators have been investigating the actual causes of it, but so far have not reached any conclusions. This investigation part is being conducted by the police to establish how and who caused the building collapse, as well as the casualties at the site. The DSI has been instructed to look into possible irregularities of its construction process, and in the second week of the earthquake (April 8), the department established three main issues for its investigation. 

The first is the possible use of nominees in the China Railway Number 10 (Thailand), which will hence breach the law governing foreign ownership in certain businesses, including construction. The second is the use of possibly flawed or substandard materials. Last but not least is the possible bid rigging in state procurements. 

Following its investigation, the DSI initially found some irregularities concerning the shareholding of the company. There are three Thais, who have held shares combining together at 51% according to Thai law, but CREC No.10 was found to be the largest shareholder of the company.

The three Thais have been found to have weak financial backgrounds, including low monthly income, whereas they have transferred shares between them. One of them has only three shares left in the company. All have disappeared since, with locations unknown until now.

The China Railway Number 10 (Thailand), meanwhile, has also been found to be a joint venture with 10 other Thai companies, which altogether have obtained 28 state contracts, worth over Bt 13,424 million.

CREC No.10

As checked by Bangkok Tribune, CREC No.10, which is the company’s largest shareholder, has also joined the ITD as a joint venture, ITD-CREC No.10, which has won the state contract to build the 30km section of the 250 km Thai-Chinese high-speed railway system, Phase 1: Bangkok–Nakhon Ratchasima Section. It’s worth around BT 9,349 million.

The project is part of the Bangkok-Nong Khai High Speed Railway Development project, which is in congruence with China’s Belt and Road Initiative (BRI), under the official cooperation between Thailand and China.

CREC No.10 also has a business connection with China Railway Group Limited (CREC), China’s super-large state enterprise, which claims to have been listed among Fortune Global 500 for 17 consecutive years. In 2022, it said it was ranked 34th on the Fortune Global 500 list, and 5th among China’s top 500 enterprises.

According to its business structure, CREC No.10 is a subsidiary of CREC’s Infrastructure Construction unit. Under the same unit, there are several other China Railway Engineering Groups with Numbers tagged. Apart from the infrastructure construction unit, CREC also has units concerning engineering design and consulting, overseas projects, equipment manufacturing, featured properties, mineral resources development, finance and trending, asset management, and other types.

As noted in its introduction on its official website, CREC, which is based in Beijing, was set up in late 2007 by the China Railway Engineering Corporation (CRECG), which is the defunct General Bureau of Capital Construction under China’s Ministry of Railways. CRECG is now under the Steering Committee for Large Centrally Administered State-owned Enterprise, and has the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) as its funder.

In late 2017, CREC was transformed from a company to “a wholly funded state-owned enterprise” and renamed China Railway Engineering Co., Ltd. Currently, CREC has a staff of about 290,000, including 85,000 skilled technicians and one academician of the Chinese Academy of Engineering (CAE), of whom more than 2,400 hold senior professional titles, according to its website.

It also claims to have enjoyed a good reputation in the global market, saying that since the construction of the 1,861-kilometre Tanzania-Zambia Railway in the 1970s, the company has successively built a large number of excellent projects in Asia, Africa, Europe, South America and the Atlantic. At present, it has representative offices and carries out projects in more than 90 countries and regions around the world, the company said.

This is in contrast to several reports, including the World Bank’s, which in 2019 imposed a two-year debarment against China Railway First Group Co., Ltd. (CRFG), one of CREC’s subsidiaries, in connection with “fraudulent practices” under the Dasu Hydropower Stage I Project in Pakistan.

According to the World Bank, the project was designed to facilitate the expansion of the electricity supply of hydropower in Pakistan. The facts of the case, as cited by the World Bank, show CRFG engaged in “multiple misrepresentations” during the bidding process for four contracts – two of which it won in 2015 – including failing to disclose subcontracted work, a subcontractor and an agent it used in bidding for one of the contracts. These are “fraudulent practices” under World Bank Group Procurement Guidelines, the World Bank noted.

“The debarment makes CRFG ineligible to bid on future World Bank Group-financed projects for the period of the debarment. It is part of a settlement agreement under which the company acknowledges responsibility for the underlying sanctionable practices and agrees to meet specified corporate compliance conditions as a condition for release from debarment,” said the World Bank in its announcement.