Chamber and committees

The Memorandum of Understanding between the Scottish Government, China Railway No.3 Engineering Group (CR3) and SinoFortone is focused on developing a working relationship to explore possible investment in Scotland.If and where such investment involves CR3, SinoFortone and third parties then any contract would be a matter for those parties.The Scottish Government has not identified any specific projects for potential investment.

There have been no discussions between the First Minister or other Ministers and China Railway No. 3 Engineering Group or SinoFortone since 5 May 2016.At his request, Scottish Government officials participated in a short teleconference with the Chair of the Asia Scotland Institute, Roddy Gow, and Sir Richard Heygate of SinoFortone on 30 June. SinoFortone highlighted their conversations with third parties about potential investment opportunities. No other issues were discussed and a minute of the teleconference was not taken.Officials met with the Chair of the Asia Scotland Institute on 29 July. The Memorandum of Understanding was discussed along with a range of issues relating to Scotland’s relationship with Asia. A note of the meeting has been placed in SPICe (Bib No. 58117).

I refer the member to the answer to question S5W-01412 on 9 August 2016, on what assessment the Scottish Government made of the activities of China Railway No. 3 Engineering Group. All answers to written Parliamentary Questions are available on the Parliament’s website, the search facility for which can be found at http://www.parliament.scot/parliamentarybusiness/28877.aspx

Neither company has had access to privileged Scottish Government information. Any information provided by other parties which SinoFortone and/or China Railway No. 3 Engineering Group have had discussion with is a matter for them.China Railway No. 3 Engineering Group and SinoFortone will receive the same access to information as any potential significant investor in Scotland. Some of that information is available publicly. Other information is provided to help and encourage investors to invest in Scotland to create jobs and economic growth.

The Scottish Government is aware that since 21 March 2016 representatives of China Railway No. 3 and SinoFortone have had conversations with a number of third parties about possible investment opportunities. The Scottish Government has had no role in those conversations.

Written information provided was included in the material released by the Scottish Government on 31 May 2016 and which was placed in SPICe (Bib No. 57958). The broad activities of China Railway No. 3 Engineering Group and SinoFortone were discussed with officials.

I refer the member to the answer to question S5W-01412 on 9 August 2016, on what assessment it made of the activities of China Railway No. 3 Engineering Group. All answers to written Parliamentary Questions are available on the Parliament’s website, the search facility for which can be found at http://www.parliament.scot/parliamentarybusiness/28877.aspx

The memorandum of understanding between the Scottish Government, China Railway No. 3 Engineering Group and SinoFortone is focused on developing a relationship to explore possible investment in Scotland. It signals that Scotland is open for business and investment in line with the guiding principles of the Scottish Government's ‘Working with China’ Strategy. This Strategy has four guiding principles that underpin all of Scotland’s dealings with China and against which success will be measured. One of those principles is Respect for Human Rights and the Rule of Law - supporting China’s process of modernisation and internal reform and the need to balance the demands of economic development with social justice. Scotland is justly proud of its reputation for ethical business practices, and knows that human rights and the rule of law are key to long-term economic success and social stability. We will continue to share our experiences and values in our dealings with China.China Railway No.3 Engineering Group is one of 46 subsidiaries of the China Railway Group. The allegations of human rights abuses made in the June 2013 Amnesty International report were against the Congo International Mining Corporation (CIMCO), a subsidiary of China Railway Group, and relate to activity by CIMCO and CRG in August 2011 and April 2012. The allegations of gross corruption in the December 2014 report by the Council on Ethics for the Norwegian Government Pension Fund Global relate to the China Railway Group. There is no reference to China Railway No.3 Engineering Group in the report.Scottish Government officials have considered publicly available information regarding the actions taken by the Chinese Government to tackle corruption; key sources of information on corruption and human rights abuses; and other publicly available information, including company databases, on the activities of China Railway No. 3 Engineering Group.Following this consideration, the Scottish Government notes that:(i) The UK Government’s May 2016 advice to businesses on key risks they may face when operating in China states that:

"China is currently listed as a country of concern in the FCO’s annual Human Rights and Democracy Report… Since coming to power in China, President Xi Jinping has launched a wide-ranging anti-corruption drive. China has enacted extensive anti-bribery legislation”.

(ii) The World Bank specifies firms and individuals who are ineligible to be awarded a World Bank-financed contract for set periods because they have been sanctioned under the Bank's fraud and corruption policy either as a result of specific examination by the bank or because other development banks (Asian Development Bank, European Bank for Reconstruction and Development, Inter-American Development Bank, and African Development Bank) have sanctioned them. China Railway No. 3 Engineering Group is not ineligible for World Bank financed contracts.

(iii) Publicly available information, including the websites and associated reports of the Business and Human Rights Resource Centre, Human Rights Watch, and Transparency International, provides no evident reference to allegations of corruption or human rights abuses by China Railway No. 3 Engineering Group.

The Scottish Government welcomes and values Amnesty International’s role and expertise in promoting and protecting human rights. Officials considered Amnesty International’s June 2013 report, ‘Profits and Loss: Mining and Human Rights in Katanga, Democratic Republic of Congo” which was sent to the Scottish Government by Amnesty International on 19 May. The First Minister replied to Amnesty International on 12 June. A copy of that letter has been placed in SPICe (Bib No. 58118).

There have been no discussions between Ministers and the Norwegian Government Pension Fund. E-mail correspondence between Scottish Government officials and Norges Bank Investment Management (NBIM), the Bank now responsible for managing the Investment Fund, and the Norwegian Ministry of Finance confirms the findings of the Council on Ethics’ December 2014 report and that at the start of 2015 changes were made to the role of the Ethics Council and to how and by whom the Investment Fund is managed.

As indicated in the answer to question S5W-00024, as the Memorandum of Understanding does not involve any legal, contractual or funding obligations or commitments on behalf of the Scottish Government, full due diligence was not undertaken.

The figures quoted may differ slightly from those published elsewhere because they were exported on a different date and the database may have changed between the dates extracted, e.g. due to late returns or corrections to earlier returns.