New China deal keeps Tallinn tunnel project on track, but it’s still dogged by critics

Peter Vesterbacka's Finest Bay Area Development company has signed a letter of intent this week with three Chinese companies, including the world's biggest construction firm.

Peter Vesterbacka (C) signs letter of intent with Chinese state companies, Beijing, 11th July 2019 / Credit: P. Vesterbacka Twitter

When officials from China’s Railway Engineering Corporation CREC came to Vantaa last September to take part in a conference on large-scale tunnel construction, they arrived too late to attend the main event.

A delay in getting Finnish visas – one of Peter Vesterbacka‘s pet peeves – meant the delegation only got there at the tail end of the symposium. The meetings they were able to have, however, helped smooth the way for the world’s biggest construction company to join Vesterbacka’s much-hyped Tallinn tunnel project this week.

On Thursday in Beijing, businessman Vesterbacka inked a letter of intent between his Finest Bay Area Development company and three Chinese firms: China Railway International Group, CREC, and China Communications Construction Company.

The companies will participate in the final design and construction of the 100km tunnel which is planned to link Tallinn Airport and Helsinki Airport with a high speed train. Two Finnish companies previously involved with the project, Pöyry and A-Insinöörit, continue to be attached to it.

“The partner companies are among the largest in the world in their own specialty” says Vesterbacka in a press statement.

Graphic showing detail of proposed high speed rail link tunnel / Credit: Finest Bay Area

China’s 21st century Silk Road project

A construction mega-project on the scale of the Tallinn tunnel would bring thousands of jobs to the area, boost regional investment and build new connectivity not just within northern Europe but between Asia and Europe as well.

The Chinese view the tunnel as part of their grand Belt and Road strategy – a modern version of the Silk Road, linking China along the notional trade routes plied by Marco Polo, which were crucial to the economies of Chinese dynastic regimes for almost a thousand years.

It might seem like a positive development, but it’s been undermined by political bickering almost from the start, and beset with legitimate concerns voiced by ministries and experts about the proposed speed of construction, how it will be funded and whether there’s a viable business model when the trains start running.

In a series of interviews with News Now Finland going back nine months to autumn 2018, Vesterbacka candidly addresses his thinking about going into business with Chinese companies, and signing funding deals for billions of euros with Chinese and Middle Eastern investors.

“Of course there has been a lot of discussion and speculation in Europe and within the EU about the good or bad impact of Chinese investment” says Vesterbacka in the Helsinki office he uses as a base when he’s not flight-hopping from Europe to Asia.

Some of those concerns are at a national security level, about having de facto foreign ownership of a tunnel that would become a vital piece in the transport infrastructure of the two Baltic countries as soon as it opened.

After all, China has a history of throwing money at projects to cultivate influence. They’re building stadiums, schools, roads, bridges and more in Africa, but it’s not clear quite what they might expect in return. At the very least access to farm land, mining concessions or deep-water ports; international allies during times of crisis, and potential locations for military bases.

“There’s a lot of discussion about Chinese investment and what about Africa, what about Greece, what about Sri Lanka? I think again that we should look at the facts, look at the set up, what are we doing here. It’s not like we are selling a harbour to China or creating some Chinese operated monopoly or anything like that” – Vesterbacka says the tunnel would be operated by a Finnish company after construction – “I think it’s important to see this as a great example and testament [for] Finland, Estonia, part of the EU, part of the Eurozone, a fantastic place to invest” he adds.

In December last year Finest Bay Area Development announced €100 million in funding from a Middle East investment company called Arj Holding, based in Dubai. In March they revealed a memorandum of understanding for €15 billion to cover the full costs of the construction project (estimated at €12.5 billion) and infrastructure such as trains, from Chinese investment company Touchstone Capital Partners.

The current funding model would be made up of 30% equity investment, and 70% loans.

“We’re looking at less than half the funding coming from China, the rest coming from northern Europe, Nordic countries, pension funds from here in our part of the world” explains Vesterbacka, adding that he’s had a “positive response” from every one of the major pension funds in Finland and Sweden that they’ve talked with so far.

Peter Vesterbacka during an interview in March 2019 / Credit: News Now Finland

Ethics issues in doing business with Chinese state? 

Business ties aside, there have been ethical concerns raised about getting into bed with Chinese state-owned companies, especially for human rights-minded Finns, when the Chinese state is riding roughshod over the human rights of its citizens.

Just this week nearly two dozen countries on the United Nations Human Rights Council in Geneva wrote a letter highlighting the ill treatment of China’s Uighur Muslim minority, with an estimated one million people rounded up and imprisoned or sent to re-education camps.

Peter Vesterbacka says he believes that engagement, not isolation, is the key to affecting change. It’s the same rationale the Finnish government uses when engaging at the most senior levels with China – like during the 2017 state visit of Chinese Premier Xi Jinping; or when President Sauli Niinistö and First Lady Jenni Haukio paid a return state visit to China in January this year.

“My perspective is that we need to engage in a dialogue with all of these guys. I am not a big believer in let’s just isolate and ignore. Look at Cuba, look at Iran, look at these sanction programmes that haven’t been very effective. The only time we make progress is when we engage in dialogue. We can’t only [say] ‘guys, not good, don’t do that’. If you take Asia and you take China, not a good idea to make people lose face and nothing good comes out of that” he explains.

Still, if the money could come from a less controversial Asian country like South Korea or Japan, would it make things morally easier for Vesterbacka, and take the sting out of some of his detractors in Finland?

“Yes of course you can say yes everything in China is government. But it’s not completely black and white.”

But he does concede that in purely business terms “if we get a better deal from Japan, of course we would do it with Japan.”

Peter Vesterbacka presents an update to his tunnel project at a public meeting in Tallinn, February 2019 / Credit: News Now Finland

Ambitious timetable for running the first trains

If you’ve got €100 to spare, you can already buy a ticket for the first train scheduled to race through the tunnel at 300km per hour on 24th December 2024.

That’s the headline-grabbing timetable Vesterbacka has consistently used in media appearances. When the opening date almost inevitably slips, it will be used as a stick to beat him with.

Estonia’s Minister of Public Administration Jaak Aab told public broadcaster ERR this week that he didn’t think the 2024 date was “particularly realistic”.

The mistake that functionaries and politicians in Helsinki and Tallinn have made however is to treat the date so literally, instead of viewing it from the perspective of the man who sold the world’s mobile phone users on Angry Birds when he worked his ‘Greatest Showman’ magic as Rovio’s Chief Marketing Officer.

Pushing such an ambitious launch date is a marketing ploy to whip up enthusiasm, and to galvanize a notoriously slow planning process into action. Vesterbacka wants people to get caught up in the excitement of ‘Hurricane Peter’.

When construction eventually begins – whether on Vesterbacka’s preferred route via Espoo’s Keilaranta business hub and two offshore islands built from 80 million square metres of excavated rock and soil; or via Helsinki Central Railway station which the capital’s mayor Jan Vapaavuori (NCP) is stubbornly insisting on – progress will happen quickly.

The latest generation of plasma drilling technology means construction can proceed at twice the speed of boring machines currently being used on other large engineering projects.

The three new Chinese companies bring a wealth of expertise with them from home.

“They have built 16,000km of railroad tunnels in China, 40,000km of other tunnels, so they know what they’re doing” says Vesterbacka.

The tunnel boring machines – TBMs – replace the drill and blast method that’s traditionally been used in Finnish construction projects. This allows the whole 17.5-metre diameter tunnel to be bored at once, as the concrete elements to support and seal the walls are put in place.

Markku Oksanen from Finnish construction company Pöyry confirms the construction period for the tunnel will be “exceptionally short”.

In one of his interviews with News Now Finland, Peter Vesterbacka fishes out some fragments of slate grey plasma-drilled rock from his pocket and shakes them around.

“We originally thought we would need 12 TBMs and drill in six directions, two tunnels and pipes in 6 directions, but A-Insinöörit and Pöyry who are working on the more technical plan, I think the current estimate is we will need 16 TBMs, drilling in eight directions at the same time” says Vesterbacka.

“It’s crazy fast, but it’s doable”.

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