…Robeson Benn, Dr Roger Luncheon unaware of details
There has been a plethora of remarks, for and against China Harbour Engineering Corporation (CHEC) as well as the Expansion of the Cheddi Jagan International Airport (CJIA), but the financing has not attracted much scrutiny.
Only recently Shadow Public Works Minister, Joe Harmon, told a media briefing that “China Harbour has not given us a grant… it is a loan, and what we need to know is, what are the terms and conditions of the loan.”
The loan however, is not coming from China Harbour but rather, from the Chinese Export Import (Ex-im) Bank.
The terms and conditions for the US$141M loan, for which Guyana has applied has not been signed into effect as yet.
Substantive Public Works Minister Robeson Benn, during a recent press engagement, when asked what the terms and conditions attached to the loan from China’s Ex-im Bank are, was at odds to explain.
He skirted the answer saying that he was not prepared at the time.
Head of the Presidential Secretariat Dr Roger Luncheon, on Saturday last, was also at odds to give any specifics on the terms and conditions of the loan.
This publication has been reliably informed that Guyana’s application for the loan is still at its preliminary stage.
A senior government official close to the issue has told this publication that “Terms and Conditions are only agreed upon once the Ex-im Bank agrees in principle to grant the loan.”
The official pointed out, that this means that there is still room for negotiation on the Terms and Conditions of the US$141M loan.
The official says that at present, no offer has been made by Exim Bank to Guyana, as it relates to the Terms and Conditions of the loan.
Research shows that while Exim is categorized as a policy bank and its loans are classed as government to Government deals, it normally transfers the money it lends directly to a Chinese company, rather than to the host government.
The Chinese Company in this case is CHEC and has already inked the contract with the Guyana Government to expand the Cheddi Jagan International Airport.
Process for Chinese $$$
The process for securing the loan from China’s Exim Bank is very different from typical aid projects.
Firstly, the Chinese company suggests the project to the client in the host country.
Both Minister Benn and China Harbour’s Regional Director, Zhongdong Tang, have confirmed this aspect.
There has been consensus on the fact that, China Harbour approached the Guyana Government with a number of projects.
The airport expansion project was agreed upon, finalized and a contract has since been executed and is in force.
Having approached a country with an investment proposal, the Finance Ministry of the host government (in this case Guyana) then applies to Exim Bank for a loan, and Exim conducts preliminary due diligence before giving approval.
When the loan is approved the finance ministry signs two agreements: a framework on the terms of the loan with China’s ministry of commerce, which is in charge of China’s aid programme and a loan agreement with Exim Bank.
The Chinese company carries out the construction – or provides the service or exports the goods, depending on the type of deal – and asks for payment from the local client, which could be a state-owned enterprise or government department. The client then applies to Exim for the funds, which are then paid directly to the Chinese company.
What’s the catch?
On Saturday last, Dr Luncheon was asked specifically about the Terms and Conditions of the loan and his response was, “I can’t tell you what the specifics are, but I will tell you about Exim Bank loans of the countries for which Guyana apply, particularly India and China.”
Both China and India operate state owned Export Import (Exim) Banks.
According to Dr Luncheon, loans from Exim Banks are usually at concessionary rates.
This, he said, means that the interest rates for the repayment of the loan would be unusually low “it is very, very unusual for it to come anywhere close to commercial lending rates,” and suggested one, or at the high end two percent rates.
Asked about the “catch” that comes with such low repayment rates, Dr Luncheon said, “The catch – most of the countries that provide the Exim Bank loans, they are often offered in ways that would have the supplier of the financing benefitting from procurement of goods and services by those nations…so it is not unusual both at the international or at the bilateral level.”
He said that this applies also to Inter-American Development Bank (IDB) loans, where the goods and services for which the loan is being secured, can only be procured from “IDB participating countries.”
He explained that if Guyana were to use an Exim Bank from India, then the goods and services will have to be procured from India and said too, that “China is no different.”
Dr Luncheon was asked specifically when the Terms and Conditions of the current Exim Bank Loan would come into effect and his response was “at procurement.”
The Head of the Presidential Secretariat explained that “when you need to procure, the Exim Bank in the context of the agreement would ensure that the procurement rules abide by the loan agreement.”
Asked about the stage of the US$141M loan application, Dr Luncheon said that while he could not recall specifically, “I know when we met the representatives through the Embassy, and this was in June, that issue of finalizing was being addressed…We are now in July.”
While conceding that he could not be 100 per cent certain, Dr Luncheon told this publication, “I want to believe that the agreement has been made but I am not in a position to confirm.”
He posited that given the relationships between the two Governments, “there would be enough merit “in bringing to conclusion such an engagement as quickly as possible.”
Preparatory works have already commenced at the Timehri location, but this is being funded through the $4.5B which was approved in the 2012 National Budget as the country awaits the US$141M for which it has applied.
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