Nov 28, 2021 News
A Lesson for Guyana?
…Guyana already owes millions, gearing to borrow US$1.5B more
Kaieteur News – China ranks among the top three richest countries in the world, with available liquidity being doled out in the form of loans to the tune of trillions. The country has been on an aggressive campaign pursuing a global infrastructure agenda under the rubric of the Belt and Road Initiative.
Lauded when first announced just over a decade ago, several countries that latched onto millions in loans for large scale infrastructural projects, have since been finding themselves in a predicament where they would end up having to forfeit state assets and in some cases sovereign land.
This is as a result of the terms and conditions attached to these loans, including the exclusion of specific international arbitration bodies such as the Paris Club. The latest victim, Uganda, is at present unable to pay its debt to China for a US$207M loan from the Chinese Exim Bank it contracted back in November 2015.
The loan had a maturity period of 20 years including a seven-year grace period. According to International reports now surfacing, the country has now signed an agreement to virtually surrender the new airport to the Chinese lenders.
That airport serves as the country’s only international airport for a nation with a population of some 46 million people and a US$37.4B economy. According to international reports, efforts on the part of the Ugandan government have failed to convince the Chinese lenders to renegotiate “the toxic clauses of the 2015 loan,” leaving Ugandan President, Yoweri Museveni’s administration in limbo.
According to the Uganda Civil Aviation Authority (UCAA), some provisions in the Financing Agreement with China expose Entebbe International Airport and other Ugandan assets to be attached and taken over by Chinese lenders upon arbitration in Beijing.
China, according to international reports, has rejected recent pleas by Uganda to renegotiate.
The Daily Monitor, this past week said, the Ugandan government waived international immunity in the agreement it signed to secure the loans, exposing Entebbe International Airport to take over without international protection.
Uganda in March sent a delegation to Beijing hoping to renegotiate the toxic clauses of the deal but the officials came back empty-handed as China would not allow the terms of the original deal to be varied.
Uganda’s Finance Minister, Matia Kasaija was also forced this past week to apologise for the “mishandling of the $207 million loan” from the China Exim Bank.
Notably, progress of works at the airport has only reached 75.2 percent completed, with two runways having reached overall completion of 100 percent. Entebbe International Airport is Uganda’s only international airport and handles over 1.9 million passengers per year.
In March of this year, Chinese and Guyanese Presidents, Xi Jinping and Dr. Irfaan Ali, held talks on the promotion of a series of initiatives, including the Belt and Road Initiative (BRI), China’s controversial debt-laden plan to build a trade super highway across the globe.
That news was first reported by Xinhua News Agency, the official state-run press agency of the People’s Republic of China.
The Office of the President had also reported that the President led a high-level ministerial team in the discussions that included Vice President, Dr. Bharrat Jagdeo, Senior Minister within the Office of the President with responsibility for Finance, Dr. Ashni Singh, Minister of Foreign Affairs and International Cooperation, Hugh Todd, and the Minister of Public Works, Juan Edghill.
BRI was unveiled in 2013 by President Xi and since then has been relatively successful around the world with some of China’s partners. Its official outline states that BRI is meant to “promote the connectivity of Asian, European and African continents and their adjacent seas, establish and strengthen partnerships among the countries along the Belt and Road, set up all-dimensional, multi-tiered and composite connectivity networks, and realise diversified, independent, balanced and sustainable development in these countries.”
Guyana signed on to an instrument signalling its intent to participate, in July 2018. The then Granger administration’s Minister of Foreign Affairs, Carl Greenidge, who is now Government Advisor on Borders, had signed onto a Memorandum of Understanding (MoU) with Chinese Ambassador to Guyana, Cui Jianchun, noting that Guyana would cooperate within the Framework of the Silk Road Economic Belt and the 21st Century Maritime Silk Road Initiative.
Guyana currently has a debt of some $1,056,093,456 or about US$5.2M in loans to the Chinese Exim Bank. This is in addition to a number of other Chinese related and other loans.
Under the initiative, scores of countries appear to benefit from multimillion-dollar soft loans from China for the construction of roads, bridges, airports, deep water ports and other infrastructure.
Kaieteur News has highlighted how China has been targeting weak and/or corrupt governments to sign onto its initiative, signing away exorbitant loans for mega-infrastructural projects.
In 2018 alone, China acquired over 20 deep water harbours and airports from several countries around the world.
The country was able to do so by lending those countries massive amounts of money they would be unable to repay within the stipulated period. The country is accused of leveraging these massive loans it holds over small states worldwide to snatch assets and increase its military footprint.
Developing countries from Pakistan to Djibouti, the Maldives to Fiji, all owe huge amounts to China. Already there are examples of defaulters being pressured into surrendering control of assets or allowing military bases on their land. Vice President Jagdeo recently confirmed that his government is exploring accessing a US$1.5B access to credit from China.
Uganda is not the only country to have suffered the fate of having to turn over its assets to the Chinese for defaulting on loans.
Sri Lanka is one such country that had to formally hand over the strategic port of Hambantota to China on a 99-year lease, in 2019, in a deal that government critics have said threatens the country’s sovereignty.
The state-controlled China Merchants Port Holdings Company signed a deal with the Sri Lanka Ports Authority to control a 70 percent stake in the Hambantota port, which lies on the southern coast of the country.
Sri Lankan politicians said the Hambantota deal, valued at US$1.1 billion, was necessary to chip away at the debt, but analysts warned of the consequences of signing away too much control to China.
“The price being paid for reducing the China debt could prove more costly than the debt burden Sri Lanka seeks to reduce,” said N. Sathiya Moorthy, a senior fellow specialising in Sri Lanka at the New Delhi-based Observer Research Foundation.
Kaieteur News had previously published extensive reports which detailed how several countries became trapped by opting to utilise China’s BRI.
In Cambodia, China “invested” some US$5.3B. While these and other initiatives were said to be geared to better the lives of Cambodians, the reality could not have been further away from this dream.
Back in 2008, China’s Tianjin Union Development Group (UDG) was granted a 99-year lease to around 20 percent of the country’s total coastline at the modest price of US$30 per hectare.
Cambodia’s Constructors Association has estimated the so-called “Pilot Zone” project’s total cost at US$3.8 billion. The amount of land leased is more than three times the legal limit under Cambodian land law, which caps land concessions at 10,000 hectares.
In Zambia, an international airport, a state-owned electricity company, a National Broadcasting Network and a major roadway in Zambia, have all been taken over by China.
In fact, the takeover of the South African country has become so pronounced that some observers are asking the question, “Is Zambia the first African country to become a full Chinese colony?”
Zambia’s reported ‘colonisation’ is due to its government’s failure to repay a US$8B debt to China for infrastructural projects undertaken by the Chinese under programmes like the BRI.
A giant dam called Coca Coda Sinclair in the Ecuadorian jungle, financed and built by China, was supposed to christen Ecuador’s vast ambitions, solve its energy needs and help lift the small South American country out of poverty.
Instead, it has become part of a national scandal, engulfing the country in corruption, perilous amounts of debt — and a future tethered to China as a result of an inability to make good on its US$19B debt payments.
The price tag involved Chinese loans, not only for the dam but bridges, highways, irrigation, schools, health clinics and a half dozen other dams the government is scrambling to pay for.
It doesn’t matter whether Ecuador can afford them. China gets paid either way. To settle the bill, China gets to keep 80 percent of Ecuador’s most valuable export — oil — because many of the contracts are repaid in petroleum, not dollars. China gets the oil at a discount, then sells it for an additional profit.
Pumping enough oil to repay China has become such an imperative for Ecuador that it is drilling deeper in the Amazon, threatening more deforestation.
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