Assets-tied Loans: China counters ‘distorted’ reports

No African asset tied to loan deals has ever been surrendered to China due to default, the Chinese embassy in Uganda has said.

The spokesperson for the embassy, Fang Yi, said this, on Sunday, in response to reports that Uganda’s Entebbe airport is exposed to the risk of being taken over by the Chinese in the event of loan repayment failure. Uganda had borrowed $200 million from China’s Export and Import Bank to expand the only international airport in the East African nation.

The reports on the exposure of the airport tied to the Chinese loan have sparked concerns across Africa, as well as the international development circle, about Beijing’s involvement in Africa as a donor and trade partner. Critics – including watchers in Nigeria, Africa’s largest economy that is also relying on “generous” Chinese loans to fund critical infrastructural ambitions – say Beijing is herding poor African nations towards a debt trap and endangering their sovereignty.

“The malicious allegation that “Uganda Surrenders Key Assets for China Cash” has no factual basis and is ill-intended only to distort the good relations that China enjoys with developing countries including Uganda,” The Chinese embassy said. “Not a single project in Africa has ever been “confiscated” by China because of failing to pay Chinese loans. On the contrary, China firmly supports and is willing to continue our efforts to improve Africa’s capacity for home driven development.”

“The very few noises will not interfere with the determination and unity of China-Uganda cooperation, nor will it shake the solid ground of China-Uganda friendship. We are confident that the majority of the public understand the cooperation between China and Uganda is mutual benefit in essence.”

The embassy also noted that China-Uganda economic and trade cooperation, including investment and financing in the field of large-scale infrastructure, follows the principle of equality and mutual benefit, and has been conducted in accordance with the laws and rules of the international market, and strictly abided by the laws of the host country.

According to a report by THE CITIZEN, Uganda Civil Aviation Authourity (UCAA) officials flagged up to 13 clauses in the agreement as “unfair and (being able to) erode the sovereignty of Uganda.”

Among the clauses that the officials want to change is the need for the UCAA to seek approval from the Chinese lender for its budget and strategic plans, the paper reported. Another clause, which they want to be amended, mandates that any dispute between the parties will have to be resolved by the China International Economic and Trade Arbitration Commission, according to the newspaper.

While the embassy said it would listen to “constructive” suggestions, it said loans agreements, including the Entebbe airport deal, were “voluntarily” signed.

READ ALSO: Chinese loans constitute only 3.9% of Nigeria’s total public debt stock – DMO

“It should be pointed out that China-Uganda cooperation has always adhered to the principles of openness, transparency, equality, and mutual benefits. All loan agreements, including that of the Entebbe Airport Expansion and Upgrading Project, are voluntarily signed by both parties through dialogue and negotiation on equal footing without any hidden terms or political conditions attached. Terms of the loan agreement for Entebbe Airport Expansion and Upgrading Project are in full compliance with the prevailing conventions and practices in the international financial market.”

“We are willing to listen to constructive suggestions as we continue our efforts to ensure China-Uganda cooperation to be more inclusive and benefit more common people,” the embassy said, adding that the upcoming 8th Ministerial Conference of the Forum on China-Africa Cooperation (FOCAC) will bring more good news to China-Africa and China-Uganda cooperation.

China has boasted that its aid is based on principles of non-interference, non-conditionality, and respect for sovereignty and in a way that allows the beneficiaries to determine the kind of assistance they want, showing some difference from the traditional donors of the West. But critics say, in practice, the Chinese loans are problematic because natural resource-tied loans, as in Angola, make beneficiaries risk exploitation and have little control over prices and management.

In addition to the exploitation of cheap labour and alleged lack of respect for local content development, critics say by not insisting on conditions around democracy and human rights, China is worsening the human rights situations in Africa.