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Uganda’s Main Airport Becomes Latest Target For China’s “Debt Diplomacy”

Courtesy of ZeroHedge View original post here.

Uganda's Main Airport Becomes Latest Target For China's "Debt Diplomacy"

During the height of the Trump era trade war with China, Vice President Mike Pence accused Beijing of waging "economic warfare" in a stirring speech that broke down how the CCP uses a tactic Pence termed "debt diplomacy" to pressure developing nations to submit to Beijing's influence, WSJ reports.

One notable example is the Sri Lankan government's effective surrender of one of its biggest ports to the Chinese government. The takeover drew the attention of American journalists, including reporters for the NYT, who provided extensive coverage of how Beijing used its Belt and Road Initiative to seize control of strategic assets belonging to other developing nations.

If anything, the process has only accelerated in the years since that NYT story was written. Now, Uganda's only international airport, the Entebbe International Airport, is at risk of being lost to Chinese creditors thanks to a poorly understood clause in a contract approved by the country's leaders a few years back. It granted a Chinese firm $200M to perform renovations on the airport. But thanks to this fine print that nobody apparently looked at, China might wind up with a major score by gaining effective control of the airport.

Of course, Uganda is hardly alone. Kenya and Ethiopia have also expressed regrets about Chinese-built railroads being extremely overpriced.

Here's how the deal worked:

Under the plan, Export-Import Bank of China would lend the money to Uganda, which would pay Beijing-based China Communications Construction to build new passenger and cargo complexes, plus fix two runways and associated taxiways.

These renovations are about 75% complete and link the airport to a separate Chinese financed-and-built highway to Uganda’s capital, Kampala. In that era, a proposal for the loan, the project would be split into two phases with borrowing of $200M and $125M at a 2% interest rate and with a 27-year payback period.

It all adds up to a total outlay of $417.91M.

A reference in the 17-page proposal (which isn't publicly available) shows there's at least $17M in an escrow arrangement, which is in itself unusual because beu

In response to the torrent of criticism, Beijing insisted that if it had wanted to take the airport, it wouldn't have suspended debt repayment for various loans in 2020 and 2021 and simply allowed borrowers to default.

The episode has been an imposition for the US on behalf of longtime president, Yoweri Museveni, who had already been criticized as being too cozy with Chinese leaders and for pivoting from $3.5 billion in World Bank debt relief a decade ago to a borrowing spree nearing $11 billion, almost all of it from China.


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