Know how China Exim Bank loans work

I WANT to explain how the China Exim Bank loans are drawn for projects in Papua New Guinea using the Pacific Maritime Industrial Zone (PMIZ) project as an classic example.
Unlike traditional lending institutions such as the World Bank and Asian Development Bank, China Exim Bank loan terms and conditions require that the main contractor in the project should be a Chinese government-sanctioned company, which is given the minimum leverage of using 30 per cent local content of the host country to deliver according to contract design specifications and costs without failure.
All payments made directly to the contractor is guided by the counterpart funding ratio/percentage during mobilisation, progressive and completion segments.
The China Exim Bank pays its component directly to the contractor’s account back in China after certification and approval advice is received from PNG Treasury Department upon recommendation from the implementing agency.
In the same way, the proportionate of PNG Government component is paid by the implementing agency to the contractor to deposit into its local bank account held in PNG.
The onus is on the Chinese contractor to procure materials and transfer required operational funds to its PNG local bank account to execute the project from both sources of funding until the project is completed or the funding is exhausted for further variation assessment, if need.
As for the initial US$95 million (K300 million) PMIZ China Exim Bank loan, the Government is required under a signed loan agreement to fund 22 per cent (K70 million) while the China Exim Bank to fund 78 per cent (K230 million).
The first down payment for designs and re-mobilisation took place in 2011 in which the Government, under the Commerce, Trade and Industry Department, made a down payment of K10 million while China Exim Bank may have released about K80 million to the contractor.
Unfortunately, the five-year window to draw down the loan expired after delays caused by disgruntled landowners.
China Exim Bank froze/cancelled the loan as a result. Only K90 million was paid to the contractor when the bank pulled the plug.
The onus is on the contractor to report to an investigative authority on the use of funds to deliver designs and mobilise on site.
Another misunderstanding is that the PMIZ loan repayments has already being factored into annual debt servicing by Treasury when it is due, like the total of K45 million repaid in the last four years is part and parcel of that obligation.
Some uninformed politicians and their cronies have been taken for a ride by the China Exim Bank to make a hogwash business case for PMIZ to get a fresh US$165 million (K578 million) loan based on actual geotech and initial framework agreement for a delivery of an international standard port, which was well and truly captured in the 2016 designs.
It was independently revalidated into Australian standard by AECOM Ltd of Australia under the sponsorship of Kumul Consolidated Holdings Ltd.
The China Exim Bank lacks appreciation that the Government, by progressive appropriation bills, consolidates all loan repayments through annual budgetary process and not for a single project to generate cash flow for direct loan repayment purposes as the confusing case for PMIZ to cause another four years of delay.
In fact, a 2008 feasibility study revealed a break-even point on two or more operators.
What more does China Exim Bank wants when RD Tuna has expanded four times in the Philippines in the space of tuna processing and associated industries?
All alleged abuses of PMIZ funds is from the internal operational budgetary funds released and held in a trust account under the Commerce, Trade and Industry Department to secure land and site preparations, including all statutory requirements prior to actual procession of the site by the contractor to commence construction.
This should clear the air for Treasurer Ian Ling-Stuckey and his team, aided by local Madang MPs to deliver PMIZ this time around for a greater benefit to the country.

LG,
Observer