In the newest report of Oil Roads, which is expected to borrow funds for. The China Exim Bank is supposed to be provider of 85 % of the cost of the operation and building of the roads in these projects. I will only look into one of them, as I have previously looked at this significant one.
This is the Hoima-Butiaba-Wasenko Road. A project that was supposed to start in 2015 and was clocking in funds from the state budgets in 2017. Back in 2015, the road was estimated to cost $126m USD. Today, with the recent report, the same road is costing $179,538m USD. That is jump of nearly $50m in a five years time. In addition, of these bloated funds, 85 % of it will be loaned from China and the rest 15% covered by the Government of Uganda (GoU).
In 2017, this project was designated the China Communications Construction Company (CCCC), which signed a deal in January 2016. However, by the time of the report 2019, it is another Chinese Company who has the contract. This is Chongqing International Construction Corporation (CRC) Ltd. With the recent contract, the loans are clearly getting direct back to the Chinese, as their corporations are the ones with the contracts to build. A clever way of borrowing and then getting returns.
With this mind, we can see the changes, see over the years how the price has changed. If Members of Parliament was afraid of the price per kilometre in the past. They should be now. As the changes of price on the same project has changed significantly. There is no doubt, that the Chinese government are getting added loans on each of the packages in this deal. As this is just one of the roads in question.
This is 111km is now costing 659,921,964,460.17UGX in Ugandan terms or 659bn shillings and that equals to about 5,9bn shillings. Therefore, the prices has sky-rocketed and the price per kilometre is abnormal and extremely costly. The overpriced asphalt and the consultation is in absurd levels. The previosly estimated price for this road was about 444bn shillings. Therefore, we can see rising price between the years in both currencies. About 200bn shillings growth in 5 years.
To many cooks and too few ingredients. They are boiling soup on nails on this one. Wonder how this will end. As I felt in 2017, that the pricing of this particular road was a bit too much, but now they have just escalated it.
We can wonder whose eating, but someone is. We just don’t know who, because there been designated funds to build this one in the past and it has still not commenced. Surely, this road will be built, but at what point. However, with the added loans, the pressure should be on. Also, to secure the oil so it makes financial sense too. That the added value is there. It got to be. Because this project is over the top. This is the real OTT service, paid for by the Chinese and the tab is all taken by the Ugandans. Peace.
Certainly, the massive loans given to the “Build! Build! Build” are starting to cost. As the big infrastructure projects and other loans are taking their toll on the economy. Therefore, the Philippines and President Rodrigo Duterte are trying to collect something. It seems like the Chinese counterparts are getting lots of collateral and salvage the spent funds in Philippines. Because, as the weeks goes by and the ASEAN friends, the one with the upper-hand is China.
This is surely not how Duterte want it too look, as they are having a bargain. There has already been putting into question the control of Benham Rise and the hard-won control of the island there. Still, the Republic haven’t fought with tooth and nail to get it back. This week, it seems like there are more installations on it. The sovereign Philippines are being toyed with by China. They are being fooled and has to accept deals, because of the loans to Beijing. Manila is indebted and has to give concessions. Why else, would this week be filled with new Chinese interference and getting licenses in the Philippines?
Weather Station Controversy:
““It is currently coordinating with concerned government agencies, as well as with the Philippine Embassy in Beijing to verify the existence or non-existence of these alleged facilities,” he said. Panelo earlier addressed this concern on Monday saying Foreign Affairs Secretary Teodoro Locsin jr. will “do his job” once the reports have been verified. China’s Foreign Ministry Spokesperson Lu Kang announced on November 1 that Beijing has already begun operating weather stations on the artificial islands in South China Sea. “These projects are designed to observe the maritime, hydrological, meteorological conditions and air qualities, and provide such services as maritime warning and forecast, tsunami alert, weather forecast, air quality forecast, and disaster prevention and relief,” Lu Kang said in a press conference” (Janine Peralta – ‘Philippines to take action if Chinese weather stations in South China Sea are verified — Palace’ 06.11.2018 link: http://cnnphilippines.com/news/2018/11/06/ph-china-south-china-sea-panelo.html).
“One of the projects included an exploration between state-owned Philippine National Oil Company (PNOC) and Chinese state-owned CNOOC Ltd., located off Calamian in southwestern Palawan province, Cusi told Manila Bulletin in a news briefing. Cusi was referring to Service Contract 57 which covers an oil and gas project awarded to PNOC’s exploration unit, and picked CNOOC as a partner. Cusi did not share details for Service Contract 72, an exploration permit held by the Philippines’ PXP Energy Corp. for Reed Bank, but clarified that the Reed Bank, another disputed South China Sea area, is not of the two” (Meanne Rosales – ‘ PH to seal 2 exploration deals with China’ 09.11.2018, link: https://powerphilippines.com/2018/11/09/ph-seal-2-exploration-deals-china/)
Chinese Telecommunication as the Third Telco:
“Philippine President Rodrigo Duterte has lauded the entry of China Telecommunications Corp., or China Telecom, in his country’s telecommunication industry, saying the Philippines stands to benefit from the “good competition” that a Chinese company will bring to the industry” (…) “Duterte said that China “has proved to be of very incredibly high quality of electronics.” “(Xinhuanet – ‘Duterte welcomes China Telecom’s operating in Philippines’ 08.11.2018).
As we see, the sudden Benham Rise in the South China Sea and the will of China to takeover the place, while the Malacañang are preoccupied with sneering at priests, Rappler and who else who hurt their pride. They are not seeing or looking away from the sovereign implications on Benham Rise. As there are talks already of military installations, but now also monitoring equipment and a weather station. Clearly, the Chinese sees it as their land, while the PH are busy trying to find out what is happening there.
Than, you have the oil-fields in the same region, where the Chinese National Offshore Oil Company (CNOOC) have gotten licenses to drill oil there. Clearly, this is all intentional, as well as they are the lucky third Telecommunication Company and getting into the Cellphone business too. This is just fitting as a glove. They are both getting territory in the South China Sea, they are getting exploitation opportunities and steady profits through a cell-phone carrier. All this they have gotten for dropping some loans, that is hard for the Philippines to repay in cash.
That is why they are allowed to get these things, as collateral for the debt. This is a game the Chinese plays well. That is why this is all happening. We have seen similar efforts done in Sri Lanka. That will surely happen in the Philippines too. As the Chinese is not forgiving with their loans. They want points on the dollar. Not loose money and certainly not lose face on the investments made. Peace.
“If you owe your bank a hundred pounds, you have a problem. But if you owe a million, it has.” – John Maynard Keynes
There are worries about the rising levels of debt the Philippines has to China. That should worry all Filipino. Since, this will be repaid, even as the infrastructure projects under the President is served now. The time for repaying these debts will come. This might be the next one after President Rodrigo Roa Duterte might have to answer for that. But he should be worry himself of the levels he is putting the Republic in, unless he wants important parts of the infrastructure be “given” to the Chinese as a way of repaying the debt like Sri Lanka did.
“The conclusion of an agreement with China to manage the Hambantota port was seen as inevitable after the government buckled under Chinese pressure when the China Communication and Construction Co Ltd, which was building the port city, demanded USD 143 million as compensation for the stalling of the work. The Sri Lankan government was also compelled to renegotiate the Colombo Port city project last year, which had been suspended due to criticism about the Chinese ownership of 20 hectares of freehold land as well as controversy over the project’s possible negative environmental impact” (Smruti S. Pattanaik – ‘New Hambantota Port Deal: China Consolidates its Stakes in Sri Lanka’ 17.08.2017).
This story should be worrying for the Philippines as the rising debt to China will come to roost one day. Duterte has accepted and taken it for his projects, but will it be sustainable. That is something he himself should ask himself and also if they can repay this debt without paying a high price.
Jovito Jose P. Katigbak reported in June 2018 this: “Another issue worth noting is debt sustainability. There are concerns that borrowing heavily from China will lead the country into a debt trap. A 2017 Forbes article contends that the Philippine government debt could swell up to USD 452 billion by 2027, which translates to a debt-to-GDP ratio of 197 percent. The estimated figure is based on an annual 10 percent interest rate on loans levied by the Chinese government, hence tying the Philippines into a “virtual debt bondage”” (CIRSS Commentaries – ‘BRIDGING THE INFRASTRUCTURE INVESTMENT GAP THROUGH FOREIGN AID: A BRIEFER ON CHINESE ODA’ June 2018).
If the Filipino doesn’t get to worried about the amount they are borrowing from China. It isn’t only Sri Lanka who has eaten over more debt than they can swallow and has to repay with other means. There are worry in the Pacific island of Tonga.
As reported from Tonga: “Chinese aid in the Pacific region has increased dramatically in recent years and the country has become the region’s second-largest donor. Tonga’s debt to China has been estimated to be more than $100m by Australia’s Lowy Institute think-tank. The prime minister told local media last week that countries would get together to ask the Chinese government to “forgive their debts”. “To me, that is the only way we can all move forward, if we just can’t pay off our debts,” he added. Beijing has refused to write off loans in the past but has given Tonga an amnesty on repayments” (Simone Rench – ‘Tonga premier to ask China to ‘forgive’ Pacific debts’ 21.08.2018 link: https://www.publicfinanceinternational.org/news/2018/08/tonga-premier-ask-china-forgive-pacific-debts).
We have seen what the Chinese done to the Sri Lankan and Tongan counterparts. Both of instances could be happening to the Philippines. Not that you wish that, but the repayments of the growing debt will happen at one point. Even if there is long grace-period of lower rates on the interests as promised to Manila. You can wonder when the Beijing want to recoup the funds and the debt.
Right now, Duterte has a good relationship with Beijing, but when do they feel they have invested enough in the Build! Build! Build! (BBB) projects and wants profits and returns on the investments?
Because the Chinese will not do this forever. They might act nice at first and investing in infrastructure projects as a part of the Belt and Road Initiative (BRI), but when time goes by and lack of repayment hits the fan. The familiar faces of Beijing will get their value for the money and the sovereignty will be taken away. As a port, a piece of mines or exploration of some sort of industrial output will go directly to Beijing and a state owned company. Since they will get their repayment for all the offered debt to the nation.
That is what Duterte is risking, if it is oil exploration and extraction, mineral resources or even ports that is vital to the business done in the Philippines. Does he wants to risk that for the signature building of the BBB?
This should not surprise you, that the Chinese government and their subsidiary businesses are making sure they are gets the best deal with the Ugandan counterparts. The Bank of Uganda policy paper are spelling out the advantages for the Chinese in the bilateral and the state-to-state offerings given to the Ugandans. They are clearly getting infrastructure loans and plyaing minor rolse in GVCs, therefore, the Ugandans are people loaning for infrastructure and then repaying, while the Chinese contractors and Chinese labor are working on the indebted projects. Just take a look, it is not a positive read!
“It should be emphasised, however, that for Uganda to leverage the shifting growth dynamics in China (such as a shrinking labour force, rising wages and an appreciated Renminbi), it must create a conducive investment climate. Low wages and a competitive exchange rate alone will not make much difference without reliable power and transport links, or in the face of suffocating bureaucracy and corruption” (Bank of Uganda, P: 6, 2017).
“With the migration of labour-intensive manufacturing shifting from China and an improvement in investment climate, Uganda also stands to expand its involvement in global trade, including Global Value Chains (GVCs). Historically, countries like Uganda have played a relatively minor role in GVCs. Figure 5 below, which illustrates a useful measure of Uganda’s integration in GVCs, relative to other sub-Saharan countries, indicates that Uganda is below the average value-chain position for developing countries” (Bank of Uganda, P: 6, 2017).
“It must be pointed out that while China has emerged as a significant financer of infrastructure projects in Africa, it still lags behind both private investment and the more traditional sources of funding. Recent research actually reveals that, over the past few years, China has contributed about only one-sixth of the US$30 billion Africa receives annually as external finance for infrastructure” (…) “Moreover, most of this financing to the transport and energy sector takes the form of state-to-state, non-concessional deals and comes from the Export-Import Bank of China (China Exim Bank). Examples of the major state-to-state deals signed with China Exim Bank in Uganda include: US$1.4 billion and US$483 million for Karuma and Isimba hydropower dams as well as US$350 million for the construction of the Kampala-Entebbe express highway” (Bank of Uganda, P: 7-8, 2017).
“For Uganda, which has so far committed up to US$ 2.3 billion in contracts with China Exim bank and is soon to take on more debt for projects like the Standard Gauge Railway, debt sustainability is a growing issue of concern; underscored by the fact that the country faces a low tax-to-GDP ratio relative to its regional peers and significant public investment challenges. Uganda’s debt as a percentage of revenues has risen by 54% since 2012 and is expected to exceed 250% by 2018, raising calls for caution and improved public investment management from various policy circles including the IMF, World Bank and Moody’s, which downgraded Uganda’s long-term bond rating in 2016 citing deteriorating debt affordability” (Bank of Uganda, P: 10, 2017).
This here report shows both the possible troubles with the debt, that already are problem with current budget, but will become bigger. Secondly, that the relationship and bilateral business agreements with China, will only benefit China and not Uganda. As they might get the infrastructure projects, but they have to repay the debt and also use funds on labor from the Chinese contractors and businesses. They are not hiring and educating locals to work these sorts, because Chinese are getting their own hired.
This here is not bringing positive results, but instead are being a nice debt collector for China and will be indebted to them. While the Ugandans gets scarps from the Chinese, as the infrastructure projects like the Dam they have bought on debt, has been said is “shoddy” work. That proves the Chinese gets easy money, get expat workers and later returns on every single Yen. Peace.
Dollar, David; Mugyenyi, Akura & Ntungire, Nicole – ‘How can Uganda benefit from China’s economic rise?’ (August 2017) – International Growth Centre Uganda & Bank of Uganda
As the Budget Framework paper for Financial Year 2017/2018 in Uganda, the Uganda National Roads Authority (UNRA) requested for the roads a total of Shs. 1,779bn and the required just to build the road in this budget year alone where 1,107bn. This was seen as a strategic area from the state, as the road is seen as one of them Oil Roads. Which, is one of the most important projects the government has, as the future profits of these are soon all used before the drilling starts. This with the giant projects and the misuse of funds. This is epitome with the Hoima-Butiaba-Wasenko road! Just take a look at the reports collected on the road. But the official paper of the budget said otherwise than the framework, who was just nonsense.
While the Budget report to the Parliament of May 2017 Vote 113 UNRA Hoima – Wanseko Oil Road Shs. 29.00bn. This funds will be available after reconciliation of numbers. While the Ministry of Finance, Planning and Economic Development (MoFPED) where planning proposed numbers for the Oil Roads and the Hoima – Wanseko road where the length of 83 kilometers, and the budget was 444bn. Which is a bit more than the vote! And doesn’t fit with the records even. The numbers are staggering and confusing. As to put it further every unit or kilometers are estimated to cost 5,35bn. So the cost of the oil-road just in this budget year is insane.
“Hon. Cecilia Ogwal expresses concern about the cost of the Hoima-Butiana-Wasenko oil road of shs53billion per kilometre” (Parliament, 31.05.2017). The Road that is under construction and is upgraded are 111 kilometers road. If the MP’s estimate is correct means the road cost shs. 5,883bn or Shs. 5.8 trillions. In the budget plenary session on the 31st May 2017 she was also very adamant that the roads who we’re budgeted without feasability studies should be cut and get other use of the funds. Still, that didn’t happen. One of these roads was the oil-road of Hoima-Butiaba-Wasenko. But with this years Budget report and actual feasibility study alone, proves the state will use 444bn on the road. As the other reports prove what they we’re planning to use. But this project started in 2015 and the reports of the misspending on it, seems so big as it gets. So the Road development and the Oil Road could be proof of another UNRA scandal. Take a look!
“The works on Hoima-Butiaba- Wanseko road are expected to start during the second half of 2015. This is subject to availability of funding for the project,” said Dan Alinange, the UNRA head of corporate communications” (Rwothungeyo, 2014).
Hoima-Butiaba-Wanseko cost Shs. 454bn:
“Works minister John Byabagambi and the new Uganda National Roads Authority (UNRA) executive director Allen Kagina have agreed to handpick a contractor for Hoima-Butiaba-Wasenko road despite an earlier petition on influence-peddling and fraud in the process. Mr Byabagambi has also changed from his earlier position where he opposed the move, when he was still a junior minister. A whistleblower had raised the red flag in a petition to Ms Kagina indicating that the project cost had been inflated by Shs66 billion ($20 million)” (…) “The 111km road stretches from Hoima to Butiaba on Lake Albert and one of the major corridors in the oil-rich Albertine Graben in south western Uganda. The project is expected to cost Shs454 billion” (Musisi, 2015).
UNRA on the Spot:
“The third road project, pointed out by the whistleblower is the 55km Hoima-Butiaba-Wanseko road. According to the dossier, bids for the road were opened on January 22, 2016 and the deal was awarded to China Communications Construction Company (CCCC) at Shs 398 billion. According to the whistleblower, this would translate into $2m per kilometre, which is exorbitant. The whistleblower notes that this is way above construction estimates posted on the Unra website, which are at $960,000 per kilometre. Later, after an outcry from some bidders, Unra cancelled the deal, the whistleblower says. “The IGG should investigate the people who crafted this ignominious evaluation and bring them to book. They should even be interdicted as investigations continue,” notes the dossier. The whistleblower claims that roads in the oil sub-region of Bunyoro have been restricted to only Chinese firms because of the funding from Exim bank. Local and other foreign firms, the dossier noted, were left out” (Kiggundu, 2017).
So the prices of the budget framework and the budget report of 2017/2018, as the whistleblower of early May 2017 are clearly saying that the $2m per kilometers on the Hoima-Butiaba-Wanseko. If the US Dollars are Currency converted into Uganda Shillings which means the price per kilometers are Shs. 7,187bn, that means the price calculated by the budget and the MoFPED are Shs. 5,35bn. That means that are a difference in the price per kilometers which is Shs. 1.837bn. If the budget would be correct than the total price for the 83 kilometers, would e 596bn. I also find it strange that the UNRA budget and length on the FY 2017/2018 is 83 kilometers, as the initial length was 111 kilometers. That is also a length of roads that suddenly couldn’t disappear.
This road is surely more expensive than the government wants it to be, or certainly some lost public funds. Not shocking in the nation run by National Resistance Movement. The total tally of the cost will be revealed, but is not yet. Peace
Kiggundu, Edris – ‘UNRA on spot over Chinese contracts’ (03.05.2017) link: http://observer.ug/news/headlines/52685-unra-on-spot-over-chinese-contracts.html
Musisi, Frederic – ‘Minister, Kagina hand-pick contractor’ (26.06.2015) link:http://mobile.monitor.co.ug/News/Minister–Kagina-hand-pick-contractor/2466686-2765360-format-xhtml-9uhqklz/index.html
Rwothungeyo, Billy – ‘Hoima-Butiaba-Wanseko road for upgrade’ (02.01.2014) link: http://www.newvision.co.ug/new_vision/news/1336203/hoima-butiaba-wanseko-road-upgrade