Guyana not threatened by Chinese investment, loans – Pres. Ali

Jan 15, 2023 News

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…says China integral to growth of country

By Davina Bagot

Kaieteur News – Guyana has often been warned by the experiences of other countries when it comes to borrowing loans from China and the foreign country funding local projects through procurement models that allow for transfer to government at some point.

President Irfaan Ali however is not threatened by those warnings and instead believes that China has an integral role to play in the development of Guyana.

He made his position clear during a virtual interview with a Chinese Journalist, Wang Guan on the China Global Television Network (CGTN), released on Saturday.

“Over the years, many reporters in Western news media described China’s economic activities and economic investment for example in Latin America and the Caribbean- your country included – as predatory and neo-colonialism,” said the journalist as he introduced his question to the Guyanese Head-of-State, asking if he agrees with that methodology.

Ali made it clear that he does not support that view and instead sees China as a necessary partner to aid in the advancement of the country.

“If that was how I felt, I would not have been alluding throughout this interview to our welcoming nature for Chinese investment and investors and I would not have made the statements that I just made that we see China – Chinese investment and investors – as an integral part of the development and advancement of our country,” the President said.

He added, “What we want, is exactly I’m sure what China wants, is for those investment to bring the greatest benefit to the people of our country and also to support the development and advancement of China.”

In fact, President Ali explained that the bilateral relations between the two countries will only strengthen in the future.

Weighing in on energy cooperation between the two states going forward, the Guyanese leader urged that there is no immediate end to fossil fuel but the path to renewables must still be pursued. To this end, he said that China can play a part in Guyana’s energy sector.

“We see China as an important part in the energy equation of our country,” Ali noted as he urged the country to participate in the public bidding process, especially for energy-related projects.

He reasoned that China has technology, human resource strength and the capital resources that can fast track investments in the green energy sector to make hydro, solar and wind projects a reality.

The President said, “What is a great problem of the developing world is the capital cost for some of these alternative energy solution, and what China has to do is to work at a Global scale on supporting these alternative energy initiative.”

A Chinese contractor, China Railway First Group, had won a bid under a Build, Own, Operate and Transfer (BOOT) arrangement to construct the Amaila Falls hydro project that would have generated 165 megawatts of electricity for the country.

This agreement would have allowed the developer to operate the project for a 20-year period before handing it over to the government, at no cost. During that time, Guyana would have purchased the power produced from the facility at a specified cost to pay back for the investment.

Transparency activists had however pointed out that the project had the potential to lose its viability after this period. In addition, the terms of the arrangement allowed for Guyana to bear the most burdensome risks involved with the project. These include those related to political force majeure, payments risks in the event that electricity sold is not sufficient to meet the Power Purchase Agreement (PPA) demands, and hydrology where Guyana stands the risk associated with the likelihood of there being insufficient water supply, meaning if the Amaila Falls runs dry, among other risks.

The project was again shelved mid last year, after the contractor reportedly developed financing issues.

On December 30, 2022 the Government of Guyana entered into a new contract with the China Export Import (EXIM) Bank for the US$172 million loan to help build the new Demerara River crossing.

In a statement to the press, the Ministry of Finance announced that the Government completed the electronic signing of the loan to the tune of 160.8M Euros.

Guyana has been borrowing majority of its bilateral loans from the People’s Republic of China. Last year, it was reported that the bulk of the country’s loans were owed to the China EXIM Bank.

The Governor of the Bank of Guyana (BoG), Dr. Gobind Ganga in an interview with this publication had said the China Exim Bank accounts for 39.5 percent of the country’s total external debt. Additionally, debt repayment to the China Exim Bank had accounted for 82 percent of debt repayments to bilateral creditors. In the first three months of the year, US$10.6M alone was paid to the Chinese lending institution, up by 1.4 percent. The increase, according to the Central Bank, was as a result of higher principal repayments during the review period.

At that time, Guyana’s total stock of public debt, which comprises both external and domestic debt stood at US$3.248 billion.

China Exim Bank was a major contributor to a loan Guyana had taken to modernise the Skeldon Sugar Factory. This plant was to boost the sugar production figures of the industry; to essentially rescue the sugar sector from its ailing state. Instead, it turned out to be a contributing factor to the poor health of the industry.
In 2017, this newspaper reported that the Ministry of Finance contracted two loans for the Skeldon project. These were from the Export Import Bank of China, the repayment period for which ends in 2025 and the Caribbean Development Bank, the repayment period for which ends in 2033.

On the two loans, the total amount that the Government is paying (principal and interest) is US$3.8M per year.

Another project that was completed and funded by loans from China is the Cheddi Jagan International Airport, Timehri.

The airport expansion contract was signed in 2011 under then President, Bharrat Jagdeo, and was passed through the truncated presidency of Donald Ramotar. However, when the David Granger administration took over in 2015, it said that the very defective plan needed adjustments and changes were made. The decade-old project was awarded to China Harbour Engineering Company (CHEC) for the sum of US$150M – $138M from the China Exim Bank and $12M from the consolidated fund – taxpayers’ money.

Even though the modernisation project has been completed, according to the subject Minister Juan Edghill, works will continue at the airport.

Guyana cautioned

With the myriad of multi-million dollar projects slated to shortly come on stream, a former diplomat, Professor Dr. Shamir Ally has warned that Guyana’s failure to pay back on loans borrowed to facilitate these projects can land the country in a severe debt crisis, similar to the prevailing situation in Sri Lanka.

In a letter to this publication, Prof. Ally, who formerly served as Guyana’s second Ambassador to Kuwait and Guyana’s First Alternate Governor at the Islamic Development Bank, pointed out that while infrastructure development is key to a country’s progress, it is equally important for the country to manage its debts.
More importantly, he pointed to the importance of feasibility studies being conducted to ensure the viability of huge planned projects.

It was reported that 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 at the time, Uganda, was 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, the country was forced to sign 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.

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, which 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.

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• China Global Television Network (CGTN), Chinese investment, Chinese Journalist, loans, President Irfaan Ali, Wang Guan

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