The China effect
Cameroon will use China's loan to fund deep sea port expansion
In January 2011, it was announced that China will lend Cameroon 243.5bn CFA francs ($48.7m), the majority of which will be spent on financing new deep-sea port facilities at the port at Kribi in the south of the central African nation.
This announcement represents the latest in an increasing number of Chinese deals involved with financing new port developments in Africa.
Another notable example is Chinese funding for the development of the new port of Lamu in Kenya, designed to provide a gateway to southern Sudan.
Rumours also abound about China having an involvement in financing proposed new container terminal developments in Dar es Salaam, Tanzania and Mombasa, Kenya. Behind these projects, which have only recently come on the radar are a range of other confirmed China Port finance deals in Africa spanning the liquid bulk, dry bulk and container sectors.
There are fewer impediments to China concluding port financing deals – fewer rules and regulations compared with say institutions offering loans that are based in Europe or the US. And of course China has a hunger to be in Africa to secure, over the longer term, the much needed mineral resources it needs and is able to offer competitive financing as one way or another virtually all loans are state-backed.
There is also the reality that China has been proactive in marketing itself as a source of finance in Africa. In many African countries, there is now a strong awareness of China as a source of finance for infrastructure projects while there is a lack of knowledge regarding alternative sources of finance from Europe and the US – infrastructure funds, private equity concerns and so on. It is becoming easier to look to China for finance than elsewhere.
Another indicator of this trend can be seen in Indonesia where China’s sovereign wealth fund, the State Development & Investment Corp, has recently expressed strong interest in investing in infrastructure and natural resource projects in the distant provinces of Papua and West Papua.
This “interest” includes port projects in Sorong, West Papua and Biak and Jayapura in Papua. The latter project will include container terminal development.
It is also notable that leading Chinese port operators are now building interest in projects overseas. China Merchants Holdings, China’s leading port operator, last year concluded a $500m deal to take a 55% stake in the first terminal of Colombo South Harbour, Sri Lanka. China has also had an involvement in the development of port facilities In Pakistan, Bangladesh and Myanmar.
In Pakistan, Gwadar Port, located in the remote province of Balochistan at the Apex of the Arabian Sea and entrance to the Arabian Gulf, is a flagship project. Phase I of the development of Gwadar Port was completed at a cost of $248m with China providing the largest chunk of finance, $198m.
China also invested $200m dollars for the coastal road linking the port of Gwadar to Karachi. It is additionally continuing its financial and technical support for other phases to be completed in the future at a cost of $526m.
The first phase development entailed the construction of three berths and supporting facilities and nine more berths will be built in subsequent construction phases.
In Bangladesh in the first quarter of last year it was announced that China will play a significant role in the financing of a new deep-sea port in Chittagong that will be developed in three major phases up to 2055. When completed, this new port will offer the capacity for handling 3m teu of container cargo/yr and up to 100m tonnes of bulk cargo/yr.
Clearly, China has embarked upon a course that will see it become more and more of a force in port financing. Project size presents no problem and evidently China is prepared to invest in locations where others might not so readily jump in.
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