Active Mixed AidData Chinese Aid

[Suspended] China Eximbank suspended RMB 414 million of RMB 690 million government concessional loan for Caustic Soda Plant and Industrial Zone Project (Linked to Record ID#96221, #98029 and #73299)

¥414M RMB

Funder	Export-Import Bank of China (China Eximbank)
Recipient Organization	Ministry of Defense of Myanmar
Country	Myanmar
Start Date	Jun 01, 2010
End Date	Mar 26, 2030
Duration	7,238 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`108348`

Grant Description

[Suspended] China Eximbank suspended RMB 414 million of RMB 690 million government concessional loan for Caustic Soda Plant and Industrial Zone Project On April 22, 1992, Myanmar Paper and Chemical Industries and Yunnan Provincial Chemicals Import and Export Corporation signed a contract for a caustic soda plant.

The original memorandum was signed December 5, 1989. The plant was reported to cost $6 million.

In December 1998, China's Kunming Electro-Chemical Plant (KECP) in Yunnan province and the Myanmar Paper and Chemical Industry (MPCI) under the Ministry of Industry No.1. signed a contract to renovate the caustic soda and chlorine plant at Sittoung Paper Mill No.1 in Mon state.

Under the contract, the Chinese side was responsible for bearing the $1.2 million cost of the renovation, which covered the supply of machinery equipment and transfer of technical know-how, while the Myanmar side was responsible for repaying loan with the cash proceeds from caustic soda sales.

In June 2010, China Eximbank and the Ministry of Defense of Myanmar signed an RMB 690 million government concessional loan (GCL) agreement for the Caustic Soda Plant Construction Project.

📋 Loan / Grant Terms

💰 Loan Amountare unknown

The proceeds of the loan were to be used by the borrower to finance a commercial contract between Myanmar Economic Holdings Ltd (MEHL) and China Ordnance Industries Group Corporation Limited (NORINCO). The purpose of the project was to construct a caustic soda plant in Thaton Township within Mon State.

It was envisaged that the plant would produce chemicals for the soap industry.

China Eximbank made an initial RMB 276 million ($40 million) disbursement in support of this project and the Ministry of Defense used the disbursed funds to pay NORINCO for the acquisition of equipment (to support the caustic soda plant).

Then, in December 2013, MEHL and the Ministry of Defense transferred responsibility for the caustic soda plant and the RMB 690 million loan to Myanmar’s Ministry of Industry.

The Government of Myanmar subsequently decided to suspend the caustic soda plant project and replace it with an industrial zone project in Thaton Township within Mon State.

According to the Public Accounts Committee of Myanmar’s Parliament, approximately 2/3 of the funds that were paid to NORINCO were unrecoverable.

There are some indications that the China Eximbank loan for the Caustic Soda Plant and Industrial Zone Project may have financially underperformed vis-a-vis the original expectations of the lender.

After the disbursed portion (RMB 276 million) was paid in March 2018, the remaining 60% of the loan (RMB 414 million) was originally allocated under the foreign loans program for the 2015-2016 fiscal year, but the Union Government, in its Cabinet Meeting No. (8/2016), decided to suspend the project.

📋 Staff Comments

This project is also known as the Ion Membrance Caustic Soda & Polyvinyl Chloride (PVC) Project. The Burmese project title is ေကာ့စတစ္ဆုိဒါစက္႐ုံ.
The implementation status of the industrial zone project is unknown. This issue warrants further investigation.
The China Eximbank loan that supported this project is not included in the Overseas Development Finance Dataset that Boston University’s Global Development Policy Center published in December 2020.
Some sources identify Myanmar Economic Holdings Ltd (MEHL) as the borrower. MEHL is a major conglomerate run by the Burmese military (through the Ministry of Defense.
According to the World Bank's Debtor Reporting System (DRS), the weighted average maturity of all official sector lending from Chinese creditors to government and government-guaranteed borrowing institutions in Myanmar was 19.3343-years in 2010. AidData estimates the maturity of the China Eximbank loan that supported the Caustic Soda Plant and Industrial Zone Project by using this figure. See https://www.dropbox.com/s/949n5rctiue6d7c/IDS_Average_grace_period_and_maturity_on_new_external_debt_commitments.xlsx?dl=0 6. According to the World Bank's Debtor Reporting System (DRS), the weighted average grace period of all official sector lending from Chinese creditors to government and government-guaranteed borrowing institutions in Myanmar was 5.0126-years in 2010. AidData estimates the grace period of the China Eximbank loan that supported the Caustic Soda Plant and Industrial Zone Project by using this figure. See https://www.dropbox.com/s/949n5rctiue6d7c/IDS_Average_grace_period_and_maturity_on_new_external_debt_commitments.xlsx?dl=0 7. According to the World Bank's Debtor Reporting System (DRS), the weighted average interest rate of all official sector lending from Chinese creditors to government and government-guaranteed borrowing institutions in Myanmar was 3.7267% in 2010. AidData estimates the interest rate of the China Eximbank loan that supported the Caustic Soda Plant and Industrial Zone Project by using this figure. See https://www.dropbox.com/s/ab8qt4n6jijcbhd/IDS_Average%20interest%20on%20new%20external%20debt%20commitments.xlsx?dl=0

📚 Sources & References

Myanmar foreign loans rise to US$10.2B in last fiscal yearhttps://www.mmtimes.com/news/myanmar-foreign-loans-rise-us102b-last-fiscal-year.html
Chinese Caustic Soda Plant Pact
CHINESE COMPANY TO RENOVATE PAPER MILL
Over $ 3 billion and nearly 2 billion yuan in loans from China in four years
Between 2006 and 2011
Myanmar received more than US $ 3 billion in loans from China and nearly two billion Chinese yuan in loans, the largest amount in the power and energy sectors., 6 Months Audit Report Update
Not implemented; Report highlights financial losses caused by loss-making businesses
Not implemented; Report highlights financial losses caused by loss-making businesses
The New Light of Myanmar
China Overseas Development Finance Loan applications and disbursements are still being received and processed as the projects continue to evolve. Ongoing monitoring and evaluation are in place to ensure project continuity.