China Eximbank extends $2 billion master buyer’s credit loan facility agreement in March 2004 (Linked to Record ID#34030 and #85457)

China Eximbank extends $2 billion master buyer’s credit loan facility agreement in March 2004 On November 28, 2003, the Chinese Government and the Angolan Government signed a framework agreement pertaining to a special economic cooperation arrangement (Agreement name in Chinese: 中华人民共和国商务部与安哥拉共和国财政部关于两国经贸合作特殊安排的框架协议).

Following the signing of the framework agreement, on March 2, 2004, China Eximbank entered into a $2 billion Master Loan Facility Agreement (MLFA) with the Government of Angola.

The facility was split between a $1.0 billion Phase I facility and a $1.0 billion Phase II facility.

Availability of the Phase II facility was subject to confirmation by the lender on or prior to the date falling five years after satisfaction of the conditions precedent to the MLFA and was made available by China Eximbank during that period.

The MLFA is a framework agreement under which the Government of Angola and China Eximbank may conclude individual buyer’s credit loan agreements (ILAs or subsidiary loan agreements) for the purpose of financing up to 90% of the contract price owing to certain contractors in respect of certain contracts.

The first tranche of the facility was released in December 2004. The facility was fully drawn down as of December 31, 2017.

Sonangol provided a source of collateral under the MLFA, and repayments were made with the proceeds of oil sales from Sonangol to UNIPEC (China international United Petroleum & Chemicals Co. Ltd, Sinopec group), which were deposited in an Angolan Ministry of Finance (MINFIN) account at China Eximbank.

The volume of oil to be sold to UNIPEC each month for repayment of the loan varied according to market oil prices.

Under the agreement, 70% of works have to be contracted with Chinese companies and the same proportion of construction material, equipment and labour has to be contracted in China. Loan disbursements were made on a project-by-project basis.

Tendering, management and payments were jointly managed by the Chinese Ministry of Commerce and the Angolan Ministry of Finance (which coordinated the various Angolan line ministries responsible for supervising the projects).

The Angolan Ministry of Finance submitted the projects for tendering; China Eximbank selected Chinese candidate firms for the projects; and a joint commission made the final firm selections.

The process was managed by an office in the Angolan Ministry of Finance -- known as Gabinete de Apoio Técnico (GAT) -- that was specifically created to manage the MLFA with China Eximbank.

On June 9, 2015, Angola and China Eximbank entered into amendments of this MLFA and others in order to realign payments of drawn amounts under certain ILAs with the revised schedules of progress and/or completion of certain specified public investment projects, the timing and/or scale of which was altered when the revised 2015 national budget was adopted in March 2015.

However, it is unclear whether the borrowing terms of the MLFA were amended. The following is a list of projects financed through Phase I of the facility (as of December 31, 2007).

A portion of the following projects were signed as part of a commercial contract between Sinomach and Angola's Ministry of Education to construct 28 schools (captured via Record ID#85457): Record ID#34772, a $12.5 million loan to Angola for the Bus Transport Project, which involved the acquisition of 250 buses Record ID#34773, a $41 million loan to Angola for construction of two agriculture schools in Huambo and Bié Record ID#34774, a $15.2 million loan to Angola for rehabilitation of Malange Agricultural School Record ID#34775, a $16.1 million loan to Angola for construction and equipping of three secondary schools in Luanda, one in Benguela Record ID#34776, a $53,044,838 loan for four technical schools in Luanda and two technical schools in Benguela Record ID#34777, a $7.18 million loan for construction of 2 secondary schools in Malange Record ID#34778, a $12.88 million loan for construction of technical institute and secondary school in Huila Record ID#34779, a $41.2 million loan for construction and equipping of two agricultural schools in Kwanza-Sul and Kwanza Norte Record ID#34794, a $8.66 million loan for the construction of Instituto Médio Politécnico no Sumbe Record ID#34796, a $26.26 million loan for the rehabilitation and equipping of Malange Hospital Record ID#34798, a $36.47 million loan for rehabilitation and equipping of Benguela Regional Hospital Record ID#34841, a $10.81 million for the construction and equipping of health centers in Malange Record ID#73809, a $8.33 million loan for the rehabilitation and equipping of Namibe Municipal Hospital Record ID#34843, a $43.254 million loan for the construction and equipping of regional hospital in Lubango Record ID#34844, a $32.134 million for the rehabilitation and equipping of Huambo Central Hospital as well as for the provision of 86 ambulances Record ID#34845, a $3.6 million for the construction and equipping of Huambo Health Center Record ID#34846, a $16.67 million loan for the construction and equipping of 2 municipal hospitals in Kwanza-Norte and Kwanza-Sul Record ID#34783, a $7.2 million loan for the construction and equipping of 2 Kwanza-Norte Health Centers Record ID#34784, a $95.3 million loan to Angola for Phase I of irrigation construction in Caxito, Gandjelas, Luena, and Wako-Kungo Record ID#34785, a $28.871 million loan for the purchase of agriculture equipment for MECANAGRO Record ID#34786, a $20.131 million loan for purchase of agricultural equipment, machines and tools for MECANAGRO and Instiuto de Desenvolvimiento Agrário Record ID#34787, a $40 million loan for the rehabilitation and expansion of Luanda Electric Grid Phase II Record ID#34788, a $13.13 million loan for the reconstruction of Quifangondo LT 60 kv and substation Record ID#34789, a $34.53 million loan for the construction of third 220 kv transmission line in Cambambe Record ID#34847, a $26.564 million loan for the construction of the Luanda Sul substation and 220 kv transmission line Record ID#34848, a $25.423 million loan for the construction of the Capanda, Lucala and Ndalatando LT 220 Kv transmission line Record ID#34849, a $40.225 million loan for the partial rehabilitation of the Luanda water supply system Record ID#34850, a $20.136 million loan for the rehabilitation of the water supply system in Huambo Record ID#34851, a $19.385 million loan for rehabilitation of water supply system in Caxito, Catete, and Uige Record ID#34852, a $60 million loan for the construction and equipping of TPA center in Camama Record ID#34853, a $190.515 million loan for the rehabilitation of the highway in Quifangondo, Caxito, Uige, and Negage The following is a list of projects financed through Phase II of the facility (as of June 30, 2008): Record ID#34836, a $39.424 million loan for the construction and equipping of hospitals and health centers in Huambo, Huila, and Benguela Record ID#34840, a $62.187 million loan for the construction and equipping of secondary schools, technical institutes, and administrative centers in Huambo, Juila, Bie, Cunene, Cuando, and Cubango Record ID#34881, a $83.909 million loan for the construction and equipping of technical institutes, administrative institutes, and secondary schools in Luanda, Bengo, Cabinda, Namibe, and Zaire Record ID#34883, a $60.581 million loan for the construction and equipping of technical institutes, agricultural institutes, administration institutes, and a secondary school in Luanda-Sul, Luanda-Norte, Uige, and Moxico Record ID#34884, a $43.578 million loan for the completion of university campus facilities Record ID#34885, a $36.963 million loan for the construction of the Palácio da Justiça in Luanda Record ID#34887, a $88.307 million loan for provision of 25 fishing boats and 1000 canoes Record ID#34889, a $88.062 million loan for the provision of 5 patrol boats, 10 shrimping boats, and 2000 canoes Record ID#34890, a $63.792 million for the provision of 10 fishing boats, 1 speedboat, 1 naval launch base, 5 patrol vessels, and 1 tugboat Record ID#34898, a $48.606 million loan to Angola for Phase II of irrigation construction in Caxito, Gandjelas, Luena, and Wako-Kungo Record ID#34917, a $66.898 million loan for construction of New Generation Network in Bengo, Bie, Kwanza-Norte, Kwanza-Sul, Luanda, Malange, and Moxico Record ID#34918, a $61.195 million loan for construction of New Generation Network in Benguela, Kwanza Norte, Cunene, Huambo, Uige, and Zaire Record ID#34919, a $67.747 million loan for construction of New Generation Network in Huambo, Bie, Huila, and Luanda; including optic fibre cabling, IP, VSAT, and intelligence network Record ID#34920, a $52.871 million loan for construction of New Generation Network in Bie, Huambo, Huila, and Luanda Record ID#34921, a $25.637 million loan for rehabilitation and expansion of MT/BT networks in Luanda Record ID#34923, a $26.866 million loan for rehabilitation and expansion of MT/BT networks in Malange Record ID#34924, a $45.627 million loan for rehabilitation and expansion of MT/BT networks in Luanda-Sul, Luanda-Norte, Dundo, and Saurimo Record ID#34925, a $32.317 million loan for the rehabilitation and reinforcement of water systems in Luanda-Sul, Luanda-Norte, Dundo, and Saurimo There is evidence that some of the borrowings approved through MLFA and projects financed through the MLFA were plagued by corruption.

Dai Chunning, a China Eximbank official, was convicted in 2017, more than a year and a half after he first stood trial behind closed doors, on corruption charges including taking bribes. He denied some of the allegations against him and later lost an appeal against his conviction.

He received a suspended death sentence, which—in line with usual practice in China for such a penalty—was commuted to life imprisonment in 2020.

Prosecutors said that Dai Chunning, acting by himself or with associates, solicited or took bribes worth more than RMB 200 million, and attempted to defraud the state of some $19 million in assets, according to court documents.

Leung Ping, a well-connected businessman, told Chinese investigators that he, at Dai Chunning’s behest, teamed up with a Hong Kong businessman named Yu Tai Wai (who at the time represented the Angolan Government in talks to secure infrastructure loans from China) to broker Chinese infrastructure projects in Angola and help everyone involved 'make money together.' Leung Ping said Yu Tai Wai represented Angolan parties in talks to negotiate Chinese loans (through the MLFA) and consulting fees for the projects.

Dai Chunning and his associates would take these fees as kickbacks for themselves and use a portion of them to pay bribes to Angolan officials, according to Leung Ping's our testimony.

There are also some indications that the Government of Angola's borrowings under the March 2004 MLFA have financially underperformed vis-a-vis the original expectations of the lender.

As a result of the Government of Angola’s decision to avail itself of the G20's Debt Service Sustainability Initiative (DSSI), the MLFA and ILAs entered into by China Eximbank and the Government of Angola (described above) were under DSSI treatment and payments due by the Government of Angola under these finance agreements were suspended from May 1, 2020 until December 31, 2021.