Completed Mixed AidData Chinese Aid

China Eximbank provides preferential buyer's credit for New Tyre Factory Project (Linked to Record ID#98029, 96221)

$28.05M USD

Funder	Export-Import Bank of China (China Eximbank)
Recipient Organization	Myanmar Foreign Trade Bank (MFTB)
Country	Myanmar
Start Date	May 29, 2011
End Date	Jan 31, 2029
Duration	6,457 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`64522`

Grant Description

China Eximbank provides preferential buyer's credit for New Tyre Factory Project On May 29, 2011, China Eximbank and Myanmar Foreign Trade Bank (MFTB) signed a preferential buyer’s credit (PBC) agreement for the New Tyre Factory Project. The borrowing terms of the PBC are unknown.

The proceeds of the PBC were to be used by the borrower to partially finance a $33 million commercial contract between China National Construction & Agricultural Machinery Import & Export Corporation (CAMC) and Tyre Rubber Industry Corporation of the Second Ministry of Industry of Myanmar, which was signed on September 25, 2007.

The purpose of the project was to construct a tire factory in the town of Bilin within Mon State with an annual capacity of 300,000 radial tires.

The scope of the project included factory design, equipment supply, installation and commissioning, and personnel training. CAMC was the EPC contractor responsible for project implementation. On November 21, 2008, the commercial (EPC) contract went into effect. A final acceptance certificate (FAC) for the project was issued on December 2, 2010.

However, as of 2019, the factory was not running at full capacity due to lack of raw materials and up-to-date machinery.

There are some indications that the China Eximbank loan for the New Tyre Factory Project may have financially underperformed vis-a-vis the original expectations of the lender.

In 2020, China Eximbank and the Government of Myanmar signed a debt suspension agreement as part of the G-20 Debt Service Suspension Initiative (DSSI).

Under the terms of the agreement, the lender agreed to suspend principal and interest payments due between May 1, 2020 and December 31, 2020 under 3 buyer’s credit loan (BCL) agreements, 6 government concessional loan (GCL) agreements, and 27 preferential buyer’s credit (PBC) agreements (as captured via Record ID#98029).

Debt service payments under many of these loan agreements were again deferred in 2021 (as captured via Record ID#96221).

📋 Staff Comments

This project is also known as the No (2) Tire and Rubber Factory and the Bilin Tyre Factory. The Burmese project title is ဘီးလင်းတာယာစက်ရုံ. The Chinese project title is 孟邦轮胎厂改造项目 or 缅甸轮胎厂项目 or 缅甸子午线轮胎厂项目.
Per China Eximbank’s policy that a PBC can be used to finance up to 85% of the cost of a commercial contract, AidData has recorded the face value of the PBC (i.e. the transaction amount) as 85% of $33 million ($28,050,000).
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.
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 15.0477-years in 2011. AidData estimates the maturity of the China Eximbank loan that supported the New Tyre Factory 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 5. 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 5.7977-years in 2011. AidData estimates the grace period of the China Eximbank loan that supported the New Tyre Factory 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 interest rate of all official sector lending from Chinese creditors to government and government-guaranteed borrowing institutions in Myanmar was 4.6293% in 2011. AidData estimates the interest rate of the China Eximbank loan that supported the New Tyre Factory 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

Sinomach Today
The New Light of Myanmar
Volume XIX
Number 39
中工国际：签下缅甸轮胎厂项目
缅甸总理出席中国承建轮胎厂竣工典礼
China's Overseas Development Finance
TYRE PLANT IN MYANMAR
Industrial Projects
Tyre Plant in Myanmar
Successful acceptance of the Myanmar radial tire plant project
Commercial Contract Signed for Myanmar Tyre Factory Project
Tire Industry in Burma
Haohua Engineering Company undertakes Myanmar radial tire project 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.