CDB provides EUR-denominated loan for Phase 2 of the Myingyan No. 1 Steel Mill Construction Project (Linked to Record ID#98030, 98031)

CDB provides EUR-denominated loan for Phase 2 of the Myingyan No. 1 Steel Mill Construction Project On July 14, 2010, China Development Bank (CDB), Myanmar Economic Corporation (MEC), and Myanmar Foreign Trade Bank (MFTB) signed an EUR-denominated loan agreement worth $709,661,382.10 for Phase 2 of the Myingyan No. 1 Steel Mill Construction Project.

Then, on June 14, 2011, China Development Bank, Myanmar Economic Corporation (MEC), and Myanmar Foreign Trade Bank (MFTB) signed an EUR-denominated loan agreement worth $855,000,505.70 for Phase 2A and 3 of the Myingyan No. 1 Steel Mill Construction Project.

According to a Government of Myanmar General Statistical Report and a Mandalay Regional Auditor General's Report (covering the period April 2018 to September 2018), total CDB disbursements for the project amounted to EUR 1,042,340,000 (EUR 566.97 million euros when the steel mill was under MEC ownership and EUR 475.37 million during the period when Myanmar’s Ministry of Industry was responsible for the steel mill).

The CDB loan repayment period for Phase 2 of the project runs from FY2015-16 to 2030-31. The CDB loan repayment period for Phase 2A and Phase 3 of the project is FY2017-18 to 2032-33. The total principal and interest outstanding under the two CDB loans was EUR 1.615 billion as of 2020.

The purpose of the project was to construct a steel mill — with the capacity to produce 400,000 tons per year of steel, steel products, construction materials, and machinery materials — near Sar Khar Village within Myingyan Township and the Mandalay Region (approximately 3.3 miles west of milepost 450/0 on the Yangon Myingyan Highway).

The project was implemented in three phases. Phase 1 commenced operations in March 2010 and it reportedly reached completion.

However, it does not appear that Phase 2 or 3 (which were designed to produce value added products) ever reached completion. Responsibility for the steel mill was transferred from MEC to Myanmar’s Minstry of Industry on October 1, 2012.

There are some indications that the CDB loans for Myingyan No. 1 Steel Mill Construction Project financially underperformed vis-a-vis the original expectations of the lender. The mill was shuttered on February 17, 2017 because it was consistently losing money.

Then, in 2020, the Acting Mandalay Chief Minister stated that the total project debt including interest exceeded EUR 1.615 billion.

Consequently, the Government of Myanmar found itself in the position of having to pay 500 million kyats ($345,000) a day to CDB to service a loan contracted by a military-backed conglomerate (MEC) for a steel mill that was no longer operational.

In 2020, CDB 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 5 loan agreements (as captured via Record ID#98030). Debt service payments under these loan agreements were again deferred in 2021 (as captured via Record ID#98031).

On August 16, 2021, the military junta-appointed Minister of Industry, Dr.

Charlie Than, visited the project site and announced that work at the steel mill would commence 'as soon as possible' (at the instruction of coup leader Min Aung Hlaing).

A Yangon-based observer monitoring investment projects in the country noted at the time that the military regime was rapidly resuming Chinese-financed projects -- paused by the [National League for Democracy (NLD) government] -- to prove that it could make the initiatives profitable: 'They are doing that intentionally and for political purposes.

They want to say that they are able to do it even though the previous civilian government suspended it,' the observer said.