Narrative
Full Description
Project narrative
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. All borrowings under the MLFA, which is an oil prepayment facility, carried the following estimated borrowing terms: a 21.5 maturity, a 1.5 year grace period, an interest rate of 3-month LIBOR plus a 1.5% margin, a 0.3% management fee, and a 0.3% commitment fee. 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. In July 2006, China Eximbank and the Government of Angola signed a $60,581,824.02 subsidiary buyer’s credit loan agreement under the MLFA for the construction and equipping of technical institutes, agricultural institutes, administrative institutes, and a secondary school in Luanda-Sul, Luanda-Norte, Uige, and Moxico Provinces. The proceeds of this loan were used to partially finance a $67,313,137.80 commercial (EPC) contract with Sinohydro, which was signed on July 27, 2006. The project, which employed 453 Angolan workers and 205 Chinese workers, involved the construction and equipping of 3 polytechnic (technical) institutes in Luanda-Sul Province, Luanda-Norte Province and the town of Bairro Kandande (within Uige Province); one agricultural institute in Uige Province; two administrative and management institutes in the city of Uige within Uige Province and the town of Bairro Quituma within Moxico Province; and one secondary school in the town of Bairro Benvindo within Uige Province. Sinohydro was the EPC contractor responsible for project implementation. The EPC contract supporting the project was originally scheduled to begin on August 15, 2007. According to Sinohydro, construction began in August 2007. However, construction of the Angola Lunda Norte Province Secondary School reportedly did not commence until August 15, 2012.
Staff comments
1. The Portuguese project title is Construção e Apetrechamento de 3 Institutos Politécnicos na Lunda Sul, Lunda Norte e Uíge, de 1 Instituto Médio Agrário no Uíge, de 2 Institutos de Administração e Gestão no Uíge e no Moxico e de 1 Escola Secundária no Uíge. The Chinese project title is 安哥拉七所学校建设项目. 2. Additional information about the implementation status of each technical institute, administrative and management institute, and school as of June 2008 can be found on pages 14-16 of "LINHA DE CRÉDITO COM O EXIMBANK DA CHINA RELATÓRIO DAS ACTIVIDADES DESENVOLVIDAS II TRIMESTRE DE 2008". 3. The 2003 framework agreement (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) specified that Sinosure would be signing relevant agreements with the Government of Angola. Therefore, AidData has coded Sinosure as an accountable agency and as providing insurance for the loan. 4. AidData considers this loan to be collateralized in a de facto sense. The cash deposited by the Angolan Ministry of Finance into a bank account controlled by China Eximbank is, for all intents and purposes, a source of collateral. This is true even if the lender does not have a formal security interest in the account. 5. AidData relies on the maturity, grace period, and interest rate that are recorded in the World Bank's Debt Reporting System (a 3.0899% interest rate, a 21.5 year maturity, and a 1.5 year grace period). See https://www.dropbox.com/s/ab8qt4n6jijcbhd/IDS_Average%20interest%20on%20new%20external%20debt%20commitments.xlsx?dl=0 and https://www.dropbox.com/s/949n5rctiue6d7c/IDS_Average_grace_period_and_maturity_on_new_external_debt_commitments.xlsx?dl=0 and https://www.dropbox.com/s/2sw4f7gluxa52fk/DRS%20Official%20Commitments%20from%20China%20Through%202021.xlsx?dl=0 and https://www.dropbox.com/s/0vpohwt96l40o19/World%20Bank%20DRS%20Extract%20Sep%202021%20--%20Chinese%20Loan%20Commitments%20from%202013%20to%202019.xlsx?dl=0 6. According to another World Bank source (https://documents1.worldbank.org/curated/pt/122781468002433388/pdf/397100v20ER0P01disclosed0Feb0602008.pdf), all borrowings under the MLFA carried a management fee (comissão de gestão) of 0.3%; a commitment fee (comissão de imobilização) of 0.3%, and an installation fee (comissão de instalação) of 1%.