China Eximbank provides $45.7 million preferential buyer’s credit for New Century Education Project (Linked to Record ID#40435)

Project narrative

On August 21, 2014, China Eximbank and the Government of Mongolia’s Ministry of Finance signed a $45.7 million preferential buyer’s credit (PBC) agreement [CHINA EXIMBANK PBC NO. (2014) 21 TOTAL NO. (315)] for the New Century Education Project. The PBC was approved under a $500 million line of credit (captured in Record ID#40435) for various projects that was signed by the two governments on June 16, 2011. The borrowing terms of the PBC were as follows: 20 year maturity, 7 year grace period, and 2% interest rate. The proceeds of the PBC were to be used by the borrower to partially finance an EPC contract [ZTE Contract ID# S1MN2015032001A10 and Project Reference ID# NC-01/2012] between ZTE Corporation and Mongolia’s Ministry of Education and Science, which was signed on March 26, 2012. The project involved the acquisition and installation of a modern broadband teaching network covering the entire country, including the provision of smart classroom facilities, more than 30,000 laptop computers, and teaching equipment. The ultimate purpose of the project was to provide fiber-optic internet services to 625 schools. The project officially commenced on November 9, 2015. However, ZTE Corporation had already delivered two batches of equipment on September 16, 2015 and September 26, 2015. It delivered a third batch on November 20, 2015. Then, in February 2016, 1,196 laptops were delivered to secondary school teachers in Bayankhongor aimag. This project, which was originally expected to take two years to complete, was plagued by controversy. In 2013, Mongolia's Anti-Corruption Agency detained ZTE managers for alleged bribery involving the New Century Education Project and tenders and purchases made by the Mongolia’s Ministry of Education, Science and Culture. Mongolian anti-corruption officers also raided ZTE’s offices and its managers' homes. ZTE responded by denying any wrongdoing. It issued the following statement: ‘ZTE notes recent media reports about alleged investigation of the company’s operations in Mongolia. ZTE wishes to clarify that its representative office in Mongolia is operating as normal and the company’s operations in Mongolia comply with all relevant local and international rules and regulations. As a public company listed on the stock exchanges of Shenzhen and Hong Kong, ZTE is committed to the strictest standards of legal compliance in the conduct of its business and is bound by the company’s mission to fulfill its corporate social responsibility. ZTE takes any allegation of business misconduct quite seriously