Project ID: 61213

China Eximbank provides $229.1 million preferential buyer’s credit for Kumul Submarine Cable Project

Commitment amount

$ 234926428.6

Constant 2017 USD

Summary

Funding agency [Type]

Export-Import Bank of China [State-owned Policy Bank]

Recipient

Papua New Guinea

Sector

Communications (Code: 220)

Flow type

Export Buyer's Credit

Concessional

Yes

Category

Intent

Mixed (The next section lists the possible statuses.)

Commercial

Development

Representational

Mixed

Financial Flow Classification

OOF-like (The next section lists the possible statuses.)

Official Development Assistance

Other Official Flows

Vague (Official Finance)

Flows categorized based on OECD-DAC guidelines

Project lifecycle

Status

Completion (The next section lists the possible statuses.)

Pledge

Commitment

Implementation

Completion

Suspended

Cancelled

Milestones

Commitment year

2016

Completion

2020

2020-06-01

Planned

2020-08-21

Actual

Description

From July 5-10, 2016, during PNG Prime Minister Peter O'Neill's state visit to China, China Eximbank and the Ministry of Treasury of the Government of Papua New Guinea signed a $229,198,215.15 preferential buyer’s credit (PBC) agreement for the Kumul Submarine Cable Project. The borrowing terms of the PBC are unknown. However, it is known that the Ministry of Treasury of the Government of Papua New Guinea on-lent the proceeds of the PBC to Kumul Consolidated Holdings (a PNG state-owned enterprise), which in turn use the proceeds of the PBC to finance approximately 85% of the cost of a $270 million (K879 million) commercial contract with PNG DataCo Ltd. and Huawei Technologies Co Ltd. The Kumul Submarine Domestic Fiber Cable Network is a national backbone transmission network that involved the laying of 5,600 kilometers of submarine fiber optic cable to connect at least 15 coastal and maritime provincial centers across Papua New Guinea. It consists of three systems. System 1 (blue line) connects Jayapura to Arawa with 7 branching units connecting to Vanimo, Wewak, Lorengau, Madang, Kimbe, Kavieng and Kokopo. System 2 (green line) connects Madang to Pom with 3 branching units connecting to Lae, Popondetta and Alotau. System 3 (black line) connects Daru and Kerema to the existing branching units in LNG system. The submarine cable network was constructed in two phases: Phase I of the project involved connecting Port Moresby to Madang, with landing stations in the Port Moresby, Alotau, Popondetta, Lae and Madang. Phase II involved connecting Madang to Wewak, Vanimo and New Guinea Islands. The ultimate goal of the project is to improve access to broadband and internet services to all users throughout the coastal centers of the country. This network also sought to provide additional interconnection points to international submarine cables in Madang, Vanimo and Jayapura (Indonesia) resulting in more reliable international telecommunication services for PNG. Huawei Technologies Co Ltd. was the contractor responsible for implementation. PNG DataCo Ltd., the wholesale arm of Kumul Telikom Holdings (a state-owned company in PNG), was also involved in implementation. China National Machinery Import and Export Corporation was a subcontractor and the designated provider of cable equipment. The precise project implementation start date of the project is unknown. However, as of November 2018, the project had already achieved a 60% completion rate. System 2 was completed on February 19, 2019. Then, in March 2020, the Kumul submarine cable network (KSCN) landed in West Sepik’s Vanimo. Phase 1 was completed in May 2020. The project was ultimately completed ahead of schedule on or around August 21, 2020. It has generated controversy because the underlying commercial contract with PNG DataCo Ltd. and Huawei Technologies Co Ltd. was reportedly overpriced by 30-50%, creating a heavy debt load for Kumul Consolidated Holdings. According to a report published in The Australian, there are also concerns that revenue generated by the the Australian Government-financed Coral Sea Cable System (CSCS) is being used to ‘cross-subsidize’ the Kumul Submarine Cable Project (i.e. facilitate loan repayment to China Eximbank).

Additional details

This project is also known as the PNG National Submarine Fibre Cable Network Project, the PNG National Submarine Fiber Cable Network Project, the Domestic Submarine Cable Network Project, or the PNG National Submarine Fiber Cable Network Project. The Chinese project title is Kumul国内海底光缆项目 or 持的巴新国家海底光缆项目.Kumul Submarine Cable Project was implemented in anticipation of the Coral Sea Cable System (CSCS) — an undersea fiber-optic cable connecting Sydney, Honiara and Port Moresby — being established. The CSCS was financed with a grant from the Australian Government and it was completed in December 2019, a month ahead of schedule. The Coral Sea Cable Company will be in charge of maintaining and operating the international cable, which is expected to increase digital capacity by a thousand times to 20 terabytes. Meanwhile, the state-owned PNG DataCo will be responsible for the connection domestically and for wholesaling the service to local retailers such as Telikom PNG and Digicel. PNG’s capital city will benefit from the improved bandwidth almost immediately. Already, data costs have fallen sharply and will do so further. According to PNG DataCo, the cost of internet use has fallen from $1,300 per Mbps per month in 2014 to $54 (K185)per Mbps per month at the start of 2020.

Number of official sources

14

Number of unofficial sources

15

Download the dataset

Details

Cofinanced

No

Receiving agencies [Type]

Kumul Consolidated Holdings (KHC) [State-owned Company]; Papua New Guinea State Treasury [Government Agency]

Implementing agencies [Type]

China National Machinery Import & Export Corporation (CMC) [State-owned Company]; Huawei Technologies Co., Ltd. [Other]; PNG DataCo Ltd. [State-owned Company]

Loan type

Concessional

Gurarantee provided

No

Insurance provided

No