China Eximbank provides $35 million government concessional loan for Phase 2 of Distant Education Network of Community Colleges Project (Linked to Project ID#61232)

In May 2010, the Government of Papua New Guinea began negotiations with China Eximbank about a possible loan for Phase 2 of Distant Education Network of Community Colleges Project. On March 17, 2011, China Eximbank and the Government of Papua New Guinea signed a $35 million government concessional loan (GCL) agreement for Phase 2 of the Distant Education Network of Community Colleges Project. The GCL, which is captured in this project, ID#61231, carried the following borrowing terms: 15 year maturity, 5 year grace period, 2% interest rate, and 1% management fee. The proceeds of the GCL were to be used by the borrower to finance a commercial contract with ZTE Corporation, which was signed in 2010. The Chinese Government also agreed at least in principle to provide a grant for this project (see Staff Note 4 and Project ID#61232). The original purpose of this project was to convert vocational training centers in rural areas into community colleges. It was expected that 15 vocational centers would be converted to community colleges by the end of 2013. The project originally had three (3) main components: 1. Establishment of Community Colleges in the selected vocational centers in the country; 2. Training of various trade and life skills courses; and 3. Program Coordination and Management. It was going to establish pilot project sites in East Sepik, Milne Bay, East New Britain, Enga and Western Highlands Provinces. However, the project ultimately focused on the development of an online distance education network to deliver training materials and services to people in remote and mountainous areas. ZTE Corporation was the general contractor responsible for implementation. In June 2010, it hired U-Konekt Technologies Ltd (“U-Konekt”) as a subcontractor. U-Konekt was responsible for installing containers and establishing parts of Wimax, a wireless network. The project commenced on May 25, 2012 and it was completed in 2016. However, the project was plagued by a corruption scandal. According to court filings in Singapore, the Government of Papua New Guinea established the Inclusive Education for National Development for Community Education Trust (“ITE Trust”) in 2008 to set up Community Colleges in Papua New Guinea (“PNG”) for, among other things, the improvement of the quality of of education and the provision of education skills. The board of the ITE Trust had three trustees — of whom two were co-chairmen of the board. One of the co-chairmen was Michael Maiwa Somare (“Moox”) who is the son of Sir Michael Thomas Somare, the Prime Minister of Papua New Guinea at the time. The other co-chairman was Father Xavier Alphonse, who was based in India. The remaining trustee was an American named Thomas Philip Doehrman, Lim Ai Wah is Doehrman’s wife. The ITE Trust had the aim of providing accessible technical or vocation education to underprivileged children (“CC Project”). As Papua New Guinea is a vast and mountainous island country, the cost effective solution was to conduct lessons from a central location and to broadcast them wirelessly in real time to the Community Colleges. The CC Project was split into two phases. Lim Ai Wah ("Lim”) established the first four Community Colleges in phase 1 of the project through her companies, Quest Petroleum (Singapore) Pte Ltd (“Quest Petroleum”) and Quest Investments (PNG) Limited (“Quest Investments”). They were incorporated in Singapore and Papua New Guinea respectively. It was not feasible to construct conventional brick and mortar buildings due to Papua New Guinea’s geological and infrastructural constraints. Therefore, Lim imported easily assembled containers from a Chinese company, Renhe Movable Travelling Lodge Manufacture Co. Ltd. (“Renhe”), and used them as classrooms, dormitories, clinics and police posts. Phase 2 of the project envisaged the founding of 13 more Community Colleges. As the ITE Trust was short on funds, the Government of Papua New Guinea obtained a $35 million loan from China Eximbank and the terms of the loan stipulated that a Chinese company was to be appointed as the main contractor of the project. ZTE Corporation (“ZTE”) became the main contractor for the second phase of the project. Stephen Li Weiming (“Li”) was an employee of ZTE and he was responsible for liaising with the ITE Trust. The arrangement between ZTE and the ITE Trust was reflected in a number of written contracts. On June 8, 2010, ZTE Corporation entered into an agreement with Questzone Offshore Limited (“Questzone”), a shell company that was incorporated in the British Virgin Islands (“BVI”) on February 26, 2010 (“Questzone ZTE Contract”). On May 4, 2010, Lim Ai Wah and her sister, Lim Swee Kheng, became the only directors of Questzone. Lim was its only shareholder. Clause 4.1 of the Questzone-ZTE Contract stipulated that ZTE was to pay full contract sum of US$3,600,000 to Questzone’s Singapore Standard Chartered Bank account after ZTE received at least $3,600,000 from the ITE Trust. On July 15, 2010, Lim Swee Kheng issued a Questzone invoice to ZTE for the sum of US$3,600,000 (“Questzone Invoice”). This invoice later formed a basis for criminal charges under Singapore’s Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act. On July 30, 2010, ZTE duly transferred a sum of $3,599,972.85 (after service charges) to Questzone’s Singapore bank account. Between August and November 2010, Questzone transferred a total of five sums of monies to J&M International Ltd, a BVI company incorporated by Li’s wife, Catherine Li (Catherine Chen) (“J&M International”), and the personal Standard Chartered bank account of one Sir Michael Somare, the former Prime Minister of Papua New Guinea (“Somare”) and who is also the father of Moox. These payments also formed a basis for criminal charges under Singapore’s Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act. The Prosecution alleged that Lim, Doehrman, and Li had engaged in a conspiracy to create a fictitious contract and a false invoice, namely the Questzone-ZTE Contract and the Questzone Invoice. It was further alleged that no services were ever intended to be provided under the Questzone-ZTE Contract as its purpose was to disguise the illicit nature of the $3,600,000 payment. The Prosecution postulated that these arrangements were necessary because the intended recipients of the $3,600,000 were in positions of conflict of interest as they were involved in either ZTE or the ITE Trust. Moreover, Lim was the wife of Doehrman who was at the material time a trustee of the ITE Trust. The then Prime Minister of Papua New Guinea, Somare is Moox’s father. Moox was the cochair of the ITE Trust. Doehrman and his wife, Lim Ai Wah, were ultimately convicted on July 22, 2016 of various money laundering and related offenses. Doehrman was sentenced to 70 months’ jail and Wah was sentenced to 60 months’ jail. Similar charges were pressed against Stephen Li Weiming (“Li”) but he has since absconded from bail. Li is a Chinese national.

Additional details

A media source (https://www.thenational.com.pg/png-and-china-sign-multi-million-kina-agreements/) suggests that the government concessional loan (GCL) agreement was signed on December 23, 2010. However, Singaporean court records (see https://d6mljhs7208w9.cloudfront.net/uploads/2017/11/Public-Prosecutor-v-Lim-Ai-Wah-and-Thomas-Philip-Doehrman-PNGi.pdf and https://pngiportal.org/directory/public-prosecutor-v-lim-ai-wah-and-thomas-philip-doehrman) indicate that the GCL agreement was signed on March 17, 2011. AidData has coded the official commitment date based on the court records. The GCL was almost certainly denominated in RMB. However, AidData has only managed to identify the USD value of the loan. This issue requires further investigation. 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 2013 and 2014 budget reports published by the Government of Papua New Guinea, the Chinese Government agreed (at least in principle) in 2012 to provide a grant of 4 million PNK for the Community Colleges Project. The actual figures for 2012 drawn from the Government of Papua New Guinea’s 2016 Budget Book differ from the Appropriation figures in its 2013 Budget Book. The 2013 Budget Book lists a Chinese Government grant of 4 million PNK. However, in the Government of Papua New Guinea’s 2016 Budget Report, there was is grant recorded from China. The status of the grant is coded as a pledge

Number of official sources

15

Number of total sources

19