China Eximbank provides $10.75 million loan for Refined Salt Factory Construction Project

In 1996, China Eximbank and the Government of Papua New Guinea (PNG) signed a preferential loan framework agreement to support various industrial development projects in PNG. On March 29, 1999, the Government of Papua New Guinea and Liaoning International Trade Corporation (LITC) of the People's Republic of China signed an agreement regarding the Refined Salt Factory Construction Project. The agreement established a project company called PNG Salt Industries Limited (PNGSI or PNG Salt Industry or 巴新盐业公司) as a wholly-owned subsidiary of LITC. Then, under the terms of the 1996 framework agreement, China Eximbank provided a $10.75 million preferential loan to the Government of Papua New Guinea for the Refined Salt Factory Construction Project in 2000. It appears that the Government of Papua New Guinea on-lent proceeds of the loan to PNGSI. The purpose of the project was to construct a factory — with the capacity to produce 10,000 tons of refined iodized salt each year — in the villages of Lealea and Papa within Central Province. Upon completion, the factory was also expected to provide employment for about 300 people. LITC was the contractor responsible for implementation. A formal groundbreaking ceremony took place on March 31, 1999. However, construction did not begin until a Memorandum of Understanding (MOU) was signed by two local groups of landowners near the project site on or around August 22, 2000. The signing of the MOU came after a long delay because of differences between the two landowner groups. Trial production began on February 18, 2002 with raw salt imported from Australia while negotiations continued on the construction of a salt pond near the Papa and Lealea villages. The factory ultimately went into operation on May 16, 2002. PNGSI planned to market the salt under the brand name of "Crystal Salt" and sell it in 500 gram and one-kilogram packets. The completion of the project was also expected to eliminate PNG’s need to import salt and make it a net salt exporter. At the time that the factory went into production, PNGSI employed over 50 people at the factory, of which 21 were from Papua and Lealea landowner villages and nine from neighboring settlements. The rest were Chinese workers. PNGSI planned to increase the workforce to 800 as soon as the production capacity of the factory stabilized.

Additional details

This project is also known as the Papa/Lealea Salt Manufacturing Project, the Papa/Lealea Salt Plant Project, and the Salt Project. It appears that the Government of Papua New Guinea then on-lent proceeds of the loan to PNGSI. However, this issue requires further investigation. This project was implemented on a build-operate-transfer (BOT) basis. Under the terms of a BOT agreement, the factory is to be transferred to PNG ownership (local landowners) after 30 years of Chinese ownership, in 2032. Some sources identify the location of the factory as Konedobu. This issue merits further investigation.

Number of official sources

5

Number of total sources

11