China Eximbank provides $50 million preferential buyer’s credit for Zamyn-Uud Infrastructure Improvement Project

In 2008, the Governor's office of Zamyn-Uud Free Zone initiated and formulated the Zamyn-Uud Infrastructure Improvement Project. Then, on June 1, 2010, the Ministry of Finance of Mongolia and China Eximbank signed a $50 million preferential buyer's credit (PBC) agreement for the Zamyn-Uud Infrastructure Improvement Project. The PBC was approved under a $300 million general loan agreement (line of credit) for various projects that was also signed by the two governments on June 1, 2010. The borrowing terms of the PBC were as follows: a 1.75% interest rate and a 20-year maturity. The borrower was to use the proceeds of the PBC to partially finance a $58.8 million commercial (EPC) contract between Mongolia’s Ministry of Roads, Transportation, Construction and Urban Development and China CAMC Engineering Co., Ltd. (CAMCE), which was signed in January 2011. The remaining $8.8 million will be provided by the Government of Mongolia. The purpose of the project was to construct a water treatment plant, a wastewater treatment plant, a 90MW thermal power plant, an electricity substation, power transmission lines, and 13.5 km of roads, lighting and sidewalks within Zamyn-Uud soum and the Zamyn-Uud Free Zone. Zamyn-Uud soum (district) is the busiest international border port between Mongolia and the People’s Republic of China (PRC). The local population relies heavily on border traffic and trade activities. The Zamyn-Uud free zone, which is located 780 kilometers southeast of Ulaanbaatar and adjacent to the border crossing point at Zamyn-Uud, is the border crossing closest to Tianjin, the gateway port in the PRC for Mongolia’s shipments to Japan and the Republic of Korea. CAMCE was the EPC contractor responsible for project implementation. The project commenced construction in 2011. Construction of the water treatment plant began in 2012. Mongolia’s Prime Minister and Minister of Economic Development conducted an on-site project inspection in early March 2013 and then again on November 19, 2013. Representatives from China Eximbank’s Concessional Loan Department conducted an on-site project inspection on August 18, 2014. A final project handover certificate was issued on October 27, 2015. However, as of December 2017, the water treatment plant and the thermal power plant had still not been put into operation because there were insufficient users/customers to enable cost recovery. As of July 2021, the Zamyn-Uud Free (Economic) Zone had still not opened.

Additional details

1. This project is also known as the Zamyn-Üüd Infrastructure Improvement Project. The Chinese project title is 蒙古扎门乌德基础设施改善项目. The Mongolian project title is “Замын-Үүдийн дэд бүтцийг сайжруулах” төсөл or Замын-Үүдийн дэд бүтцийг сайжруулах төсөл. 2. The China Eximbank loan (PBC) 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. 3. On March 30, 2015, CAMCE signed an RMB 17.32 million contract for the construction, installation and construction of the Zamyn-Uud Infrastructure Improvement Project. Given that this event took place several years after project implementation began, it is possible that this contract was an amendment to the January 2011 commercial contract (providing top-up funding for new and additional activities that were not specified in the original contract). This issue warrants further investigation. 4. Project ID#85842 was financed through the same $300 million general loan agreement (line of credit) with the same borrowing terms.

Number of official sources

22

Number of total sources

32