[Disbursed] China Eximbank disbursed RMB 276 million of RMB 690 million government concessional loan for Caustic Soda Plant and Industrial Zone Project (Linked to Record ID#96221, #98029 and #108348)

Project narrative

On April 22, 1992, Myanmar Paper and Chemical Industries and Yunnan Provincial Chemicals Import and Export Corporation signed a contract for a caustic soda plant. The original memorandum was signed Dec 5, 1989. The plant was reported to cost 6 million USD. In December 1998, China's Kunming Electro-Chemical Plant (KECP) in Yunnan province and the Myanmar Paper and Chemical Industry (MPCI) under the Ministry of Industry No.1. signed a contract to renovate the caustic soda and chlorine plant at Sittoung Paper Mill No.1 in Mon state. Under the contract, the Chinese side is to bear the cost of the renovation of 1.2 million U.S. dollars which cover the supply of machinery equipment and transfer of technical know-how, while the Myanmar side is to repay with the products of caustic soda. It is unclear if it is the same project signed earlier in 1992. In June 2010, China Eximbank and the Ministry of Defense of Myanmar signed an RMB 690 million government concessional loan (GCL) agreement for the Caustic Soda Plant Construction Project. The borrowing terms of the loan are unknown. The proceeds of the loan were to be used by the borrower to finance a commercial contract between Myanmar Economic Holdings Ltd (MEHL) and China Ordnance Industries Group Corporation Limited (NORINCO). The purpose of the project was to construct a caustic soda plant in Thaton Township within Mon State. It was envisaged that the plant would produce chemicals for the soap industry. China Eximbank made an initial RMB 276 million ($40 million) disbursement in support of this project and the Ministry of Defense used the disbursed funds to pay NORINCO for the acquisition of equipment (to support the caustic soda plant). Then, in December 2013, MEHL and the Ministry of Defense transferred responsibility for the caustic soda plant and the RMB 690 million loan to Myanmar’s Ministry of Industry. The Government of Myanmar subsequently decided to suspend the caustic soda plant project and replace it with an industrial zone project in Thaton Township within Mon State. According to the Public Accounts Committee of Myanmar’s Parliament, approximately 2/3 of the funds that were paid to NORINCO were unrecoverable. There are some indications that the China Eximbank loan for the Caustic Soda Plant and Industrial Zone Project may have financially underperformed vis-a-vis the original expectations of the lender. After the disbursed portion 276 million was paid in March 2018, the remaining 60% of the loan (CNY 414 million) was originally allocated under the foreign loans program for the 2015-2016 fiscal year, but the Union Government, in its Cabinet Meeting No. (8/2016), decided to suspend the project.