China Eximbank provides RMB 448.9 million government concessional loan for Solomon Islands National Broadband Infrastructure Project (SINBIP)

Project narrative

In August 2022, the Government of Solomon Islands and China Eximbank signed a preferential loan framework agreement for the Solomon Islands National Broadband Infrastructure Project (SINBIP). Then, in October 2023, the Government of Solomon Islands and China Eximbank signed an RMB 448.9 million government concessional loan (GCL) agreement for the National Broadband Infrastructure Project (SINBIP). The loan (GCL) carries a 20.3333-year maturity, a 5.3333-year grace period, and a 1% interest rate. The Government of the Solomon Islands expects to repay the loan with project revenues (revenues generated from mobile network towers). The purpose of the project is to deploy 161 new mobile network towers across the country and improve mobile coverage offered by the state-owned Solomon Telekom Company Limited (Our Telekom). It was designed to be implemented in three phases over three years. The first phase (in year 1) was to involve the installation of 42 base stations in the country's Guadalcanal, Central, and Isabel Provinces in 2023 to provide network guarantees for the South Pacific Games. The second phase (in year 2) was to involve the installation of 68 base stations in the country's Western and Choiseul Provinces in 2024. The third phase (in year 3) was to involve the installation of the remaining 51 base stations in Malaita, Makira, and Ulawa as well as Temotu and Renbel Provinces. China Harbour Engineering Company Limited, a state-owned company, and Huawei Technologies Co., Ltd. are the contractors responsible for project implementation. Work on the SINBIP started in 2019 with the submission of a feasibility study on the project. After a cabinet endorsement, a Steering Committee was set up, consisting of senior staff from relevant government ministries, to review the SINBIP feasibility proposal put forward by Huawei and advise the Cabinet not only on the project’s financial and economic viability, but also on its technical compatibility with the country’s existing telecommunication infrastructure. As a result, the Steering Committee contracted a local expert and a private consulting firm from New Zealand, with both financial and technical expertise to provide an independent review of the SINBIP feasibility study. The two consultants’ recommendations revealed that the SINBIP was both financially viable and compatible with existing telecommunication infrastructure in the country. However, an assessment by KPMG warned that the project proposal put forward by the Government of the Solomon Islands ‘significantly overstate[d] the financial return potential’ of the project and it warned that the project would require financial subsidies. The KPMG report estimates the project will ultimately generate a financial loss of almost $100 million, and that around $156 million will be required over 20 years to bridge that shortfall. KPMG concluded that the risks surrounding the project were ‘manageable,’ but also warned the planned three-year rollout was ‘overly ambitious’ and that it ‘does not appear realistic’. KPMG estimated that the project could generate ‘indirect’ economic benefits ‘in the range’ of the $100 million needed to offset the direct anticipated financial losses, but it also concluded that it was ‘challenging to reliably quantify indirect economic benefits’ from the towers. According to the report, ‘it is less certain that they can be achieved as they rely on other social and economic initiatives.’ In December 2022, Parliament's Public Accounts Committee noted that it was 'concerned the tower project is not commercially viable and will attract significant debt burden to the country at a time when domestic borrowings is increasing and cash reserves are dwindling.' It also recommended that 'the KPMG independent report be updated once the government has settled final scope and terms of the project to verify commercial viability and risks.' Construction was originally expected to commence in early 2023 and conclude by early 2026. The Government of the Solomon Islands originally expected to complete 48 percent of the 161 towers before the Pacific Games in November 2023. The project's official groundbreaking ceremony took place on August 2, 2023. However, construction did not begin until August 28, 2023. The first telecommunication tower launched in Sali village on March 22, 2024. The second telecommunication tower launched on April 10, 2024. On October 16, 2024, the Samasodu communication tower was officially launched in Isabel Province by Prime Minister Jeremiah Manele.