Sunday 27 October 2013

Myanmar Railways to buy Chinese materials in return for pledged US$92m loan

Myanmar Railways is set to buy Chinese materials, technology and services for two train construction projects, as China has pledged to finance them with US$92 million loan at 2 percent interest rate, according to sources close to the projects.

One project will manufacture railway carriages, and another will build locomotives. Ninety percent of total cost of the two projects will be financed by the loan from Chinese Export-Import Bank (EXIM Bank), said the source on anonymity. 


Myanmar Railways signed two agreements for the projects with China National Machinery Import & Export Corporation on July 17, 2013.

The railway carriage construction project was valued at US$54.070 million, and China EXIM Bank will loan US$48.663 million, i.e. 90 percent value of the project, to Myanmar. The rest cost will be borne by Myanmar government.

Likewise, the locomotive construction project was valued at US$47.916 million, and the Chinese bank will help with US$43.124 million loan.

The two Chinese loans combined together will amount to 91.757 million. Their interest rate was agreed at 2 percent; the administrative fee at 0.25 percent; and the undertaking fee at 0.25 percent. Myanmar will have to make repayment of the loan in 20 installments in 15 years.

One of the conditions of the loans is that Myanmar must buy from China the materials, technology and services required for the projects.

Myanmar took these loans as part of the total US$400 million credit the then Chinese Premier agreed with Myanmar’s previous military government in 2010. The loans, being already in the budget, were not discussed in parliament.

Myanmar has recently signed another US$100 million loan with China for its micro-credit projects in rural areas. The Chinese loan’s interest rate was set 4 percent.

Observers criticize that China charges too high interest for its loans to Myanmar. They highlighted the Japanese assistance loans charge only 0.01 percent interest.
 
source: Eleven Myanmar

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