Beijing to host credit agencies in BOT talks

PUBLISHED : Monday, 13 October, 1997, 12:00am
UPDATED : Monday, 13 October, 1997, 12:00am

The mainland has invited export credit agencies from OECD countries to a meeting in Beijing next month on project financing and speeding up approval of build, operate and transfer (BOT) projects.

Jackie Clegg, vice-chairman of the US Export-Import Bank (Eximbank), said a board member of the bank would attend.

Since 1994, the bank has provided US$6 billion in financing in Mexico, the Philippines and other countries but not in the mainland.

'It is very important for US exporters that Eximbank be a player in project finance in China,' she said.

'We are going to do it just as soon as we have the answers to some of our questions and the US taxpayer is to be paid back.

'If we can get certain restrictions and certain agreements met, then we will be able to go ahead with the project finance cases.' The outstanding issues are assurances that investors are going to be able to get back their investment, long-term tariffs, foreign exchange availability, elimination of conflicts among and credit worthiness of Chinese partners, legally binding contracts and the legal and regulatory framework.

The mainland signed its first BOT project last month with a consortium of Electricite de France (EDF) and GEC-Alsthom for the Laibin B coal-fired power plant in the southwest region of Guangxi, worth more than $600 million.

EDF and GEC-Alsthom are investing $150 million in the project, with financing including $300 million in export credits backed by Coface, the French credit agency and $160 million in commercial loans.

Beijing is eager to sign more deals in power, water treatment and other infrastructure projects, because they involve no investment by the Chinese side and the plant is given to the mainland free of charge at the end of the contract period.

Bids closed last month for a second national BOT project, a power station in Changsha.

Other deals have been held up by arguments over terms of repayment to the foreign investor and who will guarantee it, level of tariffs and the legal and regulatory framework for BOT.

Beijing has promised to implement new build, operate and transfer regulations by the end of 1997.

'We are going to be looking at the Laibin B project to see if that can be used as a template, a model for other project finance around China,' Ms Clegg said.

'In project finance, the first deal in a country is always the hardest. Once you can get a model, then we are able to do many deals in a short period of time.' Minister of Foreign Trade and Economic Co-operation Wu Yi said the US Eximbank could do more to reduce the soaring US trade deficit with the mainland if it provided more loans.

Ms Clegg said the US had instead helped reduce such aid by Organisation for Economic Co-operation and Development (OECD) countries from $10 billion to an annual $4 billion.

'The US policy is not to initiate tied aid which we consider a trade-distorting mechanism but does not encourage fair trade and open market,' she said.

'It is very expensive, costing you at least 35 cents on every dollar spent. On many of our other financings we make money.

'It is not an effective tool in trade finance for an export credit agency.' She said the bank was willing to match tied aid offered by other countries. This made possible a $60 million contract signed last week in Beijing for ticketing equipment for the second line of the Shanghai subway to be sold by US firms.