Uganda said it terminated a deal with a Chinese contractor to build a $2.3 billion railroad after it failed to secure Beijing’s financial backing for the project.
(Bloomberg) — Uganda said it terminated a deal with a Chinese contractor to build a $2.3 billion railroad after it failed to secure Beijing’s financial backing for the project.
The East African nation has been in talks with Yapi Merkezi to take over the development of the project, and expects the Turkish company to submit an expression of interest in weeks, according to Perez Wamburu, Uganda’s project coordinator.
“The contract was terminated, things weren’t working out,” Wamburu said in an interview on Thursday.
It marks an end to eight years of Uganda pursuing Chinese funding for the project to build the 273-kilometer (169.63 miles) railway from its border with Kenya to its capital, Kampala, further delaying Ugandan President Yoweri Museveni’s plan to develop a regional transit hub.
Funders had since 2015 remained non-committal to back the plan on concerns it might not be viable if a connection to the Indian Ocean coastline in neighboring Kenya isn’t complete within the same time-frame. Kenya built 730 kilometers of its railroad, with Chinese loans, from the Mombasa port city to Naivasha, but hasn’t determined yet when it might develop the link to Uganda.
Uganda’s decision to cancel the contract with China Harbour Engineering Company may help it consider an alternative route through its southern neighbor Tanzania, where Yapi Merkezi is already building new railroads. Museveni in a December interview said the option is already under consideration should his nation and Kenya fail to synchronize the construction time-lines of their railroads.
“Practical cooperation between China and Uganda has taken the lead in China-Africa cooperation,” Chinese Foreign Ministry spokesman Wang Wenbin said at a regular news briefing Friday in Beijing when asked about the deal’s termination. “China will continue working with the world to conduct cooperation on infrastructure and financing in Africa.”
Yapi Merkezi’s board chairman, Basar Arioglu, declined to comment when contacted on Thursday. China Harbour Engineering didn’t immediately respond to a request for remarks.
Uganda is considering raising funds for the project through syndicated loans from lenders such as export credit agencies, according to Wamburu.
(Updates with comment from Chinese foreign ministry in seventh paragraph)
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