Why Has Uganda Scrapped a Deal With China?

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For the last few decades, China has jerked the whole world with its nimble economic growth, surpassing Japan and other European countries in GDP and PPP, through which the country made a breakthrough vestige in economic hegemony over the Asian, African and some other European regions and countries. Forecasters argued that the rising dragon of the east which already outweighed the United States in the Purchasing Power Parity (PPP) will outperform the West with its swift growth in economy (GDP) by 2030. However, despite China’s recent crawls in economic growth posed by Covid-19 and the Ukraine crisis, the country is still on top of the list with regard to making influences on the world economic order. In this respect, the Belt and Road Initiative (BRI) project taken by Xi Jinping in 2013 is reckoned as one of the prime and grand strategies of China through which the country has been sketching its future position in world politics.

The question may arise that how BRI again got pertinent among the bunches of issues of world politics. This is because of the newly transpired case of Uganda’s scrapping of a $2.3 billion agreement with China Harbour and Engineering Company Ltd (CHEC) regarding the construction of a railway line from Kampala, the country’s capital, to the Kenyan border. The project failed to launch after it had been contracted eight years ago. The East African country scrapped all of the contractual work it had agreed to do with the Chinese company to construct the 273-kilometre standard gauge railway (SGR). It has been deeply concerning for Uganda that the CHEC has failed to keep up its commitment and provide financial assistance to the country for the construction. According to Perez Wamburu, the project coordinator of SGR, “Uganda has not received any communication or funding for the project from CHEC for two years. This is unacceptable and disappointing.” Therefore, per his statement, the country has been in negotiations with Yapi Merkezi holding company to take over the responsibility for the development of the project and expects the Turkish firm to file a consent of interest in the coming weeks.

Why the Deal Was Cancelled?

Uganda is a landlocked country in the East African region which is holding nearly a $45 billion GDP in recent years. From an infrastructural development perspective, compared to other African countries, Uganda is considerably lagging in many aspects due to diverse socioeconomic challenges and political predicaments. One of the major hurdles behind its economic growth and development, however, is having no immediate connection with the open sea and thus, having no opportunity for seaports. Therefore, the contract between Uganda and the CHEC was very crucial for the overall economic betterment of the country overcoming the curse of landlocked feature. In this regard, the railway would connect Uganda with the Indian Ocean which might augment the extraction of the SGR’s potential to be a valuable resource for the African nation. However, the project is intended to link to Kenya’s standard gauge railway, which extends all the way to Mombasa, a port city. Kenya has constructed 730 kilometres of railroad with funding from China but the railway that connects to the Ugandan border, however, has not yet been constructed.

The contract for the construction was committed eight years ago in 2015 but no development was observed due to the obvious delay of the Chinese company. According to Wamburu, “the contract was revoked since things weren’t going as planned.” Consequently, this current finally halts back Uganda’s eight-year pursuit of Chinese financing for the project to construct the railway which could have given rise to a regional transportation hub. Moreover, it was also expected to enhance the country’s connections in the African region and incorporate it in the holistic plan of the BRI in the region but all the plans have been stuck due to the indiscreet attitudes of China. Although Chinese Foreign Ministry spokesperson Wang Wenbin said in a briefing that, “practical cooperation between China and Uganda has taken the lead in China-Africa cooperation,” China did not respond or gave any overt statement about the deal. However, as the deal was a considerable part of the Belt and Road Initiative, therefore, the transparency, credibility, commitment and trustworthiness of the BRI loans is again being questioned on the world stage.

Alternative Plan of Uganda

Given all the dynamics posed by China, Uganda is now eyeing the Turkish company Yapi Merkezi to take over the responsibility of the project that China has withdrawn from consideration. The construction of a railway in neighbouring Tanzania is one of the infrastructural projects in Africa on which Yapi Merkezi is now working. According to an anonymous source at the Ugandan Ministry of Transport told Reuters, “the discussions exhibited that Yapi Merkezi is interested in the project. The Ugandan authority in conversations with them. Although there isn’t a contract in place with them yet, there is an MoU and things are progressing quickly.” The Turkish company also noted that although a decisive agreement has not yet been inked, they have entered into a Memorandum of Understanding with the Ugandan government about the project. Uganda may take into account the different route to the shore if the contract is finally signed and substantially works out with the company. Moreover, since the company is assisting in the construction of a 1,219-kilometer SGR line in Tanzania to the port city of Dar es Salaam, in such a course, a direct railway link between Tanzania and Uganda might be a practical choice.

China’s Procrastination and BRI Question

Being steadfast and having transparency are unquestionably obligatory matters in attaining the trustworthiness of counterparts and building a solid relationship of cooperation in world politics in which China’s BRI stumbled again. Despite having robust prospects for the East African country in the BRI project, China has given rise to grave suspicion regarding the funding credibility of the BRI. No doubt that the African region to a considerable extent matters to China which the country itself does not want to miss out but the reasons behind the withdrawal of such a major construction project are still unrecognizable since no utterance has been observed from China in this regard. Even President Yoweri Museveni’s visit to China in 2018 was unable to persuade the China Exim Bank to grant the promised finance. However, there may have been some economic issues posed by Covid-19, the Ukraine war and the internal dynamics of China that constrained the country to be involved in the project.

By contrast, another question may arise while China swamped Sri Lanka and some other countries with huge economic assistance, why the country demonstrated absurdity in respect to Uganda? Apart from the anomalies in world politico-economic situations in the last two or three years, why has China made Uganda wait for eight years while it is continuing its projects in other African countries such as in Kenya?

A New Trajectory in China-Uganda Relationship?

China and Uganda maintain a sound diplomatic relationship for years. Both countries also uphold significant economic relations which by the advancement of the BRI have become more cogent for overall trade and connectivity. In the last twelve years, the trade volumes between the two counties have strikingly increased and reached a billion-dollar partnership, although the African country exports more than it imports. According to Museveni’s remarks in October 2022, in the 60 years after their diplomatic ties were established, Uganda and China have maintained tight coordination and collaboration and have jointly worked on numerous significant cooperative projects. He said that the ties between the two nations have always been strong and vibrant.

Regardless, the recent developments in the infrastructural arenas mark some discrepancies. Last year, Ugandan president Museveni called for the cancellation of the $223 million power project deal with a Chinese firm named China CAMC Engineering Company Limited due to the lack of progress after three years since the contract was signed between the two parties. The company was supposed to supervise the whole project to design, procure, install, and connect seven hydroelectric substations but the plan did not work out at all. Along with such shifts, the recent current will bring about notable challenges in the bilateral relationship, no doubt. While Uganda needs China for truly substantial infrastructural developments, China also needs the East African country for the broader objective of the tangible enactment of the Belt and Road Initiative.

– Kawsar Uddin Mahmud is a Research Intern of the KRF Center for Bangladesh and Global Affairs (CBGA).

Published in The Geopolitics [Link]