China gives 1 billion dollars of credit for the Great Ring Road around Kiev and other projects
According to the report, on December 23, 2020, China and Ukraine agreed to work together to combat the COVID-19 pandemic, to comprehensively deepen cooperation under the Belt and Road Initiative, as well as to realize the benefits of each of the parties to promote common development.
Both countries came to the above agreements during the fourth meeting of the Intergovernmental Commission on Cooperation between China and Ukraine, held in a videoconference format. The meeting was co-chaired by Vice Premier of the State Council of the People’s Republic of China Liu He and Deputy Prime Minister of Ukraine Olga Stefanishina .
It is noted that during the meeting, both sides reached a number of consensus in the field of economics and trade, agriculture, space, science and technology, education, culture and health.
Promoting strong and stable bilateral relations is in the fundamental interests of the two countries and their peoples, said Liu He, who is also a member of the Politburo of the CPC Central Committee. He expressed the hope that both sides will implement consensus, improve practical cooperation and bring more benefits to the peoples of the two countries.
In turn, Olga Stefanishina said that Ukraine is ready to work with China to overcome the negative impact of the pandemic, expand mutually beneficial cooperation in all areas and promote the development of sustainable bilateral relations.
It is also noted that after the meeting, the parties watched the signing of a number of documents on cooperation.
In turn, the ex-Minister of Finance of Ukraine (2018 – 2020) Oksana Markarova expressed her opinionabout a “tied loan” from China for $ 1 billion.
“Recently, the Cabinet of Ministers of Ukraine approved a draft agreement between the CMU and the government of the People’s Republic of China“ on deepening cooperation in the construction of infrastructure ”. Details were not disclosed, but it is clear from expert discussions and comments on social networks that this is a so-called “tied loan” in the amount of $ 1 billion, which is planned to be directed to the Kremenchug bridge and a new road around Kiev, ”said Oksana Markarova.
She notes that this type of loan provides that the lender sets the conditions for where to buy raw materials, where to get equipment and technologies and from whom to order execution. And it usually turns out that this loan will be used to pay for the work that the lender himself will do, and, possibly, will bring his employees, but will pay off with a loan, which Ukraine will then have to return.
It is also possible, Markarova writes, that the agreement contains additional conditions such as leasing land along the new road or some other “goodies” (precedents of such wishes in other countries, in particular, from the Chinese side, are already known).
The ex-finance minister notes that these agreements will not necessarily correspond to European approaches to doing business, which has already been proven by the unsuccessful experience of implementing joint Chinese-Ukrainian projects in the past.
At the same time, there is still no effective tool for screening investments and lending in Ukraine at the state level, and it can appear only after the adoption of appropriate legislation and the institutionalization of such screening.
In addition, Markarova continues, scandals that periodically arise around certain Chinese companies with information and cyber security or investigations by journalists on projects of close cooperation between China and the aggressor country, including Ukraine, give reasons for concern of a different scale.
The ex-finance minister believes that special agreements, including related loans, should be concluded with our strategic partners. Because loans and investments are of course about money, but in the modern world it is also about standards and values.
In turn, the ex-Deputy Minister of Infrastructure of Ukraine (2016 – 2019) Viktor Dovgan expressed an optimistic view on this cooperation and revealed its details.
“For several years we have been discussing the prospects for cooperation with China and projects of the Belt and Road Initiative, but not one yuan has been invested due to the difference in legislation. That is why the Framework Agreement on Tied Loans was developed, approved by the Cabinet of Ministers of Ukraine on November 25, 2020, agreed at the Intergovernmental Commission with the PRC on December 23, 2020 and scheduled for signing in January 2021, ”wrote Viktor Dovgan.
He notes that the purpose of concluding an agreement between the parties on deepening cooperation in the field of infrastructure construction is to ensure the development of priority sectors of the economy, the implementation of infrastructure projects, in particular for the development of road infrastructure, construction of bridge crossings, railway infrastructure, airports, ports.
The conclusion of the agreement will ensure the attraction of financing for the implementation of infrastructure projects, of which the first pilot is the project for the construction of the M-22 Poltava – Alexandria road on the bypass section of the city of Kremenchuk with the construction of a bridge across the river. Dnieper and the first stage of the Big Ring Road around Kiev (М05 – М06 – connection between Odessa and Zhytomyr highways).
It is noted that the list of cooperation projects can be approved during the Chinese-Ukrainian intergovernmental bilateral commission on cooperation or through friendly negotiations through the embassies of both countries.
The PRC welcomes activities that prioritize the procurement of equipment, materials and technical services from China, and encourages Chinese enterprises to hire local companies and personnel to participate in the project according to actual needs.
For cooperation in the implementation of projects and the application for preferential loans provided by China, for further participation in specific cooperation projects, the selection of a general contractor is carried out among the recommended Chinese qualified contractors / suppliers on the basis of a negotiated procurement procedure in accordance with the Law of Ukraine “On Public Procurement”.
A list of recommended qualified contractors / suppliers for each cooperation project should be provided by the PRC Embassy in Ukraine in accordance with the recommendations of the relevant specialized associations in China.
The parties must agree on the general contractor and, at the request of the general contractor, attract legal entities of Ukraine for subcontracting work on a competitive basis, but not less than 50% of the total cost of the contract.
Ukraine, in accordance with its legislation, provides assistance in activities for the entry and exit to / from Ukraine of Chinese engineering and technical personnel necessary for the implementation of cooperation projects.
The conclusion of the agreement provides for the possibility of attracting a concessional loan from the PRC government and a concessional loan to the buyer for the implementation of projects in the field of engineering, procurement, construction and services by the government of Ukraine. The conditions for attracting these loans will be worked out by the parties additionally.
Once the project has been identified, the Ukrainian borrower will provide the Export-Import Bank of the PRC with a loan application letter, a letter of intent for a government guarantee, a general contract, an expert feasibility study report, and an environmental impact assessment report. If the above documents provided by the Ukrainian borrower are approved by the Export-Import Bank of the PRC and the Government of China, it is possible to begin the procedures for negotiating and signing a financing agreement.
Viktor Dovgan believes that this agreement will open the doors for Chinese companies and loans to the infrastructure of Ukraine, which will promote competition in international capital markets and the development of Ukrainian transport infrastructure.