DRC, CHINA ANNOUNCE FIVE BILLION DOLLAR LOAN FOR

UNCLAS KINSHASA 001133

SIPDIS

SIPDIS, SENSITIVE BUT UNCLASSIFIED - PROTECT ACCORDINGLY

E.O. 12958: N/A
TAGS: ECON EAID EFIN ETRD EINV PGOV CH CG
SUBJECT: DRC, CHINA ANNOUNCE FIVE BILLION DOLLAR LOAN FOR
INFRASTRUCTURE AND MINING

REF: 06 KINSHASA 1731


1. (U) China and the DRC signed an agreement on September 17 for a
total USD five billion loan to finance three billion dollars in
infrastructure construction projects and two billion dollars in
mining sector partnerships. The GDRC Minister of Public Works and
Infrastructure, Pierre Lumbi, said that China-DRC cooperation is
based on the principle of "bringing employment to Congolese." China
has already invested USD 60 million in a joint venture mining
project with parastatal Gecamines, and USD 32 million in the DRC
telecoms infrastructure to support Chinese company Congo China
Telecom (reftel).


2. (U) Proposed infrastructure construction works include
transportation projects: 2,000 miles of new railway from the
Atlantic/Congo River port of Matadi to Sakania, on the DRC border
with Zambia; 2,000 miles of roadway from Kisangani to Kasumbalesa
(the vehicle crossing point on the border with Zambia); and a new
road to link Lubumbashi, provincial capital of Katanga, to
Kasumbalesa. The agreement also promises construction of 31 150-bed
hospitals, 145 50-bed health centers, 5,000 public housing units,
and two universities.


3. (U) An additional USD 2 billion will be used to develop China-DRC
joint ventures in the mining sector. An example of this type of
project is the recent announcement that DRC diamond parastatal MIBA
and a Chinese firm, CMEC, have signed an agreement allowing CMEC to
exploit nickel and chrome deposits near the West Kasai provincial
capital, Kananga. CMEC will reportedly invest USD 75 million to
finance local infrastructure, including a connection to the main
Inga-Katanga power line, a new cement factory, and road repairs.



4. (SBU) Comment. This latest agreement continues the pattern of
large, highly visible infrastructure projects begun during the
Mobutu years, which included the Martyrs Stadium and the Parliament
Building in Kinshasa. More recent is the Chinese hospital center
built near the airport and staffed largely with Chinese doctors and
nurses. It also confirms a move towards larger, more mainstream
mining sector China-DRC joint ventures, perhaps replacing the
smaller, "informal" Chinese operations that many have criticized in
Katanga's copper and cobalt belt.


5. (SBU) Comment (cont.) Exact details of this agreement, especially
the loan repayment terms, are unknown. One account suggested that
tolls taken on the roadways would provide some of the reimbursement.
It is generally assumed that China-DRC agreements make some
provision for repayment "in kind," using natural resources of
interest to China. Despite Minister Lumbi's assurance that the loan
agreement will benefit Congolese companies and laborers, it is
unclear how this loan will be programmed and who will decide what
the priority projects are. Past China-DRC projects have been
criticized for not using Congolese labor or suppliers, and in some
cases never being completed.


6. (SBU) Comment (cont.) The China-DRC loan agreement, signed
immediately prior to the arrival of the latest IMF mission from
Washington, raises the issue of whether the DRC, which owes over USD
10 billion to its international creditors, can afford even more
external debt, and under what terms. The agreement also raises the
specter of increased Chinese influence, both economic and political,
in the region. China's presence in Sudan, Zambia and Angola, all of
which share borders with the DRC, assumes greater importance with
this Beijing-Kinshasa deal. End comment.


BROCK