This week, Uganda was forced to hand over control over the country’s only international airport to China.
In 2015, the Uganda government signed an agreement with the Export-Import Bank of China (Exim Bank) to borrow $207 million at a 2% interest rate. The loan included a maturity period of 20 years and a seven-year grace period.
However, the Uganda Civil Aviation Authority (UCAA) says some provisions in the financing Agreement Chinese allow them to take control of Entebbe International Airport and other Ugandan assets upon arbitration in Beijing.
“The most troubling for the aviation bosses was a clause that gave Exim Bank the sole authority to approve withdrawal of funds from the UCAA accounts,” the report stated. “The bank also had the power to approve annual and monthly operating budgets, which it could reject, and the rights to inspect the government and UCAA books of accounts. The China International Economic and Trade Arbitration Commission (CIETAC) in Beijing also had the mandate to resolve disputes.”
Earlier this year, Uganda sent a committee to Beijing after Exim Bank suspended funding, citing violation of the loan agreement after UCAA failed to implement some clauses. UCAA officials have flagged as many as 13 clauses in the contract as “unfair and erode the sovereignty of Uganda.”
China also declined recent appeals by Uganda to make any amendments to the loan contract. The Ugandan government waived international immunity in the agreement it signed to secure the loans.
While China’s moves have undoubtedly placed President Yoweri Museveni in “limbo,” Attorney General Kiwanuka Kiryowa has tried to play down the latest developments.
“When you borrow money, your obligation is to pay. If you do not pay, the other party can take you to court, in which case this would be CIETAC,” he said. “Let everyone do their part. The airport makes money and will meet its obligations.”
China will now control the airport until Uganda’s debt has been paid.
