Uganda’s Entebbe airport in danger of being taken over by China for loan default     

by mcardinal

Matt Bush, FISM News


Uganda’s lone international airport, Entebbe Airport, handles almost two million passengers every year, and is now in danger of being taken over by China. In 2015, China’s Export-Import Bank (EXIM) lent Uganda $207 million for airport expansions and updates, a loan that Uganda is about to defaulting on.

To secure this loan, the Ugandan government waived off the clause for international immunity and gave EXIM Bank certain conditions and power over the airport. According to Reuters, “Ugandan Lawmaker Joel Ssenyonyi, who chairs the committee that conducted the parliamentary probe, said it gives Exim Bank approval powers over the airport’s annual budgets and that the loan terms allow China to ‘grab’ the airport in case of default.”

Revenues from Entebbe are to be deposited in an escrow account where withdrawals must be sanctioned by EXIM according to the agreement signed in 2015. The biggest concession Uganda made was waiving off the clause for international immunity. The agreement requires any dispute arbitration or court proceedings to take place in China under Chinese law. Even without officially taking over the airport, EXIM can now exercise a large amount of power over the airport.

Many see this as part of a broader strategy by the Chinese in poorer nations known as “debt traps.” Essentially, the Chinese government finds poor countries in need of loans to help with infrastructure projects including roads, electrical grids, airports, etc. and makes those loans on what appears to be good terms for both countries. However, there are certain stipulations that give China power and leverage if those countries cannot pay back the loans which is oftentimes the case.

The Chinese government and the Uganda Civil Aviation Authority (CAA) have both come out on record denying the claims. A Bloomberg article quotes Chinese Foreign Ministry spokesman Wang Wenbin as saying, “The so-called detention or takeover of projects or assets by China’s financial institutions are purely made up out of malicious intent without any basis. In fact, there is no project that has been taken over by China due to debt issues.” 

The CAA of Uganda also tweeted from their official account a denial of a Chinese takeover in response to a satirical picture showing a China “rebranding” of the airport:

It is true that China has not explicitly taken over international assets due to debt issues. There are, however, many types of power and leverage that one country can hold over another. U.N. votes, military bases, and world alliances are three obvious ways that China can wield its influence over countries that owe them money and there are many others.

A recent CNBC article looked into what has been called “hidden debts” that have been accumulated by China from many low and middle income countries. The data shows that China is making huge loans both directly to other governments and, in some instances, to “actors” acting on behalf of governments. Their research stated that AidData, an international development research lab based at William & Mary College, “analyzed 13,427 Chinese development projects worth a combined $843 billion across 165 countries, over an 18-year period to the end of 2017.”

China has not taken over the Entebbe Airport yet, just like they have not taken over any other assets from the dozens of countries that owe them substantial amounts of money that they cannot pay back. However, that money is not being distributed for free, and the “debt trap” strategy of the Chinese government is real as well. Only time will tell how these debts will be “repaid” in the future.