China to finance nine new ESL ships
By Yohannes Anberbir
The Export and Import Bank of China (EXIM) has shown a keen interest in financing 240 million dollars of Ethiopian Shipping Lines S.C (ESL) loan demands for the procurement of nine new ships with an aggregate carrying capacity of 300,000 tonnes.
The shipping line has already reached a memorandum of understanding with a Chinese-based manufacturing company for the construction of seven container and bulk cargo vessels with a capacity of 28,000 tonnes each and two fuel carrying vessels with a capacity if 41,500 tonnes each. However, the definitive agreement has remained unsigned due to credit arrangement, Ambachew Abreha, managing director of ESL told Capital, while discussing his company’s half fiscal year performance on Monday February 15, 2010.
Full constructions of the ships will coast ESL close to 300 million dollars, which is beyond the company’s capacity, Ambachew said.
“So, we told the company to find credit providers for 80 percent of the vessels total coast that already obtained the company’s consent and it is now finalising the credit arrangement with the government of China,” he explained.
The Chinese Government through its EXIM bank has displayed its willingness to cover 80 percent of the total cost of the ships with a long term credit and it is expected to be signed soon, according to Ambachew.
Positive conclusion of the current deal would add 300,000 tonnes carrying capacity to the existing 150,000 tonnes carrying capacity of ESL’s nine vessels.
It will also be a pleasing project for the government as it could ease the cost of fuel transportation. Though ESL is the sole shipping company responsible for carrying out the country’s import, it does not have fuel carrying vessels, making ESL transport the fuel on expensive rented vessels.
The Ethiopian Electric Power Corporation, Ethiopian Telecommunication Corporation and Ethiopian Road Authority are known for their strong attachments to Chinese firms and their credit facilitation. ESL’s current approach explicitly shows the country’s shift to Asian countries away from former creditors, an expert told Capital.
Ethiopia had around 2.7 billion dollars of foreign debt as of the year 2009. Around 51 percent of the total outstanding debt is from multilateral creditors such as Paris Club Creditors, according to the International Monitory Fund’s (IMF) recent document.
In recent years, however, the share of Paris Club creditors in total external debt has declined, while the share of non-Paris Club creditors has increased. Between 2006/07 and 2008/09, the share of Paris Club creditors fell from 16 to 8 percent and the share of non-Paris Club creditors (mostly from China and India) increased from 19 to 35 percent, the document revealed.
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