Resource-Financed Infrastructure: Thoughts on Four Chinese-Financed Projects in Uganda

Tom Ogwang,Frank Vanclay

doi:10.3390/su13063259

Abstract

Increasingly common methods for financing public infrastructure in developing economies are Resources-for-Infrastructure (R4I) and Resource-Financed Infrastructure (RFI), usually involving Chinese financial institutions and Chinese construction companies. Although there are advantages to the borrowing country from these project financing arrangements, there are also various issues and governance challenges. In Uganda, expectations around future revenue from oil extraction have led to many infrastructure projects being commissioned, mostly funded by RFI arrangements. To consider the appropriateness of these arrangements and to reflect on whether they are likely to contribute to positive development outcomes or be examples of the resource curse, we examined four public infrastructure projects: Kampala–Entebbe Expressway; Karuma Hydroelectric Dam; Isimba Hydroelectric Dam; and the Malaba to Kampala section of the East Africa Standard Gauge Railway. Although R4I/RFI arrangements are viewed positively by some commentators, others (especially local companies) consider they lack transparency, create unsustainable debt, promote China’s interests over the borrowing country, increase unemployment, unfairly compete with local business, deal in corruption, have poor working conditions, and result in substandard construction. Nevertheless, we conclude that Uganda and other developing countries have generally benefited from Chinese-funded infrastructure, and there is more myth trap than debt trap. However, to ensure positive development outcomes, governments and construction companies should ensure compliance with international standards, especially relating to: environmental and social impact assessment; human rights; benefit-sharing arrangements; livelihood restoration; and project-induced displacement and resettlement.

Highlights

Introduction published maps and institutional affilWith the expectation of considerable revenue in the future from the exploitation of the oil reserves in Uganda’s Albertine Graben region, there have been growing demands for the construction of public infrastructure in Uganda [1,2,3,4,5], requiring substantial funding that the Ugandan Government currently does not have [6]
As with other resource-rich, cash-poor nations, Uganda is presented with a difficult choice: delay construction of desired infrastructure until resource revenues eventuate sometime in the future; borrow money to build the infrastructure in the short term with the loans being repaid from and secured by future resource revenues, which is called resourcefinanced infrastructure (RFI); or enter into a resources-for-infrastructure (R4I) deal in which a foreign company builds the infrastructure in exchange for natural resources into the future, with the iations
In our examination of four resource-financed infrastructure projects, we considered the extent to which these issues applied

Summary

Introduction

With the expectation of considerable revenue in the future from the exploitation of the oil reserves in Uganda’s Albertine Graben region, there have been growing demands for the construction of public infrastructure in Uganda [1,2,3,4,5], requiring substantial funding that the Ugandan Government currently does not have [6]. To meet its infrastructure needs, Uganda needs to invest over USD $1.4 billion annually, well into the future [7]. As with other resource-rich, cash-poor nations, Uganda is presented with a difficult choice: delay construction of desired infrastructure until resource revenues eventuate sometime in the future; borrow money to build the infrastructure in the short term with the loans being repaid from and secured by future resource revenues, which is called resourcefinanced infrastructure (RFI); or enter into a resources-for-infrastructure (R4I) deal in which a foreign company (typically Chinese) builds the infrastructure in exchange for natural resources (concessions, resource rights, or the actual commodities) into the future, with the iations.

Objectives

Methods

Findings

Discussion

Conclusion