Solomon Islands

Solomons takes on more China debt

The cost of improving telecommunication infrastructure in the Solomon Islands comes with a bill of US$66 million dollars and the funding comes in a way of a loan from the Export and Import (EXIM) Bank of China.

The target is to erect 161 towers through the country with the help of Chinese telecommunication giants over the next two years.

The loan is the first of its kind accessed by the Solomon Islands since signing on China as a diplomatic ally in 2019.

Permanent Secretary of the Ministry of Finance and Treasury McKinnie Dentana said at a press conference that the investment would be financed by a concessional loan being negotiated with the EXIM Bank of China.

He said the concessional loan would be charged at one per cent interest over 20 years.

An estimated 48 towers are expected to be up and running by the time the Pacific Games opens in November-December next year.

A government statement said the Solomon Islands National Broadband Infrastructure Project or SINBIP will be responsible for the construction of the towers.

It said work had progressed with the recent signing of a contracting agreement with the vendor and contractor, Huawei/China Harbour Engineering Company Limited.

The Solomon Islands Government had contracted a local expert and a private consulting firm from New Zealand, with both financial and technical expertise to provide an independent review of the SINBIP feasibility study.

Zhang Wencai, Vice President of China Eximbank. Picture: Eximbank

According to the statement, the two consultants’ recommendation revealed that the SINBIP is both financially viable and compatible with existing telecommunication infrastructure in the country.

It said the independent review of the SINBIP showed that the project would generate sufficient revenues for government to fully repay both the principle loan amount and interest costs within the loan period.

The government said that it planned to create a new company, as owner of the infrastructure and the proposed investment will utilise services or capacity currently provided by the Undersea Cable investments.

Meanwhile another report done by KPMG warned the proposal put forward by Solomon Islands will require financial subsidies.

The report estimated the project would generate a financial loss of almost $US100 million and that around $US156 million will be required over 20 years to bridge that shortfall.

However, the report agreed that the risks surrounding the project were manageable and indirect economic benefits “in the range” of the $US100 million would be generated.

The Solomon Islands is not the first nation in the region to get loans from the EXIM Bank of China. To upgrade its road and waterways infrastructure, Fiji also had taken loans from the EXIM Bank.

One of the conditions of the loan was the contracting of Chinese labour and contractors for the works.

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Almost 20 years later, some of the companies have set up bases in Fiji and have become players in the construction industry.

Opposition members and civil society groups in Solomon Islands raised concerns about the deal, saying the bidding process was mired in secrecy.

The main question Solomon Islanders are asking if there was a need to build so many towers.

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