China Development Bank provides $240 million loan for Djibouti International Free Trade Zone (DIFTZ) Expansion Project (Linked to Record ID#59393, 97763)

📋 Staff Comments

1. This project is also known as Phase 1 of the Djibouti International Free Trade Zone (DIFTZ) Project and Phase 1 of the DIFTZ at PK 23 Project. The Chinese project title is 吉布提国际自贸区于 or 布提自贸区建设项目2. The Djibouti Port and Free Trade Zone Authority (DPFZA) is the sole government authority in charge of the administration and the control of all the free zones and ports in Djibouti.
2. On March 28, 2019, Khor Ambado Free Zone Co. (FZCO or Djibouti Asset Company) — a special purpose vehicle and joint venture between Port of Dalian Authority Group (10% equity stake), China Merchants Shekou Industrial Zone Holdings (招商局蛇口工业区控股股份有限公司) (6% equity stake), China Merchants Investment Development Co., Ltd (CMID) (12% ownership stake), China Merchants Port Holdings Co., Ltd (12% ownership stake), and the Djibouti Ports & Free Zones Authority (DPFZA) (60% equity stake) — entered into a land lease agreement (the “Land Lease Agreement”) with China Merchants Holdings (Djibouti) FZE (“CM Djibouti”), a subsidiary of China Merchants Port Holdings Company Limited, pursuant to which the Djibouti Asset Company as lessor would sub-lease a parcel of land with an area of 137,801.63 square meters within the Djibouti International Free Trade Zone (the “Djibouti Lease Land”) to CM Djibouti as lessee, for a term commencing on the date of the Land Lease Agreement and ending on August 14, 2116. The Lease Land shall be used for the purposes of carrying out logistics, commerce and trade activities within the Djibouti International Free Trade Zone. CM Djibouti shall pay to the Djibouti Asset Company (i) an aggregate amount of $27,756,004.31 (equivalent to approximately HK$216,497,000) for the full term of the Lease, (ii) a deposit of US$200,000 (equivalent to approximately HK$1,560,000) in addition to the rent and (iii) property management fees at an annual rate of US$1.00 (equivalent to approximately HK$7.80) per square meter of the surface area of the Djibouti Lease Land. The Djibouti Asset Company is an associate of CMG, the ultimate holding company of China Merchants Port Holdings Company Limited.
3. Under the BRI banner, Chinese SOEs, especially China Merchants Group (CMG), have been attempting to replicate elements of its “port in front-(industrial) park in the middle-city behind” or Port-Park-City (PPC) model in Africa. The model is based on the Shekou Industrial Park in Shenzhen city in China’s Guangdong Province, established in 1979. It was the country’s first special economic zone, and it sparked Shenzhen’s growth as a commercial and industrial hub. CMG’s efforts to build the village of Shekou into a world-class industrial zone resulted in an area without basic infrastructure being transformed into a modern metropolitan center. The Shekou Model “entails developing adjacent industrial parks, commercial buildings, highways, free trade zones, residential areas, and power plants.” With the focus on the port, the model does not aim only to facilitate the transportation of goods but to “develop a larger, integrated system that helps sustain the port and is sustained by it in turn”. In 2017, Li Xiaopeng, president of CMG, mentioned that his company is using the Shekou Model as a template or a concept that can be applied and tweaked to adjust to its port projects worldwide.” 5. In the World Bank's Debtor Reporting System (DRS), the full face value of the loan is not recorded. The (60%) portion of the loan ($144 million) that is backed by a sovereign guarantee is recorded in the DRS. See https://www.dropbox.com/s/2sw4f7gluxa52fk/DRS%20Official%20Commitments%20from%20China%20Through%202021.xlsx?dl=0.
4. The loan's interest rate (5.4025%) is identified in the DRS. See https://www.dropbox.com/s/ab8qt4n6jijcbhd/IDS_Average%20interest%20on%20new%20external%20debt%20commitments.xlsx?dl=07. One official source (https://www.dropbox.com/s/16kxocb9iaoj7jo/Rapport-annuel-DFE-2020.pdf?dl=0) identifies Bank of China rather than China Development Bank as the lender. This discrepancy warrants further investigation.

📚 Sources & References

• 新华网：国开行：向非洲提供投融资超过500亿美元
• IMF Correspondence re- Djibouti-Galileh Road
• Damejog Port Crud…l Airport in Obock
• Djibouti International Free Trade Zone
• 中国海外基础设施开发投资有限公司与吉布提自贸区管委会 签署项目谅解备忘录
• China in Africa: Phoenix nests versus Special Economic Zones
• 国家开发银行副行长袁力一行访吉
• 葛华参赞出席吉布提自贸区先导区开工典礼仪式
• 吉布提总统盖莱出席吉布提自贸先导区合作框架协议签约仪式
• 招商国际与吉布提自贸区签署“吉布提自贸区项目合作框架协议”
• RE- Query re- Chinese lending to Djibouti
• Infrastructure & Investment of Ports and Free Zones
• Silk Road to the Sahel: African ambitions in China’s Belt and Road Initiative Loan applications and disbursements are still being received and processed as the projects continue to evolve. Ongoing monitoring and evaluation are in place to ensure project continuity.