The story pertains to an issue in Uganda’s commercial partnership with China. Since 2016, the Government of Uganda has been collaborating with state-owned Chinese construction companies and state banks to finish the expansion of the Entebbe Airport – Uganda’s only international airport (AFP Staff Writers, 2022). In February, Uganda became obliged to comply with aggressive loan repayment terms. They include channeling 100% of revenues from the airport into its joint account with the Exim Bank of China, one of Uganda’s largest lenders (AFP Staff Writers, 2022). The emergence of this questionable term of collaboration did not come as a surprise. Last year, Ugandan media sources expressed concern about China’s readiness to gain full control over the airport in case of Uganda’s inability to service the loan, but China actively denied such hypotheses (AFP Staff Writers, 2022). To repay the debt, Uganda would have to prioritize this matter over resource allocation to public services.
The story exemplifies indirect expansion and the phenomenon of debt-trap diplomacy in international trade. As a developing third-world nation with lower GDP levels and population size compared to China, Uganda is particularly vulnerable to influences from stronger powers and more economically productive external creditors. These impacts are especially worrying when it comes to poorer nations’ strategically significant objects, such as airports. Uganda’s decision to enter into collaboration with China, a potential superpower, could be in line with the latter’s economic power expansion plans. Uganda’s government failed to assess risks for its infrastructure and draw links between its financial situation, China’s strategic ambitions, and the history and outcomes of the Belt and Road Initiative in other African states.
As a sovereign state, Uganda should have prioritized its strategic assets’ security prior to entering into international agreements with China’s state-owned financial institutions that act in the country’s best geopolitical interests. For instance, it could have proposed the collaboration and loan repayment mechanisms that would nullify Chinese creditors’ right to confiscate the asset. Alternatively, establishing neutrality in terms of the jurisdiction to be used in dispute resolution is another missed opportunity for Uganda to optimize the balance of power within the contract’s frame. As of now, Chinese lenders have the right to process disputes surrounding this international commercial alliance in accordance with Chinese law, which could be devastating for the unity of Uganda’s strategic assets.
Reference
AFP Staff Writers. (2022). China puts ‘aggressive’ terms on Uganda airport loan: Researchers. Africa Daily. Web.