US$8b standard gauge railway deal gone bad in Uganda

standard gauge railway
Railway line in Uganda: there is dispute involving construction of a standard gauge railway in Uganda

The Government of Uganda is in a tight spot following a dispute between two Chinese firms over the construction of the Standard Gauge Railway in the country, estimated to cost US$8bn.

China Civil Engineering Construction Corporation (CCECC) had signed a MOU in January 2012 for the construction of the Standard Gauge Railway in Uganda. The company had estimated the cost of the project to be US$1.25 b. The company did a feasibility study for the Standard Gauge Railway project, which saw it sign a contact with the Ugandan Government.

However, another company, China Harbor Engineering Company Limited (CHECL) was proposed for the same project with their cost estimated at US$1.75bn. The company was proposed by Rosa Whitaker, a former assistant U.S. Trade Representative for Africa and architect of the African Growth and Opportunity Act (AGOA).

A brew is developing in the government, with the sections supporting CHEC bent on ensuring CCECC loses their contract and it being awarded to their competitors. John Byabagambi, the State Minister for Works, who is also the chairman of Standard Gauge Railway Ministerial Committee is on the fore front of those in support of CHEC and has gone ahead to cancel the MOU the government had earlier signed with CCECC.

The Ugandan president held a crisis meeting on July 25th with government officials to address the issues related to the Standard Gauge Railway project deal. In the meeting, it was resolved for both parties to negotiate with investigations into the project being launched. Prime Minister Amama Mbabazi, Justice Minister, Kahinda Otafiire, and IGG Irene Mulyagonja will be on the team investigating the matter.

If the negotiations involving the construction of the Standard Gauge Railway in Uganda fail, the Government is facing the risk of compensating CCECC up to billions.

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