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China-backed sugar export project in Ethiopia is plagued by delays

A LACK of funding and technical expertise is holding up the development of Chinese-backed sugar plants in the south of Ethiopia, according to a research group.

The project's remoteness, the absence of existing infrastructure and failings of a military contractor has cast doubt on the future of the "Kuraz" sugar project, researcher Benedikt Kamski at the Arnold-Bergstraesser-Institute in Freiburg, Germany, said in a note for the Omo-Turkana Basin Research Network.

"Five years into the project, the sugar industry in the Lower Omo Valley is still in its infancy, which raises doubts about the economic returns and the feasibility of the project," he said, according to Bloomberg.

The state-owned Sugar Corp aimed in 2011 to invest US$4.6 billion in 10 new processors nationwide to annually produce 2.3 million tons of sugar by July 2015.

No projects are complete and the corporation is again importing 200,000 tons of sugar cane to meet domestic demand this year after a drought cut production.

More than 200,000 ethnically diverse people affected by conflict caused by resource competition populate the Lower Omo. The sugar project has raised donor concern over forced evictions, dwindling resource access and the impact on Lake Turkana, which straddles the Ethiopia-Kenya border.

Lenders including the Export-Import Bank of China, China Development Bank Corp. and the Industrial & Commercial Bank of China agreed to loan Sugar Corp $1.63 billion, according to Ethiopia's Finance Ministry and the ICBC.

The first repayments are due in October. The corporation has so far received $835 million in credit, it said in a report to lawmakers last month.

Metals and Engineering Corp, which is run by military officers, is constructing Kuraz I, the project's first plant, which was scheduled for completion in 2013. Consultants say the processor is currently only 75 per cent finished.