Sat, Apr 01, 2017 - Page 1 News List

Bank wins case against ex-allies

Reuters, TAIPEI and DAKAR

The logo of the Export-Import Bank of the Republic of China is seen outside its bureau in Taipei yesterday.

Photo: Reuters

Taiwan’s export-import bank over the past few months has successfully sued two African nations for US$212 million in unpaid loans and brought a claim against a third, court documents showed, in a possible warning to allies that switched recognition to China.

The three claims brought by the Export-Import Bank of the Republic of China (中國輸出入銀行) before a US district court against Guinea Bissau, the Central African Republic and the Democratic Republic of the Congo (DR Congo) amount to at least US$261.4 million.

The first case is pending, while the bank has won the latter two.

“We see this as a commercial loan case,” bank vice president and spokesman Johnson Liao (廖政聰) said.

He said most of the bank’s loans were international and are repaid.

“Usually there is a long period of negotiation. Then when we cannot find a way, we have to go through the legal process to protect the debt claims,” Liao said.

However, analysts said the legal action by the bank, which falls under the Ministry of Finance, was likely to be a warning about the costs of forging diplomatic ties with China.

Guinea Bissau and the Central African Republic have withdrawn support for Taiwan since their loans were disbursed, while the DR Congo was not previously an ally.

The Ministry of Foreign Affairs said it could not comment on the matter, because the case involves commercial loans.

A Guinea Bissau official said the government was committed to responding to the claim under the rule of law, but that its first priority is the welfare of its people and stability of the country.

Officials in the DR Congo and the Central African Republic did not respond to requests for comment.

“It is not surprising that Taiwan would seek repayment from nations that switched allegiance,” the Atlantic Council’s Robert Manning said.

“It is in part about getting their money back, but in no small part, a bit of retribution,” Manning said.

All the claims filed at a New York State district court and seen by Reuters are for loans dating back to the early 1990s — a period when Taiwan and China used “dollar diplomacy” to attract allies in Africa after the end of the Cold War.

The borrowers failed to repay any principal and most of the interest on the loans, the filings showed.

Only 21 mostly small and poor nations recognize Taiwan, and a person familiar with government thinking said maintaining allies was difficult since they could always ask for a better deal or go to China instead.

In the past two decades Taipei has struggled to compete with Beijing’s billions of US dollars in aid and debt annulments. In Africa, Burkina Faso and Swaziland are Taiwan’s last remaining allies.

In December last year, Sao Tome and Principe broke ties with Taiwan in favor of recognizing China, a decision Sao Tome and Principe Prime Minister Patrice Trovoada explicitly linked to development aid expected from Beijing.

All of the bank’s cases have been brought since December 2015, according to the filings, which are lodged in a public database whose existence few are aware of.

Judges ruled in favor of the bank in the cases of the Central African Republic and DR Congo for US$154.9 million and US$57.3 million respectively in two separate rulings in January this year.

It is unclear how the countries will settle the claims.

The case brought in June last year against Guinea Bissau adds up to at least US$49.2 million, or nearly one-fifth of its last budget.

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