April 2, 2020 / 2:53 PM / 4 months ago

Hungary, eager for loan, wants to classify details of Budapest-Belgrade Chinese rail project

BUDAPEST (Reuters) - Hungary wants to classify all data included in contracts for the $2.1 billion, tax-payer funded Budapest-Belgrade rail project for ten years, according to draft legislation, to ensure a loan deal is signed “as soon as possible”.

The project, part of Beijing’s One Belt, One Road initiative intended to open new foreign trade links for Chinese firms, has been stalled for years.

The bill, dated March 31 and submitted by Deputy Prime Minister Zsolt Semjén to parliament, argues that its aim is to help secure a loan from the Chinese Export-Import Bank to finance the project.

A key piece of data in the loan agreement is what interest rate Hungary will pay. Observers suggest that negotiations about the loan have been dragged out because of disagreements on the exact terms.

The bill declares the project to have an “overriding public interest” and exempts it from several rules that regulate construction. Some 85% of the financing is going to come from China as a loan while 15% is provided by Hungary. Hungary has already applied for the Chinese loan.

“This bill is essential to ensure that the loan agreement is signed as soon as possible,” the government argues in the legislation.

The 150-km (93-mile) Hungarian stretch of the railway will be built by CRE Consortium which includes holding company Opus Global, controlled by Lorinc Meszaros, an associate of Prime Minister Viktor Orban.

The other half of the winning consortium is owned by China Tiejiuju Engineering & Construction Kft. and China Railway Electrification Engineering Group Kft., representing the Chinese state railways company.

According to a statement by Opus in 2019, the holding company could earn revenues worth about 295 billion forints ($1 billion) from the project over the planned five-year construction period.

The project has suffered significant delays. China, Serbia and Hungary signed a memorandum of understanding on the 370-km (230 mile) rail route in December 2014 in Belgrade and the project was expected to be finished by 2017.

Construction in Serbia started in late 2017 after Serbia borrowed $297.6 million from China’s Exim Bank.

Reporting by Anita Komuves; editing by Nick Macfie

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