Taiwan wins $296m in legal claims against African nations

State-run bank's lawsuits seen as warning against forging China ties

TAIPEI/DAKAR • A state-run Taiwanese bank has successfully sued two African countries for US$212 million (S$296 million) in unpaid loans and brought a claim against a third, court documents showed, in a possible warning to allies that switched sides in Taiwan's spat with China.

The three claims brought by the Export-Import Bank (Eximbank) of the Republic of China before a US district court against Guinea-Bissau, Central African Republic and Democratic Republic of the Congo amount to a total of at least US$261.4 million, including loans and interest. It is unclear how the countries will settle the claims.

Eximbank won the cases against Central African Republic and the Congo, while the one against Guinea-Bissau is pending.

"We see this as a commercial loan case," said Eximbank vice-president Johnson Liao. Most of Eximbank's loans are international and are repaid, he said. "Usually there is a long period of negotiation. Then when we can't find a way, we have to go through the legal process to protect the debt claims."

But analysts said the legal action by Eximbank, which falls under Taiwan's Finance Ministry, is likely to be a warning about the costs of forging diplomatic ties with China.

Central African Republic and Guinea-Bissau have withdrawn support for Taiwan since the loans were disbursed. The Congo did not ditch China after receiving the money.

All the claims filed at a district court in New York state are for loans dating back to the early 1990s, when Taiwan and China used "dollar diplomacy" to attract allies in Africa after the end of the Cold War. According to court documents, the borrowers each failed to repay any principal and most of the interest on the loans.

Taiwan's Foreign Ministry said it could not comment as the case involves commercial loans. A Guinea- Bissau official said the government is committed to responding to this claim under the rule of law, but its priority is the welfare of its people and the country's stability.

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

"It is not surprising that Taiwan would seek repayment from nations that switched allegiance," said Mr Robert Manning of think-tank Atlantic Council, noting the new tensions in China-Taiwan relations since the election of Ms Tsai Ing-wen as president last year.

Ms Tsai is the leader of a ruling party that traditionally advocates independence for Taiwan, a red line for Beijing.

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

All the claims filed at the district court in New York state are for loans dating back to the early 1990s, when Taiwan and China used "dollar diplomacy" to attract allies in Africa after the end of the Cold War. According to court documents, the borrowers each failed to repay any principal and most of the interest on the loans.

Only 21 mostly small and poor countries recognise Taiwan. In the last two decades, Taiwan, whose economy is 20 times smaller than China's, has struggled to compete with Beijing's billions of dollars in aid and debt annulments.

REUTERS

A version of this article appeared in the print edition of The Straits Times on April 01, 2017, with the headline 'Taiwan wins $296m in legal claims against African nations'. Print Edition | Subscribe