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A state-owned Chinese company is set to start construction of a delayed $350 million toll road designed to reduce travel time from Uganda's Entebbe Airport to the capital Kampala by two-thirds in an effort to attract foreign investment, Ugandan officials said Friday.
The Chinese-funded project was originally scheduled to begin in the middle of last year, but was delayed by disputes over compensation for land and resettlement of the local population, according to the Uganda National Roads Authority.
Those issues have now been resolved, clearing the way for China Communications Construction Company Co. (1800.HK)(601800.SH) to commence work in July, the state-run authority said in a statement.
"It's a very important project for the country," said Denial Alinange, an UNRA spokesman. The road "will attract investments and stimulate development."
Because the project is being funded by the Exim Bank of China under a 2010 loan agreement, Uganda waived requirements for an open bid for the contract.
Like other Chinese building companies, China Communications Construction, listed on the Shanghai Stock Exchange earlier this year and in Hong Kong in 2006, is under pressure to find new projects as growth of the world's second-biggest economy slows, according to analysts. Uganda is East-Africa's second-largest economy, after Kenya's, with a gross domestic product of about $17 billion.
Some analysts have voiced concern about the cost of the 54-kilometer (34-mile) road. "It will be the most expensive road project in the Ugandan history and perhaps in the entire world," said Nicholas Sengoba, an independent researcher in Kampala.
China Communications Construction officials could not be reached for immediate comment. The Chinese embassy declined to comment.
Costs of the project, which will provide an alternative to the current 40-kilometer airport-Kampala highway, were pushed up by the nature of the road, which will have as many as six lanes, several flyovers and a 13-kilometer spur route, according to Alinange. At least 500 families living along the proposed route were compensated, he said.
China is now the Uganda's main source of foreign direct investments, accounting for least 30% of a total of $1.4 billion received in 2011, according to the state-run Uganda Investment Authority.
More Chinese companies are eying opportunities in the country's construction, agriculture, and oil and gas sectors. In February, China's state-owned CNOOC Ltd. (CEO) completed a joint venture deal with U.K.'s Tullow Oil PLC (TLW.LN) and French oil company Total SA (TOT) to develop the country's oil fields in at least three blocks in the Lake Albertine Rift basin. Under the deal, CNOOC will operate the Kingfisher oil discovery and the Kanywataba prospect, located at the Southern tip of Uganda's Lake Albert.
-By Nicholas Bariyo, contributing to Dow Jones Newswires; 256 75 262 4615; Nicholas.Bariyo@dowjones.com