May 30, 2013 / 4:53 PM / 4 years ago

UPDATE 1-Tanzania signs port deal with China Merchants Holdings

* China Merchants Holdings to build port, railway network

* Port to relieve pressure on Dar es Salaam port

* Construction to start after 2015 (Adds context)

By Fumbuka Ng'wanakilala

DAR ES SALAAM, May 30 (Reuters) - Tanzania has signed a framework agreement with China Merchants Holdings (International) Co Ltd for the construction of a new port, special economic zone and railway network that could involve more than $10 billion, the government said.

A senior official said talks with the Chinese government were under way on financing of the project.

The government has said construction of the port in Bagamoyo some 75 km north of the commercial capital, Dar es Salaam would relieve pressure on the Dar es Salaam port, the second largest in east Africa after Kenya's Mombasa.

Foreign Minister Bernard Membe said the framework agreement between Tanzania and the Chinese port operator was signed during Chinese President Xi Jinping's visit to east Africa's second-biggest economy in March.

The involvement of the Chinese company and the scope of the deal were not made public then.

"We have attracted China Merchant Holding (International) to come and build a modern fourth generation port at Bagamoyo," Membe announced in Parliament.

"Along with the construction of the port, the same firm will also build an export processing zone, a modern town plus road and rail infrastructure."

Deputy transport minister, Charles Tizeba, said: "The entire cost for the construction of a new port, economic processing zone, railway network and other infrastructure at Bagamoyo is $10 billion."

"We are negotiating with the Chinese government for the financing of this major infrastructure project," he said.

A senior official at the state-run Tanzania Ports Authority (TPA) said he expects the port construction to start after 2015.

The Dar es Salaam port handles $15 billion worth of goods annually, equivalent to 60 per cent of Tanzania's GDP in 2012.

Overall volume handled by Dar es Salaam port jumped 20 percent between July 2012 and February 2013 to 8.314 million tonnes of cargo, according to the TPA.

The port is a gateway for international trade for east Africa's landlocked countries, including the Democratic Republic of the Congo, Zambia, Rwanda, Malawi, Burundi and Uganda.

The World Bank said in a report this month inefficiency at Dar es Salaam port was costing Tanzania and its neighbouring countries up to $2.6 billion per year.

China, which built a railway linking Tanzania and Zambia in the 1960s and 1970s, is financing a $1.2 billion a 532 km (330 mile) natural gas pipeline.

In 2011 China's Sichuan Hongda Co. Ltd. signed a $3 billion deal with Tanzania to mine coal and iron ore. (Reporting by Fumbuka Ng'wanakilala; Editing by George Obulutsa and Anthony Barker)

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