New China deals inked

Rann Reuy and Don Weinland
Friday, 03 February 2012
The Phnom Penh Post

State-owned Export-Import Bank of China will lend US$302 million to Cambodia for three road and irrigation projects, officials said yesterday.

The loan will increase Cambodia’s debt to China by about 20 per cent to about $1.8 billion, according to figures disclosed yesterday by Minister of Economy and Finance Keat Chhon (pictured).

Exact figures for the Kingdom’s debt to China have been debated, with Prime Minister Hun Sen putting the figure at $2 billion in November.

However, the National Assembly’s finance commission chairman, Cheam Yeap, projected as much $6 billion just prior to the premier’s estimate.

The projects covered by the China Exim Bank loan included the 313-kilometre national roads 214 and 76 and an irrigation system in Kampong Cham, Keat Chhon said.

In August, Exim Bank gave Cambodia a $198.2 million loan at current exchange rates for Chinese-built Z-9 helicopters, the Post reported.

Increasing future debt obligations, not only to China but to other creditors, was cause for concern, Chea Kimsong, manager for the development issues program at the NGO Forum for Cambodia, said yesterday.

“While more loans may generate more returns for the economy, revenue collection should be improved too so that it may balance the future debt obligation,” he said.

The payment of interest and principle on Cambodia’s total loans was 3 per cent of the 2012 $2.6 billion national budget, Chea Kimsong said, larger than the budget for some of the Kingdom’s ministries.

Interest rates on the loans were not mentioned at yesterday’s signing.

Rates on concessional loans from China averaged 1.83 per cent as of October of last year, according to data from the NGO forum.

The rate is a percentage point higher than the average rate given from other donor countries and banks, 0.83 per cent.

Nor were contractors for the projects identified.

Chinese loans for infrastructure projects often return to China as companies such as state-owned companies China Road and Bridge Company tend to win bids for the contracts, the Post reported last year.

Cambodia has asked China’s Ex-Im Bank for loans on an additional four projects worth about $200 million, Eang Sophallet, Prime Minister Hun Sen’s personal advisor, said after a meeting between the bank and the premier on Wednesday.