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Logo of Phnom Penh Post newspaper Phnom Penh Post - ASEAN Infrastructure Fund could be within Cambodia's reach

ASEAN Infrastructure Fund could be within Cambodia's reach

Access to the region’s largest collective financial resource, the ASEAN Infrastructure Fund, could be easier than expected for Cambodia, according to an Asian Development Bank economist.

Initiated in May, the fund is expected to lend up to US$4 billion and leverage up to $13 billion for the region’s infrastructure needs until 2020.

ASEAN countries and ADB have provided initial equity of $485 million for the fund.

The 10-nation economic bloc may require $60 billion a year in infrastructure financing during the next decade.

The fund originally looked off limits to Cambodia, the Post reported earlier this year.

Under Cambodian law, the government can borrow only on concessional rates.

But borrowing from it would cost substantially less than commercial loans, and with “blended” financing costs, rates could be comparable to concessional loans, Arjun Goswami, ADB’s director of regional co-operation, said.

“With ADB co-financing, the blended rate of the total loan is still very much concessional and, in the case of Cambodia, can stay within the range of borrowing costs the Government is currently taking,” he said, noting that 70 per cent of the fund would be financed by ADB and the rest by ASEAN countries. “This means immediate access to borrowing by all member countries is possible at the start of the fund’s operations.”

In Laos, lumped into the least-developed-country category with Cambodia, a number of revenue-generating projects had been identified as potential recipients of the fund, Goswami said.

ADB and country contributors to the the fund must make sure any projects that receive funding will make significant economic and social contributions to the county.

“As long as funding costs can be absorbed and the project stays financially viable, borrowing should be done to make the project happen,” Goswami said. “In reality, there could be viable infrastructure projects in Cambodia that can immediately benefit from AIF borrowing, and consultation with the government is still open in identifying them in due course.”

Cambodia’s agriculture sector had long suffered from high logistics and energy costs, and progress had been slow at relieving the shortages that have made the Kingdom’s rice industry uncompetitive on international markets, Mekong Oryza Trading senior manager of business development David Van said yesterday.

A reliance on inland trucking, with no completion date in sight for Cambodia’s railway, would keep prices high, Van said.

“All this is still just a work in progress,” he said, referring to Cambodia’s attempt to lower power costs by building hydropower dams.

The Kingdom would need $13 billion in infrastructure investment by 2020, Goswami said.

The demand, however, might not be met as financial difficulties shrank donor countries’ financial resources.

“Available financing from the likes of AIF that the government can touch on immediately could help further relieve the infrastructure funding shortage to continue developing crucial assets to keep attracting more investment to the country,” he said.

To contact the reporter on this story: Don Weinland at don.weinland@phnompenhpost.com

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