Logo of Phnom Penh Post newspaper Phnom Penh Post - ‘BRI to greatly benefit Cambodia’

‘BRI to greatly benefit Cambodia’

Content image - Phnom Penh Post
Hun Sen shakes hands with Chinese counterpart Li Keqiang in Beijing. Hun sen’s facebook

‘BRI to greatly benefit Cambodia’

Recent research by Moody’s Investors Service revealed Cambodia, which currently has a stable B2 credit rating, is among the countries with the greatest potential for reaping economic benefits from China’s Belt and Road Initiative (BRI).

In the new report, Moody’s focuses on the potential long-term economic gains and near- to medium-term macro-stability risks for 12 emerging and frontier countries in South Asia, Southeast Asia and Central Asia.

Moody’s vice-president and senior credit officer William Foster said in the research that while BRI focuses mainly on investing in large transportation and energy projects that close critical infrastructure gaps, the project helps expand production capacity and contributes to both near-term growth and long-term growth potential in recipient countries.

“We see the greatest potential for economic gains in Pakistan, Mongolia, Kazakhstan and Cambodia,” he said.

However, Moody’s has also warned the recipient countries about overreliance on Chinese funds, saying that while BRI supports Asian infrastructure-led growth, the project can add to fiscal and external risks for the weakest nations.

“Inefficient project implementation and the absence of macroeconomic and structural reform requirements in many Chinese loans can lessen longer-term credit benefits for some sovereigns,” Moody’s said.

Business Research Institute for Cambodia CEO and chief economist Hiroshi Suzuki told The Post on Sunday that while China is currently facing great difficulty due to mounting international pressure – mainly from the US – Cambodia has good relations with China. The Kingdom can benefit much more from that country.

“I am impressed by the good negotiation skills of Prime Minister Hun Sen,” he said.

’Debt trap’

Regarding the “debt trap”, he said Cambodia is very different from other countries such as the Maldives, Pakistan and Sri Lanka.

“The debt level of Cambodia is very low,” he said, referring to figures shown in the Cambodia Public Debt Statistical Bulletin issued by the Ministry of Economy and Finance in March.

Citing the Phnom Penh-Sihanoukville Expressway as an example – which is projected to cost around $2 billion – Suzuki said the entire cost will be borne by a Chinese private company and it is said that the Cambodian government has no debt or guarantee for debt.

“The government also made great efforts to avoid the accumulation of debt by using the BOT [build-operate-transfer] method,” he said, adding that concern for Chinese investments and lending is rising.

“The people in Sihanoukville are facing problems such as increasing cost of rent, strong pressure for relocation by Chinese development, and other problems related to public order and security."

“It is said that the steam of such anger is being fanned. I hope the government will put some measures in place to avoid an explosion of popular anger,” he said.

For Cambodia, BRI investment is predominantly focused on the energy sector – both hydropower and coal power plants – and transportation projects, Moody’s said.

China’s cumulative investments in Cambodia’s energy sector currently totals more than $11.5 billion or 90 per cent of the 2018 GDP, with approximately $5.3 billion of that since 2013, according to Moody’s.

“We envisage that these power sector projects will help reduce supply-side bottlenecks,” Moody said.

It said several transportation projects are underway, including the $2 billion Phnom Penh- Sihanoukville expressway, which will reduce transportation time and cost for goods travelling to Cambodia’s sole deep-water port.

“Overall, we believe these infrastructure investments will help to raise Cambodia’s growth potential,” it said.

Centre for Policy Studies director Chan Sophal told The Post that while other donors have not done enough to rebuild the Kingdom’s infrastructure that was destroyed by three decades of civil war and have focused more on soft infrastructure, China has.

“Cambodia has been benefiting substantially from Chinese investment so far including BRI projects in the form of infrastructure, which is a top priority for economic development."

“In the future, Cambodia will benefit more from improving individual and institutional capacity to ensure fair deals and the sound implementation of projects financed by China, as well as other sources,” Sophal said.

However, he said risks remain – including an overreliance on China and over-indebtedness in the long term.

MOST VIEWED

  • Would you like fries with that? US burger chain makes Phnom Penh debut

    California-based The Habit Burger Grill restaurant chain is all set to serve up a delicious array of charbroiled burgers and sides at its newest international location in the centre of Phnom Penh. The Habit is “renowned for its award-winning Charburgers grilled over an open flame,

  • Banteay Meanchey flood victims receive aid

    Prime Minister Hun Sen on Wednesday provided aid to more than 10,000 families affected by flooding in Banteay Meanchey province’s Mongkol Borei district and offered his condolences to the 18 victims who drowned in the province over the past week. He said flooding had occured in

  • PM urges caution as Polish man tests positive for Covid

    The Ministry of Health on Wednesday reported that a 47-year-old Polish man tested positive for Covid-19 after arriving in Cambodia on Monday. There are a total of six Covid-19 patients currently in the country, all of whom are being treated at the Khmer-Soviet Friendship Hospital

  • Banteay Meanchey floods kill one more as death toll reaches 15

    As floodwaters start to recede in Pursat, Battambang and Pailin provinces and Phnom Penh, Banteay Meanchey continues to bear the brunt as one more person was killed on Monday, bringing the total number of flood-related deaths to 15 in the province this month. Banteay Meanchey provincial

  • Serving coffee with a side of robots

    The eye-catching glass building surrounded by greenery at the intersection of Streets 371 and 2002 in Phnom Penh’s Sen Sok district is more than just another coffee shop where you can while away a few hours. UrHobby House cafe is filled with robots and characters from

  • Floods prompt evacuations in Kampong Speu

    Rain-induced floods and water flowing from Kampong Speu province have submerged the houses of 1,527 families living close to the Prek Thnot River in Spean Thma, Tien, Kong Noy and Roluos communes in Phnom Penh’s Dangkor district, according to data from local authorities. Spean Thma