​Cambodia joins global infrastructure fund in Davos | Phnom Penh Post

Cambodia joins global infrastructure fund in Davos

Business

Publication date
19 January 2017 | 07:26 ICT

Reporter : Kali Kotoski

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Prime Minister Hun Sen talks about investment opportunities in Cambodia at the World Economic Forum in Switzerland. Facebook

Cambodia has become the first Asian country to sign on to the Sustainable Development Investment Partnership (SDIP), a global initiative that aims to unlock the funding of infrastructure projects through public-private sector partnerships.

The announcement came during Prime Minister Hun Sen’s four-day visit to the annual World Economic Forum (WEF) meeting in Davos, Switzerland.

Speaking at a press conference, the premier said that he hoped the international program, which is backed by the WEF and the Organisation for Economic Co-operation and Development (OECD), would bridge the gap between financing infrastructure projects beyond the planning stage.

“If we review project development in our country, you could fill several warehouses with all the plans that have been shelved because they lacked financing,” he said.

While he applauded China’s push into the region through the $40 billion Silk Road infrastructure fund, Cambodia’s inclusion into the Asian Infrastructure Investment Bank (AIIB) and the larger One Belt, One Road initiative, he said more investment was needed to develop the Kingdom’s infrastructure.

“That is not enough and we need to mobilise all resources from the private sector for infrastructure,” he said.

The prime minister added that he hopes the SDIP would lead private sector funds into four priority projects that include a new airport, a highway from the capital to Sihanoukville’s port, upgrading roads that lead to the Vietnamese border and modernising the country’s languid railway system.

The SDIP, launched in mid-2015, aims to mobilise $100 billion in private sector funding and has been particularly active in Sub-Saharan Africa where it supports large-scale energy and transportation projects. To date, the initiative has over 30 members that include governments, local and global private banks, institutional investors and public and private funders seeking to support development in emerging economies.

Keiko Honda, executive vice president of the Multilateral Investment Guarantee Agency (MIGA), a part of the World Bank that helps to mitigate private sector risk for the SDIP, said Cambodia’s inclusion into the program could provide more opportunities to mobilise investment.

“Right now there is a huge gap in infrastructure financing and we need to leverage more private investment,” she said, noting that traditional donor-led funding models were globally beginning to dry up.

However, she said that ultimately for Cambodia to benefit from SDIP, it was a matter of how much “governments and people are willing to bear the costs”.

Notable private-public sector infrastructure projects that have been undertaken in the Kingdom include the Lower Sesan II hydropower dam backed by China’s Huaneng Group, the Malaysian-built coal-fired plant operated Cambodia Energy Ltd, and the country’s three international airports, developed by French-owned Cambodia Airports.

Each of these projects was based on the build-operate-transfer (BOT) model, with government concessions lasting between 25 and 40 years.

Jayant Menon, lead economist for Asian Development Bank’s Office for Regional Economic Integration, said as Cambodia develops it needs to slowly shift away from traditional development financing and focus on cultivating public-private partnerships (PPPs).

“But for this switch to work effectively, it also needs to strengthen its institutions and improve governance to create confidence in an investment climate conducive to lumpy, long-term investments,” he said.

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