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China's loan intrigue - how much was it anyway?

China's loan intrigue - how much was it anyway?

It was by all accounts a big deal: On November 2, Prime Minister Hun Sen emerged

from a meeting with his Chinese counterpart Zhu Rongji and told reporters of a

gift "beyond our expectations".

The Chinese premier, he said, had

declared that all Cambodia's debts to the Middle Kingdom would be

relieved.

Or has it? The answer is that most people don't know, while

those that do aren't telling. What seems clear, though, is that the offer might

not be as generous as everyone first assumed.

An article posted on

China's Ministry of Foreign Affairs website that same day stated that all debts

had not in fact been written off. The offer instead referred only to those debts

that had fallen due.

"Zhu announced that the Chinese government has

decided to write off all Cambodian debts to China that have matured, which is

part of China's plans to cut or write off debts owed to China by Asian nations,"

it said.

Neither the Chinese nor the Cambodian government would clarify

what the deal was worth or - what could prove equally intriguing - when the

loans were contracted.

The deputy secretary-general at the Ministry of

Economy and Finance, Vong Soy Visoth, is in charge of accounting for the

government's debt, but couldn't help. Also unable to assist was government

spokesman Khieu Khanarith.

The first secretary at the Chinese Embassy in

Phnom Penh, Wang Tian, also did not know. On a request two months ago for the

same information, he had said the figure might be "related to confidential and

undisclosed material".

What is clear is that the Cambodian government has

borrowed at least $210 million from China since 1999. The five-year $10 million

Agreement on Economic and Technical Cooperation kicked off last January, and

back in February 1999 Hun Sen inked a $200 million loan for infrastructure in

Beijing. Both agreements were said to be interest free.

And in April

1999, the then economic and commercial counselor at the Chinese embassy, Chai

Zhizhou, told the Post the $200 million loan was very loosely

defined.

"There hasn't been any discussion of a [loan] repayment

schedule," he said at the time. "There's no time limit [on the loans

repayment]."

However none of that $210 million has matured. So if the

Chinese government's own website is to be believed, it isn't included.

It

is also not clear whether on-lending loan agreements - money lent to one party

who in turn lends it to another at a higher interest rate - that went to private

Cambodian enterprises, were part of that February 1999 pledge.

On

Christmas Day two years ago, the People's Daily in China reported that the

Cambodian government would on-lend a 50 million Yuan ($6 million) Chinese loan

to a private enterprise to construct a textile factory with a repayment period

of 20 years.

Two months earlier the same paper reported a 99.6 million

Yuan ($12 million) loan for a joint venture fiberboard plant in Kampong Cham

with Cambodia's Men Sarun Import-Export Corporation Limited. That loan was due

to mature in 2012, so is likely not part of this deal.

So with only vague

details provided on the nature of the loans, observers were left to speculate

about the actual amount. One report had the figure as high $1 billion. Some

speculated that the debt eradicated was in fact loans to the Khmer

Rouge.

That was certainly the conclusion of opposition leader Sam Rainsy,

a former finance minister. He referred to the debt at a press conference in

which he downplayed the significance of the ASEAN summit to Cambodians.

"Nobody knows what it's about. How much, when from," he said of the

debt. He mused that it may have stemmed from the Pol Pot regime, which meant

Cambodia would never have repaid it anyway.

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