T HE $2.8 million worth of Chinese manufactured military trucks and jeeps received
by the Royal Government on Dec 9 are part of a larger Chinese loan of about $10 million
signed without the approval of the Minister of Finance Keat Chhon, according to minstry
The $10 million loan, with a 5% interest rate, was allegedly negotiated and signed
by Cabinet Ministers Sok An. Although Keat Chhon had personally written in October
to Second Prime Minister Hun Sen saying he disapproved of the loan, the deal went
ahead nonetheless, according to senior sources.
The loan does not pass directly through the national budget but will be used to buy
Chinese goods, the sources say. One Finance official suggested that most of it would
go towards purchasing military equipment.
The deal was also castigated by opposition leader Sam Rainsy.
"This [deal] is illegal because any loan contracted by the government should
be authorised by the National Assembly. The National Assembly is not aware of this
loan contracted with China for military purposes," Rainsy said at a Dec 17 press
News of the loan follows ousted First Prime Minister Prince Norodom Ranariddh's claim
last month that 30 containers of ammunition from China had arrived in Sihanoukville
and were bound for CPP-aligned military units.
Western and Asian diplomats confirmed the ammunition shipment, with one source speculating
that it included weapons as well, but were unclear on any details of a larger deal
between China and Hun Sen.
"There were 30 containers, maybe more," said one source. "The deal
was not government to government but done through arms dealers with most going directly
to Hun Sen... only a trickle is going to the Ministry of Defense."
Both the delivery of Chinese trucks and the arms shipment have raised concerns in
ASEAN over a secret military build up by Hun Sen in advance of next year's expected
elections. Thailand is reportedly particulary concerned over the military transfers
and was said to have raised the issue privately with Chinese officials at the ASEAN
summit in Kuala Lumpur this week.
More broadly, ASEAN is concerned over what it refers to as "the China factor"
"ASEAN is quite wary," said one diplomat, noting that China was "fishing
in troubled waters".
"ASEAN is concerned that China may want to use Cambodia as a launch pad to subvert
ASEAN," said the source. "They want a toe-hold."
When Hun Sen presided over the donation ceremony at Olympic Stadium for the 186 trucks
and jeeps, he praised China's attitude toward Cambodia since July. "Related
to the past events, though some international circles did not rightly understand
the real situation, some friendly countries have taken their right and fair stance
towards the Cambodia problem," said Hun Sen.
China accorded rapid recognition to the new-look government after July. Prime Ministers
Hun Sen and Ung Huot went to visit King Sihanouk in mid-August at his Beijing residence,
and were then received by Premier Li Peng at a Communist Party seaside resort. The
Chinese premier was quoted as saying that China would "never interfere",
adding that Cambodia's problems "must be resolved by the Cambodian people".
At the end of September, another delegation led by Sok An went to China and met with
the Chinese Trade Minister and other officials. They agreed to draft several memoranda
of understanding on agriculture, power, fisheries and maritime transport. Sok An
is believed to have discussed the loan during that visit.
The Ministry of Finance official said Sok An has neither the constitutional power
nor the technical know-how to negotiate and sign loans from foreign governments.
According to Royal Government regulations, only the Minister of Finance can sign
loans and commit resources from the national budget. "In that story, they have
stepped over [the minister's] head directly," said another source from the ministry.
Keat Chhon declined to comment on the loan.
The loan's 5% interest rate, a commercial level, surprised ministry officials. Usually,
Cambodia is granted loans with very low interest rates.
"Through the financial organizations, the interest rate never surpasses half
a percent," said a financial expert. "This rate is very high and illegal."
Sources at the Finance Ministry said that signing a loan is a very important matter
and if the Minister does not agree, it can jeopardize loan repayments and the country's
The loan signed between Sok An and China will not appear in the budget nor in the
annual World Bank report on Cambodian debt. "The minister requested that the
loan not appear," said a ministry official.
The commercial loan granted by the Chinese is the latest sign of China's policy to
support Hun Sen and develop closer ties with the CPP. Minister of Defense Tea Banh
reportedly said that the trucks will be used during any dry-season offensive against
Ranariddh loyalists and Khmer Rouge forces in the northwest.
China was previously an ardent supporter of the Khmer Rouge, during Pol Pot's years
in power and afterwards when they backed the resistance forces fighting the Vietnamese-backed
regime in Phnom Penh in the 1980s. But military analysts generally agree that Chinese
support for the KR ceased upon the signing of the Paris Peace Accords in 1991, even
if the rebels were still able to draw on old caches of arms and ammunition along
the Thai border.
A discernable shift in Chinese policy became evident last year, highlighted by Hun
Sen's five-day visit to Beijing in July when he met with President Jiang Zemin and
Premier Li Peng. At the time the Second Prime Minister said the visit would help
end "the suspicion of the past". As well, official party-to-party relations
(between the Cambodian People's Party and the Chinese Communist Party) were discussed.
Moreover, the Chinese were believed to have been outraged by Ranariddh-led contacts
with Taiwan, including discussions on a possible direct air link with Taipei and
the opening of a Republic of China consular office in Phnom Penh, viewing the development
of closer relations with Taiwan as a slap in the face for Beijing given long-standing
Chinese support for Funcinpec during its years on the Thai border.
A few weeks after Hun Sen's visit, former Khmer Rouge foreign minister Ieng Sary
announced that he would negotiate a ceasefire with the government. Sary was the Khmer
Rouge's key point man in its relations with China, responsible for overseeing the
provision of Chinese financial and military support for the KR.
At the time, in Aug 1996, one China specialist noted: "The Chinese have made
a cool calculation. They like the King, but they have to think of their own interests.
They waited to see what the coalition would do for three years and now they have
decided to back Hun Sen."