When it comes to economies in the developing world, it is often impossible for countries to avoid taking loans from foreign investors for development. What is most important, however, is that these loans be accurately allocated with as much transparency as possible. Cambodia’s foreign debt has risen to $6 billion this year, and experts have asked the government to take transparency more seriously.
According to the public debt newsletter released by the Ministry of Economy and Finance in September, Cambodia signed a concession loan with development partners of about $732.06 million, equivalent to 74.83 percent of the legal debt allowance, including a bipartisan loan worth $571.66 million and a multilateral loan amounting to $160.4 million.
The purpose of these loans is to finance public investment projects in sectors prioritised by the government. They hope that these loans will contribute to the country’s long-term sustainability and increase economic and manufacturing productivity. About 94 percent of the loan will be used for infrastructure and the rest will cover other priorities.
“The government seems to lack transparency and be hesitant when asked to show people the loan amounts from their development partners. Even things like how the loans are being allocated lacks transparency,” said Mean Ny, an independent economic analyst and social growth researcher.
“An approximate amount of 75 percent of international legal debt allowance is considerably high. However, the government generally has their reasons for the uses of the loans on infrastructure development projects and others. They also have the capability to return back the loans to the creditors,” he added.
“I support the development of infrastructure development such as roads and bridges throughout the whole country as done by the government. We can see the new national roads are being paved. However, I think that the government should be more transparent to ensure efficiency for their projects and high quality production for their people.”
Dr Ny also said that the government had to think long term about how the country’s economy and development could function without these large loans. It is unsustainable to need these loans to cover basic developmental costs, and more effort needs to be put in to making sure the money is spent wisely.
“People used to criticize the roads built by the Chinese. By the time they move to build another road somewhere else, the road they just built is damaged. There are cases where these things were caused by a lack of transparency and proper inspection,” Dr Ny said. “Since His Excellency Sun Chanthol became the minister at the Ministry of Public Works & Transport, we have seen positivity from more people as the quality of the new roads is better than before.”
Um Vathdara, an economics professor at Panhasastra University of Cambodia, said the government plays an important role in all of these development projects, therefore they know how much should be spent to finish a project or development goal.
“For economics, borrowing isn’t the problem, but they need to be certain about what the loan has been allocated for and whether it is used according to its intended purpose,” he said. “As a citizen, we don’t know the government’s challenges. However, people request that the government disclose information and be more transparent about the uses of loans for the whole country’s growth.”
“Is the loan that the government acquired being invested in public projects that will earn back profits in return? How long do they need to pay back those loans?” he asked.
From 1993 to the first half of 2017, the government signed and acquired concession loans from development partners worth about $9 billion, with 87% of the loans going toward infrastructure and the rest going to other projects.
The newsletter said that the government has paid back about $1 billion of these loans, and $100 million in the first half of 2017.
As of June 2017, Cambodia’s public debt was $6.2 billion, up from $5.8 billion at the end of 2016.