Cambodia has expressed no interest in applying for a loan from the Asian Infrastructure Investment Bank (AIIB), even as it announced it will invest another $1.09 billion in six projects in Asean countries.
Ministry of Economy and Finance spokesman Eng Touch told The Post on Tuesday that the bank’s loan conditions were unsuitable for Cambodia and its public debt management.
“The Kingdom asks the AIIB to consider taking measures to provide highly concessional loans and technical assistance for Least Developed Countries such as Cambodia,” he said.
However, he said the government regards the AIIB as a potential main financing source for the Kingdom in the future.
“For the medium and long term period, Cambodia regards the AIIB as its financing source – in addition to existing developing partners – to boost economic growth and competition,” he said.
At the 16th China-Asean Expo, which was held in Nanning, China last week, AIIB president Jin Liqun said the bank will play a bigger role in promoting interconnectivity between China, Asean and other Asian countries, Xinhua News Agency reported on Sunday.
In the past four years, he said, AIIB has invested a total of $1 billion in 10 projects in six Asean countries.
“I am confident that Asean members will gain greater benefits and dividends from our cooperation,” Jin was quoted as saying.
A draft of the 2019 National Budget shows that the government plans to borrow an additional $1.94 billion to meet its planned budget for this year.
Business Research Institute for Cambodia (BRIC) chief economist Hiroshi Suzuki told The Post on Monday that Cambodia currently enjoys the most favourable concession loans from its development partners.
“Cambodia has a good opportunity to attract many kinds of funds with good conditions from international organisations, donor countries like Japan and the private sector,” he said.
He said entities such as the Asian Development Bank, the World Bank and the Official Development Assistance arm of Japan’s Ministry of Foreign Affairs provide loans with “very concessional conditions” with an interest rate of 0.01 per cent per annum with a 40-year maturity, which includes a 10-year grace period.
Headquartered in Beijing, AIIB is a China-initiated multilateral development bank which focuses on infrastructure investment.
Beginning operations in 2016, the bank has expanded its membership to 100 and approved 46 loan projects worth a total amount of $8.5 billion for its 18 members.
However, Suzuki warned of a possible “debt trap” as the Chinese government is AIIB’s biggest shareholder, with a 30 per cent stake.
“Many economists and governments such as the US have voiced strong concerns over the ‘debt trap’.
“To avoid the Chinese ‘debt trap’, such as the case in Sri Lanka, it will be very necessary to carefully and discreetly mull over and assess borrowing from the AIIB,” he said.
By the end of last year, the national debt had been driven largely through bilateral and multilateral concessional loans, principally from China. The Kingdom owes China nearly half of its total debt – roughly $3.4 billion.