AIIB to provide $65 million loan to Cambodia

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The Chinese-sponsored Asian Infrastructure Investment Bank is providing the loan to the Kingdom to restore rural productive capacity and support the government’s Covid-19 crisis response. AFP

The Chinese-sponsored Asian Infrastructure Investment Bank (AIIB) has said it will provide a $65 million loan to the Kingdom to restore rural productive capacity and support the government’s Covid-19 crisis response.

The loan project will be backed by the AIIB’s Covid-19 Crisis Recovery Facility (CRF) and will centre on investments in sustainable and climate resilient infrastructure in targeted rural areas, it said in a project summary published on September 4.


It said the announcement comes in response to the government’s request to the financial assistance “National Restoration of Rural Productive Capacity Programme”, which it provides under its Special Fund Window (SFW).

The AIIB set up the SFW under its Covid-19 CRF to provide interest rate buy-down for eligible sovereign-backed financing for lower-income member nations, it noted.

“The government’s fiscal response [to Covid-19, with the support of its] development partners does not leave much funding to restore the productive capacity of the rural regions, absorbing returning migrants with scarce jobs,” it said.

Royal Academy of Cambodia economics researcher Hong Vanak told The Post on Thursday that the government is cautious in accepting loans from international institutions and can still afford to take in more loans to develop infrastructure including roads, bridges and irrigation systems.

He said: “Our infrastructure system does not yet meet the needs of the people to transport their goods and agricultural products to the market.

“The loan will provide more opportunities for the government to develop more efficient infrastructure.”


Last September prior to Covid-19, Ministry of Economy and Finance spokesman Eng Touch told The Post that AIIB’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, Touch had hinted that the government regarded the AIIB as a potential main financing source for the Kingdom in the future.

Prime Minister Hun Sen has said the AIIB and China’s Belt and Road infrastructure fund provide the world with crucial alternative options for development.

“The AIIB provides complementary services to those of financial institutions such as the World Bank and the Asian Development Bank.

“The AIIB is not in competition with other powers – it was created to respond to countries in need of capital for development,” he said.

The National Budget Law for 2020 says the government planned to allocate a budget of $1.4 billion for construction and restoration of infrastructure, up 117.9 per cent compared to the amount spent last year.

In 2011, a joint survey by the Japanese government’s overseas aid body Japan International Cooperation Agency (Jica) and the International Monetary Fund (IMF) said Cambodia needs more than $13 billion in infrastructure by 2020 if it intends to continue attracting foreign investment.

It needs about $1.2 billion in infrastructure spending per year, half of which needs to go to new projects and the other half to the maintenance of existing ones, it said.

The National Budget Law for 2020 says the government planned to obtain foreign loans totalling around 1.4 billion Special Drawing Rights (SDR).

This is an international type of monetary reserve asset created by the IMF and is equivalent to nearly $2 billion.

As of June last year, the Kingdom’s had a public debt to the tune of $7.2 billion.

By the end of 2018, 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.

At the 16th China-ASEAN Expo, which was held in Nanning, China in September last year, AIIB president Jin Liqun said the bank will play a bigger role in promoting interconnectivity between China, ASEAN and other Asian countries, the State-run Xinhua News Agency reported.

In the past four years, Liqun said, AIIB has invested a total of $1 billion in 10 projects in six ASEAN countries.

Jin was quoted as saying: “I am confident that ASEAN members will gain greater benefits and dividends from our cooperation.”

Beginning operations in 2016, the bank has expanded its membership to 103 and approved 49 loan projects worth a total of $19.98 billion.