Transparency of Chinese Loans

China is Cambodia’s largest foreign donor, but many aid agreements between the two nations lack transparency, raising questions about whether Beijing is trying to buy influence in the country and how the money is being spent.

According to data compiled by Cambodia’s government, Beijing has provided Phnom Penh with nearly U.S. $3 billion in loans for 47 development projects and U.S. $180 million in grants for another 10 since 2002.

However, little information has been made publicly available about the largest of the 10 grants—a U.S. $150 million agreement made in October last year for the construction of a sports complex ahead of Cambodia’s turn as host of the Southeast Asia Games (SEA Games) in 2023.

The first phase of construction on the Morodok Decho Sports Complex is around 70 percent complete and is being built by ruling Cambodian People’s Party (CPP) senator Ly Yong Phat’s LYP Group for U.S. $39 million, paid by Prime Minister Hun Sen’s government.

A Chinese company is expected to begin construction on the second phase of the project in 2017 using the U.S. $150 million package promised by Beijing. No information has been provided on the third phase of construction.

The sports complex will be located on 85 hectares (210 acres) of land in Prek Ta Sek commune, in the capital’s Russei Keo district, as part of LYP Group’s “Garden City” satellite city.

Both governments have said that the money pledged for construction of the complex is a grant and not a loan to be repaid, despite questions from members of the opposition Cambodia National Rescue Party (CNRP) over why China had offered such a large amount when none of its previous grants had surpassed U.S. $9 million.

CPP member and secretary of Cambodia’s National Olympic Committee Vath Chamroeun told RFA’s Khmer Service that his organization requested a sports complex from the government for the SEA Games but was rebuffed seven years ago because rural development projects took priority at the time.

In 2013, the government approved the committee’s request without providing information about the source of the money to be used for constructing the complex, he said.

It has since become public knowledge that China is backing the project, and while Vath Chamroeun said he has never seen the content of the agreement between the two nations, he has “no doubt” the money was a grant and not a loan.

“China’s assistance to Africa to build similar stadiums has all been provided like that,” he said, citing Beijing’s bid to promote its influence in countries with abundant natural resources through aid to their sports sectors.

Vath Chamroeun said that documentation on the grant is in the hands of Cambodia’s Ministry of Economy and Finance, adding that the ministry’s secretary of state Vongsey Vissoth had signed the agreement.

Repeated requests from RFA to the ministry to clarify the terms of the deal have gone unanswered.

Vongsey Vissoth told RFA during a public forum on Cambodia’s macroeconomic and financial management in February that the content of the grant and all aid agreements made between the government and foreign nations are publicly available and never classified.

“We have nothing to hide,” he said at the time.

But CNRP lawmaker Son Chhay—the vice president of the National Assembly’s (parliament) Committee on Economy, Finance, Banking and Auditing—said he had not been informed of the details of the package and called on the government to release them.

“As long as I have not seen an official document which confirms that this money is a grant from China, I will believe it is a loan,” he told RFA.

Loan discrepancies

In addition to concerns over the opacity of the Morodok Decho Sports Complex agreement, a number of discrepancies between the reporting of loans from China by different government entities in Cambodia have raised questions over how the money is being used.

In its report to the National Assembly in March this year on foreign loans for development projects obtained during the second half of 2014, the Ministry of Economy and Finance said Cambodia had secured four from China, while the Council for Development of Cambodia (CDC) cites only three for the same period.

The missing information in the CDC database is an economic and technical cooperation agreement in the form of an interest-free loan totaling U.S. $32 million and earmarked for several different projects.

Another discrepancy involves a loan agreement for the second phase of a rural electricity grid extension project signed by China’s and Cambodia’s governments on Sept. 29, 2014 which the Ministry of Economy and Finance valued at slightly more than U.S. $47 million and the CDC said was worth only U.S. $9 million.

Calls seeking clarification on the inconsistencies to Vongsey Visoth and Pen Thirong, the general deputy director of Cambodia’s budget department, have not been returned.

Buying influence

Amid the lack of transparency over management of loans, Cambodia owes more than U.S. $7.1 billion in foreign debt accumulated from 1993 to 2014.

China became Cambodia’s top foreign donor in 2010, and speaking at the February forum, Vongsey Vissoth confirmed that as of early 2016, China accounted for 45 percent of Phnom Penh’s total foreign debt.

He applauded the country’s generosity and contribution to Cambodia’s economic growth, adding that borrowing money from Beijing was “the correct political move.”

“Without China, there would be no [Cambodia] today—one must learn to accept that,” Vongsey Vissoth said.

“Why shouldn’t we go to China [for assistance]? We don’t want to favor China, but if they give us what we need, shouldn’t we take it?”

He dismissed concerns that the loans would make Cambodia beholden to China, saying the government preferred Beijing’s money because aid offered by other foreign lenders comes with “too many strings attached.”

‘Everyone wants something’

Ear Sophal, the author of Aid Dependence in Cambodia: How Foreign Assistance Undermines Democracy, disagreed.

“The idea that there are no strings attached [to loans] is completely wrong, because everyone wants something,” he told RFA.

“China might want more favorable attention to its investments, for example, and might want contractors from home to build the road, bridge or … dam. And so that means business is going back to China in any case.”

Ear Sophal also questioned the value of assistance to the people of Cambodia such as that provided by China for the Morodok Decho Sports Complex, saying the money could be better spent fixing the country’s broken health-care system or improving education.

“Instead, you would have a stadium built for that amount of money, which does not seem logical in terms of the cost,” he said.

According to Ear Sophal, Chinese aid has done little to contribute to the sustainable development of Cambodia because the agreements lack transparency and fail to hold Cambodia accountable for how the money is spent.

Reported by Cheng Meng Chou for RFA’s Khmer Service. Written in English by Joshua Lipes.