China’s ‘No Strings’ Aid Increasingly Attractive

The timing couldn’t have been better.

After a week in which one NGO was suspended and others warned to “readjust their work,” and the World Bank was finally forced to reveal that it had stopped loaning to Cambodia, the government announced over the weekend that China would be sinking hundreds of millions of dollars into trade and aid.

Though the Chinese Embassy and the Ministries of Finance and Foreign Affairs have not shared details on the 29 deals signed with Beijing, the timing of the agreements is nonetheless symbolic.

With that single signing ceremony on Saturday, the government has demonstrated to its Untac-era development partners that times have certainly changed in Phnom Penh.

After years of rapid expansion here on all fronts, China is now poised to be the country’s largest “development” partner.

While Japan remains Cambo­dia’s biggest bilateral donor—the Center for the Development of Cambodia estimates that the Ja­panese disbursed $104.7 million in 2010—China, which handed out $100.2 million last year, is now firmly in the number two position.

And whereas Japan’s aid profile has changed little over the years (the 2010 figure is just $1 million more than what they gave Cam­bodia in 2006), China’s largesse has nearly doubled over the same period.

But as Chinese loans, investments and genuine aid pour into Cambodia, the disconnect between the disbursement stipulations made by Beijing and those of Phnom Penh’s more traditionally reform-oriented “development partners” is stark.

A June 2011 Cambodian De­velop­ment Resource Institute study on China’s role in poverty reduction in Cambodia concluded that “aid from China is primarily based on the actual needs of Cambodia, and it is not linked to any condition or any repayment (‘without strings attached’).

China’s development assistance has, unsurprisingly, become an attractive alternative for a government that is struggling, and failing in some cases, to keep pace with the rights-based agenda of primarily Western development agencies.

One NGO was suspended and two were hauled into the Ministry of Foreign Affairs for a dressing down recently over their advocacy on evictions, while the World Bank admitted it had halted funding projects until evictions at Boeng Kak lake in Phnom Penh were halted.

The latest deal with China also comes on the heels of a bold an­nouncement by Minister of Fi­nance Keat Chhon that the government would be indefinitely postponing November’s donor meeting. The meeting, a longstanding get-together between officials and donors, was a very public opportunity for the country’s aid providers to weigh the government’s performance on a raft of reform benchmarks and pledge money to the country for the year ahead.

The donors, who pledged some $1.1 billion in 2010, about half the government’s annual budget, have remained silent on news of the postponement.

Unsurprisingly, civil society groups and members of the opposition party have expressed unease with China’s growing position in Cambodia’s economy, and some have noted the old adage that there is no such a thing as a free lunch.

Phil Robertson, deputy director of Human Rights Watch’s Asia division, said that China’s condition-free funding coupled with the focus of its in­vestment projects—namely, rubber, mining and hy­dropower-make for a damaging mix.

Mr Robertson also questioned the wisdom of courting Chinese aid as a complete replacement for traditional donors.

“Access to international markets and trade, education of youth, support for local livelihoods and myriad other development projects arise from the mix of development partners supporting Cambodia,” he said.

“If Cambodia’s leaders think they can go it alone with China, they should think again.”

Chea Vannath, an independent political analyst, pointed out that conditions on loans and aid do not necessarily correspond to change within a country, and Cambodia should treat China as any other donor.

“It’s like a rules game. If you want to play with the World Bank, the ADB, you know the ground rules. But it doesn’t mean it comes from within,” Ms Vannath said.

“If Cambodia wants to become a democratic country, it will come from within. Not because it is imposed on them by Western or Eastern countries. Not because of the ‘strings attached,’” she said.

And at the same time, ex­plained Ms Vannath, there are sound economic reasons for Cam­bodia to branch out to new sources of funds.

“What Cambodia is trying to do is diversify the source of funding, not to put all the eggs in one basket, in order to ensure aid re­mains stable,” she said, noting that this was hardly a new policy.

“In the ’60s, the same thing oc­curred. The Cambodian government decreased aid from the Western countries and increased it from China…. What’s happening now is not an exception. One superpower becomes richer, the other becomes poorer, and the world around it keeps evolving as such.”

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