The Asian Development Bank has held back part of a $15 million loan and suspended terminal renovations as it urges the government to renegotiate the concession agreement with a French firm over the operation and management of Siem Reap airport.
A visiting mission from ADB’s headquarters in Manila criticized the government late last week for lacking a concrete plan to develop the airport and the civil aviation industry. The mission also condemned the agreement with Societe Concessionnaire de l’Aeroport because of its potential reduction of the government’s airport-generated revenue.
“The adopted operations and maintenance concession for the Siem Reap Airport Project has limited the potential for government revenue, capacity building of [State Secretariat of Civil Aviation] staff and sustainable development of the civil aviation sector,” read the report presented to the government last Thursday.
The mission, which was in Cambodia to study the financial feasibility of the agreement and future development in the country’s transport sector, conducted a presentation last Thursday at the Council of Ministers. The copy of the presentation paper was obtained this week.
According to the paper, the mission blasted the government for lacking a competitive bidding process for the airport management that would have maximized its revenue and encouraged an innovative proposal.
The mission also criticized the deal for not clearly specifying percentages of the profit sharing, nor clarifying SCA’s commitment to maintenance. There is also a risk that the concession agreement could further limit potential government revenues and development, the report said.
The concession deal guarantees SCA more than 90 percent of airport revenues and 70 percent of the airport’s operation profits while the government is responsible for repaying the ADB loan.
Officials of the Civil Aviation have said that the deal would reduce the government’s revenue, saying Siem Reap is only the airport to generate profits from passenger service charges and airplane navigation fees. It is currently making about $30,000 per week, much of which subsidizes losses at the country’s other six airports.
But the government defended the deal, claiming it would not jeopardize the country’s development.
“It makes profits,” said Khieu Thavika, spokesman for the Council of Ministers. “If it doesn’t make any profit, the government would not do it.”
SCA has also contended that the deal would benefit the government because SCA would be able to develop the airport as an international-class facility. The government would generate enough revenue to repay the loan by expanding international flights to Siem Reap, the firm claimed.
The airport has begun to undergo renovation and expand with the bank’s $15 million loan. When the government signed the agreement handing Siem Reap airport management over to SCA in late April, the first $9 million phase was just completed and another $5 million terminal renovation was about to start.
However, the government failed to consult either the “Open-Sky” policy or notify the bank of changes in airport management, as stated in the loan agreement.
“Without coordination and without consultation, ADB cannot fulfill its role as a development partner…[ADB] cannot function as lead agency and continue its planned transport program,” the mission report said.
The mission proposed canceling the terminal expansion phase and renegotiating the deal with SCA. The bank would provide technical assistance to prepare a new bid for future development on the existing airport and another international airport in Siem Reap to satisfy the increased traffic demands, and to accommodate both domestic and international passengers.
“We are looking at how we can improve the concession agreement. We try to assist the government,” said ADB country acting head Anthony Jude.
Jude said Wednesday that the bank plans to send another mission to Cambodia next month to finalize the future direction of the Siem Reap airport development project. The terminal expansion phase, he said, will be suspended until then.
Tea Sotha, undersecretary of state for the Civil Aviation, downplayed the mission’s criticism.
“ADB doesn’t oppose the government decision,” Tea Sotha said. “It’s only asked the government not to be careless with the agreement.”
Philippe Rose, commercial director for SCA, said Wednesday that the French firm has not been informed of the mission’s outcome.
“We have put the project forward, submitting a number of proposals. We will soon have some reply from the government,” Rose said.
(Additional reporting by Van Roeun)