Millions of Dollars at Stake as Hun Sen and Keat Chhon Try
To Appease Foreign Donors And Get Aid Money Flowing
In a July 1996 meeting in Tokyo, then-first prime minister Prince Norodom Ranariddh told international donors his government was committed to furthering social development, creating a rule of law and stopping illegal logging.
The international donors forked out $501 million in loans and grants.
On July 3, 1997, in Paris, Finance Minister Keat Chhon’s concluding remarks to the second Consultative Group meeting promised his government would intensify efforts to accelerate social development, develop a rule of law and stop illegal logging.
Donors offered $450 million in loans and grants.
Next week, Prime Minister Hun Sen and Keat Chhon are going to Tokyo to meet donors with a 41-page request for $1.35 billion over three years. Once again, key promises involve social development, rule of law and a halt to illegal logging.
Hun Sen and his government must convince an increasingly skeptical donor community they have the will and the power to put the world’s money where the government’s mouth is.
Cambodia’s second democratically elected government has a lot of convincing to do—and knows it. Illegal logging and evasion of import-export taxes have accelerated in recent years despite pledges from the government to control them.
“Cambodia…is asking you about your willingness to re-launch and increase your financial and technical assistance,” Keat Chhon wrote in a Jan 15 letter to international donors.
“As for you, you are asking us if the conjecture of conditions inside Cambodia is such that this assistance will be put to effective use.”
Despite pledges at earlier donor meetings, the government has not been able to fulfill its promises in many areas.
Cambodia’s ability to collect taxes is still marginal, its collection rate in 1998 dropping to 8 percent of gross domestic product—about half the average of other low-income nations.
Instead of following through on promises to enact public reform, the new government has created new ministries and boosted the numbers of civil servants.
As to the much-vaunted goal of ensuring a rule of law, the Center for Social Development, a local think-tank, recently reported that 85 percent of Cambodians say corruption is a normal part of daily life.
Authorities have made no arrests in the approximately 100 killings since July 1997 the UN has judged to be politically motivated.
Convincing the international community that Cambodia means business this time is a high-stakes issue. Historically, about half of the national economy has come from international donors, including NGOs and foreign governments. After fighting broke out in July 1997 and effectively ousted Prince Ranariddh, a slow-down in foreign assistance resulted in a 43 percent drop in 1997 in transfers for projects and grants from 1996, government documents state.
The suspension of aid and drop in investor confidence because of political instability, in combination with drought and a fall in tourism all contributed to the economy slowing to 1 percent growth in 1997 and zero in 1998, the World Bank reported. In the previous five years, the World Bank stated that economy’s annual growth rate was about 6 percent.
In a speech that he will probably echo in Tokyo, Hun Sen told parliamentarians on Nov 30, “The new stage has begun and many things need to be changed in order to make this government effective and stronger than ever.
“Respect of human rights and development—aiming to oppose, weaken and completely end abuses of power and violations of law—will make the law truly the defender of the weak…The economic government is the important subject at this time.”
The prime minister will be meeting with Japanese government representatives while Keat Chhon leads Cambodia’s delegation before the CG on February 25 and 26. The CG delegation will include leaders from Cambodia’s finance, agriculture, rural development and women’s ministries.
The CG will include Cambodia’s potential bilateral and multilateral donors, including representatives from the NGO community, The World Bank and the International Monetary Fund. They will meet at Tokyo’s Akasaka Prince Hotel.
The meeting is considered to be Cambodia’s best chance for securing aid commitments—although the timing of this event is less than favorable, coming as it does in the middle of many foreign funding cycles.??? It is also a prime opportunity for donors to air concerns on how the government is using their aid.
Meanwhile, parliamentary opposition leader Sam Rainsy has been lobbying against providing the Cambodian government direct budgetary aid. Calling the administration “a sinkhole,” Sam Rainsy has been urging countries to provide aid only to agencies and NGOs independent of the government. Only in this way, Sam Rainsy has been saying, can donors ensure that their taxpayers’ money is helping the Cambodian poor and not lining the pockets of corrupt leaders.
The last two Consultative Group meetings and three previous International Committee on the Reconstruction of Cambodia (ICORC) WHEN WERE THESE?? meetings churned up nearly $3.5 billion in pledged aid—much of it from the world’s taxpayers. The 1997 Development Cooperation Report for Cambodia reported about $2.3 billion in aid was disbursed by the end of that year.
Aside from direct benefits, foreign assistance can attract private money. More funding is needed to improve infrastructure that can draw investment, especially in rural areas, said the head of Cambodia’s foreign investment office.
“We need to build the roads, we need to build the bridges, “ said Sok Chenda, the secretary-general of the Council for the Development of Cambodia.
And with many countries in Asia still reeling from a regional economic crisis that started in Thailand in mid-1997, economic analysts speculate foreign investment in Cambodia will be slow in coming. Foreign aid could fill the gap.
“What the government is hoping for is to get this aid flowing again—that’s the focus—because substantial trade and investment for the coming year will be slow,” one Asian diplomat said.
To make the reforms that donors demand, foreign assistance is key, the government’s CG proposal stresses.
Controlling logging, demobilization and reintegrating the armed forces, overhauling of the judicial system, cutting the bloated civil service, developing infrastructure development, and paying for health, education and rural development are among hundreds of goals outlined in the document.
Many diplomats and donor representatives have said the government’s proposals look reasonable and sound, but warn that bilateral donors will likely attach tough conditions to any aid.
Japan, Cambodia’s largest bilateral donor with $523 million in loans and grants since 1993, is reported ready to provide long-term, low-interest loans for the first time in 30 years. Locally based Japanese diplomats say that any direct assistance is still under consideration.
The government has taken some public steps in recent weeks to show it is ready to do its part in reform. Ten logging concessions have been cancelled, a Value Added Tax enacted and a proposal to tax purchases of alcohol, cigarettes and gasoline passed in the National Assembly. Hun Sen announced the government would cut the armed services by 40 percent in five years.
“The Prime Minister now likes to take action and is ready to implement effectively the measures he’s undertaken,” said Sieng Lapresse, a government spokesman. “It’s not a showcase, but a commitment before the CG.”
Keat Chhon, leader of Cambodia’s delegation to the CG meeting, points out that the government has implemented reforms over the past few years to the best of its ability.
“More recent reforms have also taken place, over the last five years, and although they are still suffering from inadequate implementation, they have yielded tangible, positive results,” Keat Chhon wrote in his January letter to the international community. “Macroeconomic stabilization has been the result of reform; it was not merely a matter of spontaneous generation!”
And, Keat Chhon points out, the success of future reform efforts will be affected by Cambodia’s still-fragile meld of coalition agreements between political parties and recently reintegrated Khmer Rouge troops. With political parties still wrangling over the proposed Senate and key Khmer Rouge defectors threatening a return of civil war if they are tried for crimes against humanity, the stresses are obvious.
“The challenge—and it is a big one—is to get people to live together, and to get erstwhile adversaries or enemies to work together,” Keat Chhon wrote.
On the domestic front, Hun Sen’s challenge will be pressuring the powerful interests involved in logging, smuggling and high-level corruption to work with him on the reforms he is now publicly promoting, diplomats and analysts said.
“Hun Sen is now the only captain on the ship,” said director of CICP Kao Kim Hourn referring to the end of the dual prime minister-ship after the the July 1998 elections. “He’s the one in charge….If he doesn’t have the power to do it, who does?”
Most of the international community is silent on whether and how much they will commit in Tokyo. The government’s proposal document said that of the $1.35 billion requested, about $581 million has already been committed, leaving about $766 million to be raised.
But whatever aid comes out of bilateral negotiations between Cambodia and various agencies and nations in coming weeks, most donors will likely hand over their aid packages with strict conditions.
It is this the strongest wrapup quote we can find, “When the hurdles of implementation are placed in the way, that will be the test of the government’s commitment,” one western diplomat said.
Indeed, Hun Sen’s challenge in his term as Prime Minister will be coercing the powerful interests involved in logging, smuggling and high-level corruption to work with him on the reforms he is now publicly promoting, diplomats and analysts said.
“Hun Sen is now the only captain on the ship,” the executive director of the Cambodian Institute for Cooperation and Peace Kao Kim Hourn said, referring to the end of the dual prime minister-ship after the July 1998 elections.
“He’s the one in charge….If he doesn’t have the power to do it, who does?”