While Cambodia has been posting steady economic growth over the last two decades, the economy is still constrained by issue regarding the infrastructure quality and availability such as electricity and transportation. The priority of infrastructure and connectivity development has been emphasized in government development policy and strategies including the Rectangular Strategy, the National Strategic Development Plan, and the Industrial Development Policy 2015–2025.
ADB reported the total investment needs for the transport, power, telecommunications, and water supply and sanitation infrastructure would be approximately $8 trillion over the 11-year period from 2010 to 2020, or almost $750 billion a year; for 32 of the organization’s 45 developing member countries including Cambodia. The figure will become much higher when taking into account the costs of climate mitigation and adaptation.
In Cambodia in particular, Prime Minister Hun Sen was quoted in the media saying the country needs US$500-700 million a year for infrastructure development such as roads, bridges, electric power, and irrigation system. The public sector cannot afford this much of investment. The private sector is reluctant to invest in hard infrastructures, given the high risks and low returns, and resulting in a limited public-private partnership financing mechanism. Financing mainly comes from multilateral development agencies such as ADB and the World Bank, and bilateral donors including China, Japan, South Korea, and Australia. Indeed, the government uses over 87% of its public debt to finance infrastructure investment. In addition to multiple international cooperation on infrastructure development in the country, Cambodia hopes to take advantage of China’s Belt and Road Initiative (BRI).
July 2018 marks the 60th anniversary of the diplomatic tie between Cambodia and China. By all accounts, it has been a friendly tie with both nations supporting each other on issues related to their core interests. Cambodia has been in full support of Chinese initiatives, including the BRI and the Lancang-Mekong Cooperation. Both countries signed the Outline of Bilateral Cooperation Plan to Jointly Build the Silk Road Economic Belt and the 21st Century Maritime Silk Road in May 2017, during Prime Minister Hun Sen’s visit to China to attend the Belt and Road International Cooperation Summit. This plan seeks alignment of the two countries’ development strategies and focuses on the following key areas for cooperation, including physical infrastructure development and industrial cluster development such as special economic zone. Both countries have also set out guidelines for determining priority projects and agreed to establish a Belt and Road Working Group tasked with planning, coordination, and implementation of the action plan. The implementation of the Outline Plan fall under the mandate of the Ministry of Foreign Affairs and International Cooperation (MFAIC), and the ministry is working to raise higher awareness within the government to coordinate policies from different sectors. The MEF is the leading government agency to compile and consolidate project proposals from line ministries to include into the BRI framework.
Under the framework, Cambodia can access to financing institutions such as China-led Asian Infrastructure Investment Bank (AIIB), Silk Road Fund, and the New Development Bank; as alternative sources of capital for infrastructure and connectivity development projects in the country. These alternatives are even more crucial after Cambodia’s development status was revised by the World Bank, moving it up into lower-middle income territory. While the status upgrade is a point of pride for many, indicating success in poverty alleviation programs and an evidence of income level improvement, it comes with its own set of challenges. The World Bank uses a country’s income level to determine which to lend to and at what interest rate. The ADB also uses a similar GNI-based classification on its lending criteria.
There is no doubt the BRI is welcomed by many in Cambodia, particularly within the government. There are some critics, however, who are concerning about BRI-linked projects in the country. This has brought a good potential for a more insightful exploration to identify local concerns and opportunities regarding the effective implementation of BRI-linked investments, and how issues regarding communication and information gaps, inclusive engagement, risk management, investment impact, and sustainability, etc., can be addressed. In fact, I feel honored and rewarded to have received this exciting opportunity to conduct this research for ADB and am willing to work my best on this assignment.