May 30, 2019 / 8:27 AM / 20 days ago

Cambodia PM dismisses fears of Chinese debt trap

PHNOM PENH (Reuters) - Prime Minister Hun Sen dismissed on Thursday fears that Cambodia was falling into a Chinese “debt trap”, saying its loans are low interest, low risk and were not a threat to national independence.

Cambodia's Prime Minister Hun Sen arrives at Beijing airport ahead of the Belt and Road Forum in Beijing, China, April 25, 2019. Greg Baker/Pool via REUTERS

Speaking at a Future of Asia conference in Japan, Hun Sen said China respected Cambodia’s sovereignty when it came to using Chinese loans.

“I’ve heard so many people saying that Cambodia may fall into China’s debt trap,” Hun Sen said.

“For Cambodia, we maintain our sovereignty in borrowing, we borrowed according to the projects we need, and China respects our decision.”

His comments were broadcast on state television in Cambodia.

China is Cambodia’s biggest aid donor and investor, pouring in billions of dollars in development funds and loans through its Belt and Road initiative, which aims to bolster land and sea links with Asia, the Middle East, Europe and Africa.

Hun Sen said Chinese loans were low interest and long-term, and that overall debt remained low, at 21.5% of gross domestic product (GDP).

“Some countries owe up to 200%, 300% or 500% of their GDP,” Hun Sen said.

Cambodia’s public debt was $7 billion as of last year, according to the Ministry of Economy and Finance, and the country had repaid 19 percent of it.

Cambodia has for years come under criticism for human rights violations and other problems but Western countries hoping to see improvements have little leverage when China can be counted on to help in the event of Western aid cuts.

The European Union, which accounts for more than one-third of Cambodia’s exports, including garments, footwear and bicycles, in February began an 18-month process that could lead to the suspension of special market access for least developed countries because of human rights violations.

China has pledged to help Cambodia if the EU withdraws the market access, Hun Sen said in April during a visit to Beijing.

Reporting by Prak Chan Thul; Editing by Robert Birsel

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