Cambodia to borrow $591m from Chinese banks

November 4 2010
By Jamil Anderlini in Beijing
Financial Times

Cambodia’s largest mobile phone company will borrow $591m from Chinese banks to help pay for a contract with Chinese telecom group Huawei Technologies.

The loan, which will be the biggest financing project of its kind in Cambodia’s history, underscores the growing influence of China and its companies in the country’s economy.

CamGSM, the wholly-owned telecom subsidiary of Royal Group, Cambodia’s largest private conglomerate, will sign a financing package arranged by Bank of China, and a five-year $500m equipment and services contract with Huawei in a ceremony scheduled for Thursday afternoon.

The signing ceremony in the capital Phnom Penh will be attended by Wu Banguo, one of the nine most powerful men in China’s communist hierarchy. A number of other agreements, including large electricity deals involving Chinese state power producer Huadian, will also be signed during Mr Wu’s visit.

The flurry of Sino-Cambodian deals comes just three days after Hillary Clinton, US secretary of state, said during a visit to Phnom Penh that Cambodia should maintain a foreign policy that was not “too dependent” on China.

Chinese companies have built much of Cambodia’s infrastructure and Beijing is one of the country’s biggest aid donors.

Diplomats and analysts say China’s influence over the country’s internal and external affairs is growing, as evidenced by Cambodia’s decision to repatriate 20 Uighur asylum seekers to China last year following intense pressure from Beijing.

Two days after the deportations China signed $1.2bn worth of investments and aid agreements with Cambodia.

The Uighurs were seeking refugee status because of fears they would be tortured or executed on their return to China.

At the time, the US government called the deportation decision a “violation of Cambodia’s international obligations” and later suspended some military agreements with the country.

The finance and procurement deals to be signed on Thursday between CamGSM, Bank of China and Huawei are not unusual for Chinese companies, which are increasingly looking for growth overseas, especially in emerging markets.

Chinese state-controlled banks regularly provide cheap financing for offshore expansion and Huawei has a $35bn standing credit line from China Development Bank. Huawei did not immediately respond to a request for comment.

Royal Group will use part of the $591m Chinese bank loan to refinance a $421m bridging loan from Standard Bank and Australia and New Zealand Banking Group, according to Mark Hanna, Royal Group’s chief financial officer.

That loan helped Royal Group last year to buy the majority stake in CamGSM held by Luxembourg-based Millicom International Cellular, giving it 100 per cent control of Cambodia’s largest mobile telecom company.

Additional Reporting by Kathrin Hille