US cables detail PM’s thinking on ‘dirty debt’

Friday, 15 July 2011
Thomas Miller
The Phnom Penh Port

NEWLY-RELEASED diplomatic cables show that Prime Minister Hun Sen reportedly agreed to pay Cambodia’s 1970s-era Lon Nol “dirty debt”, despite his later calls for its cancellation. They also allege that Japan threatened to pull out of a development project in protest over attempts by the United States to collect the debt.

After years of negotiations that included trimming the debt by US$100 million, the US requested in 2006 that Cambodia begin settling the debt. While Cambodian authorities had never expressed enthusiasm about repaying the debt – estimated to have grown to US$445 million at the end of last year – the cables suggest Japan was also an obstacle to collecting the dues.

Then-Ambassador Joseph Mussomeli said in a December 2006 cable that Vongsey Vissoth, deputy secretary general at the Ministry of Economy and Finance, said the government “had run into problems with the Japanese Government” on the issue. “Already, said Vissoth, the GOJ has withdrawn funding on a joint Japanese-ADB infrastructure project in Sihanoukville because of the USG debt issue,” Mussomeli recounted. He added that his Japanese counterpart had recently “complained about the USG trying to collect on a Lon Nol-period debt accrued under wartime circumstances”.

Tatsuya Machida, counsellor at the Japanese embassy, declined to comment on the cables and said he had “no information so far to confirm or deny” Japan’s alleged role.

A 2007 cable shows that the dispute between the US and Japan was eventually resolved, but negotiations over the debt itself went nowhere.

According to a May, 2008 cable, Hun Sen accepted Cambodia’s responsibility for the debt but requested “flexibility” in repayment options, suggesting a lower interest rate and debt-for-development scheme.

“The debt is a state legacy, the PM said, and Cambodia will repay it,” Mussomeli reported.

But Cambodian officials later became more vocal in their opposition, citing shifts in public opinion on the issue. Ambassador Carol Rodley said in a December, 2009 cable that the “debt remains a continuing sticking point”.

In January last year, US Congressman Eni Faleomavaega discussed the issue with Hun Sen. The premier allegedly said that “asking approval from the National Assembly and the people to repay it would be a ‘real political risk’”.

“PM Hun Sen compared the Cambodian government’s predicament to that of being ‘squeezed by pliers – on the one side is the U.S. (the owner of the debt), and on the other side are the victims of a coup supported by the U.S.,’” a cable quoted the premier as saying. Minister of Economy and Finance Keat Chhon later “explained that Cambodian public opinion used to support the idea of recycling debt payments for assistance programs in Cambodia but had changed recently in favor of debt forgiveness”.

Then, Hun Sen announced in September that he would ask the US to cancel the “dirty debt”, and the long-stalled talks on the issue restarted during a visit by Secretary of State Hillary Clinton last October. US and Cambodian officials discussed the issue in March this year.

US embassy spokesman Mark Wenig said by email yesterday that “governments are generally responsible for the obligations of their predecessors”, adding that the US “still hopes that an agreement can be reached soon”.