Assembly Approves Loans to Correct for Overspending [-Blame the overspending on Hun Xen's gov't]

The move was passed by a vote of 80 lawmakers of 102 present, in a session to recorrect the national budget for the last two years. (Photo: Taing Sarada)

Chun Sakada, VOA Khmer
Phnom Penh Monday, 27 December 2010

“Cambodia needed more money to equip Cambodian soldiers to defend national sovereignty and territory.” [KI-Media Note: How come the Viet soldiers still come to Cambodia at will?]

The National Assembly on Monday approved the borrowing of foreign loans worth more than $300 million, after the government spent beyond its budgets for 2009 and 2010.

The move was passed by a vote of 80 lawmakers of 102 present, in a session to recorrect the national budget for the last two years.

Loans will be taken from the foreign community to refill the coffers for $46.8 million and $265 million for 2009 and 2010, respectively, according to a request from the administration to the Assembly.

Finance Minister Keat Chhon told the Assembly Monday the government has a clear policy for concessionary loans for investment in infrastructure and to promote economic growth.

Cheam Yeap, a lawmaker for the ruling Cambodian People’s Party and head of the National Assembly’s finance committee, said the loans would make up for deficiencies in revenue stemming from the 2008 economic crisis and from overspending from the military standoff at Preah Vihear temple.

“Cambodia needed more money to equip Cambodian soldiers to defend national sovereignty and territory,” he said.

Yim Sovann, a spokesman and lawmaker for the opposition Sam Rainsy Party, said Cambodia must be careful with foreign loans.

“If we depend on the loan holder who looks at hour natural resources, land, oil and mining resources, and come to violate Cambodia’s rights, and destroys our environment, we must absolutely avoid the loan,” he said.

Opposition members did not support this loan initiative because it was not clearly allocated, he said.

Prime Minister Hun Sen wrote in a statement to the Assembly the amount of these loans “will not bring Cambodian loans to a worrisome situation.”

Student Loans Remain a Heavy Risk for Lenders

More than 28,000 students graduated from 45 private and 18 state institutions last year, but the number who went on to jobs is not known. (Photo: AP)

Pich Samnang, VOA Khmer
Phnom Penh Thursday, 26 August 2010

“A student may end up jobless after graduation, so this is a high risk business.”

A lack of protections and an unpredictable job market have made lending institutions reluctant to provide student loans, banking officials say.

Students may be hard-pressed to find work after they graduate a university or they may simply not finish school. This has led to closed doors for poor students, especially in the countryside.

“If we do this, it is very risky, because we don't know whether students will finish their educations,” Sophan Nary, deputy CEO for Acleda Bank, told VOA Khmer Tuesday. “Only if the students can earn some income to pay the bank back monthly can we consider offering them loans. Or only if they have guarantees to make sure the bank can get back the money it lent.”

But even with some guarantees, lending institutions are reluctant.

“Some students are orphans, so we need to consider the guarantees also,” said Horn Rozana, the chief executive officer’s secretary for Phnom Penh Commercial Bank.

Nearly 40,000 students graduate from high school in 2007, the latest figures from the Ministry of Education show, and officials say the number is increasing yearly. But the high cost of education means that many do not finish their university studies, which cost an average $1,600 for four years.

And with no system in place to avoid risks for lenders, much of that money has to be saved ahead of time or earned along the way.

“Unlike in developed countries where they have social security numbers for their citizens, in Cambodia an individual identity cannot be tracked down,” Chea Phalarin, general manager of Amret, a microfinance institution, said. “If the person goes to a far away province or somewhere else, how can we get him to pay back the money he owes if we do not know where he is?”

Amret will sometimes offer loans to parents, who are less risk, he said. “We can’t lend to students directly because we are not confident they can pay back the money.”

In places like the US, where student loans are common, graduates begin paying back their loans after they find employment. But in Cambodia, the job market is uncertain, creating another roadblock to lending.

More than 28,000 students graduated from 45 private and 18 state institutions last year, but the number who went on to jobs is not known.

“A student may end up jobless after graduation, so this is a high risk business,” said Kong Phean, a brand developer for Cambodia Mutual Savings and Credit Network, or CMSC.

CMSC did provide 13 students with loans in 2009, but that went to students at well-known universities who were at least in their third year.

“Those in third year are less likely to drop out of school,” Kong Phean said.

There is also a belief among some lenders that school tuition is not high enough to warrant loans.

“Tuition at the moment is still affordable for most families to support their children’s education, so the demand for student loans is still not huge,” said Bun Mony, CEO of Sathapana Ltd., a microfinance lender.

Mak Vann, a secretary of state for the Education Ministry, said the ministry wants as many students to go to university as possible, but Cambodia needs to put a system in place.

“There is still a lot more to learn, say, on how it is done in the US for example,” he said.

And the ministry does offer up as many as 4,000 scholarships a year to poor high school graduates, he said.

For students like Mok Socheat, who borrowed $400 a year ago from CMSC, loans are worth it, even if he has to pay interest.

“It helped reach my goal,” he said, having landed a job as a machine operator for an electric company after graduating from the Cambodian Institute of Technology. “Without the loans, I would probably not have finished my students and would not have this job.”

When the Going Gets Tough, Most Borrow Local

By Ros Sothea, VOA Khmer
Original report from Phnom Penh
13 October 2009

Although financial institutions have flourished in recent years, informal credit systems at the village level remain popular for many Cambodians, a practice that could eventually hurt the economy and add risk to both lenders and borrowers, economists say.

Phlong Pisith, who recently completed research for Northern Illinois University, in the US, found that when money is badly needed, many still turn to rich neighbors or local leaders, a system that relies on relationships and confidence between borrows and lenders and is devoid of contracts.

Focusing on Kandal province’s Koh Thom district, where informal credit remains very popular, Phlong Pisith found that informal lending did not even require collateral.

“The traditional credit system is still active in Cambodia nowadays,” he told VOA Khmer recently. “Because when people need money urgently, they can’t go straight to the bank or micro-finance institutions. So they first go to borrow, at interest, from those they know.”

These informal systems have historic roots and are used by fishermen, farmers and business owners alike, as a way to create more jobs or improve livelihoods.

“It is very hard to borrow money from banks,” said Chum Kimsuv, a farmer in Battambang province. “There are many documents needed, such as signatures from the commune, as well as photographs. It’s too complicated. If we borrow from [local] capitalists, we already know each other well.”

Doung Chamreoun, a fisherman from Kandal, said he was a bank customer, true, but he also couldn’t abandon informal systems, which remain important to his daily living.

That may be, but economists warn these systems will eventually hurt the economy, as some lenders quickly get into trouble with high interest rates. In informal systems, these can reach from 5 percent to 10 percent a month, while credit in the formal sector is around 2.5 percent or 3 percent.

Creditors, meanwhile, risk losing money because they have no guarantees, said Lim Sovannara, an economist for UNDP. People continue to use the systems because they have limited education and limited trust of financial institutions, he added.

Phlong Pisith also found, though, that informal lending can support formal lending, helping borrowers make payments on time instead of risking their collateral.

Still, said Chan Sophal, president of the Economists Association of Cambodia, only formal credit systems will better the economy over time.

Numbers of borrowers, lenders or loan amounts in this informal section are unknown to the National Bank, its general-director, Tal Nay Im, said. But she claimed the number is falling, as more people turn to financial institutions.

Cambodia has more than 50 banks and micro-finance lenders, though only the latter provide money to the rural poor. Up to 2008, the National Bank estimates that some 850,000 people have taken advantage of such loans, a number that has jumped from a reported 44,000 borrowers in 1994.

Still, a large amount of informal lending takes place, said Ros Seilava, deputy secretary-general of the Ministry of Economy and Finance. The government is now strengthening its policies to encourage more interest rate reduction among micro-finance lenders, while encouraging people to use formal services.

ADB remained largest preferential loan provider for Cambodia in 2006 [and Khmer Children will be the largest debt payers in the world]

July 13, 2007

The Asia Development Bank (ADB) remained to be the largest provider of preferential loan for Cambodia in 2006, local media reported on Friday.

The amount of preferential loan that ADB provided to Cambodia averaged at 54.6 million U.S. dollars a year, the Chinese-language Commercial News quoted the government's efficiency report about the international aid in 2006 as saying.

The kingdom received altogether 136 million U.S. dollars of preferential loan in 2006, compared with 171 million U.S. dollars in 2005, said the report.

The decrease was not a surprise, as the international cooperative partners gave more donation and less loan, it said.

The transportation sector was the largest receiver of preferential loan in 2006, totaling 29.1 million U.S. dollars, it added.

Almost one third of the kingdom's 14 million population live in poverty. ADB, the World Bank and some countries' state-owned banks used to be major loan providers for the kingdom.

Source: Xinhua

Japan to help Cambodia develop power project with 22 mln USD loan [-Cambodia owes $132.5 mln to Japan]

March 24, 2007

Japan will provide some 22 million U.S. dollars of low-interest loan for Cambodia to implement the Greater Mekong Power Network Development Project, local media said on Saturday.

Deputy Prime Minister and Minister of Foreign Affairs and International Cooperation Hor Namhong and Japanese Ambassador Fumiaki Takahashi signed the exchange of notes here on Friday in presence of Cambodian Prime Minister Hun Sen.

According to the notes, the Japan Bank of International Cooperation (JBIC) will offer the loan at an annual interest rate of 0.01 percent with a payment period of 40 years.

The loan will serve the construction of two power transmission cables between Sihanoukville and Kampot, improvement of the kingdom's electricity equipment, construction of power transmission network among Phnom Penh and its neighboring provinces and some other projects.

So far, the Japanese government has provided some 132,519,000 U. S. dollars of loans for the Cambodian government, according to a press release from the Japanese Embassy.

Source: Xinhua

ADB dumped $185 mln into the Tonle Sap in the past 3 years

March 06, 2007
ADB provides 185 mln USD for Tonle Sap Initiative programs in Cambodia

The Asian Development Bank (ADB) has provided about 185 million U.S. dollars to various programs for developing the Tonle Sap Lake of Cambodia in the past three years, a local Media reported on Tuesday.

The programs consist of loans, grant aids and aids for technique projects, which are worth about 130 million U.S. dollars, the Kampuchea Thmey Daily said.

The other 55 million U.S. dollars from ADB will be spent for developing and exercising the process of development and management of the Tonle Sap basin, the paper said, adding that this program will also help to reduce poverty for the people who live on and around the Tonle Sap Lake.

Meanwhile, a two-day forum on the Tonle Sap Initiative ended Tuesday with renewed commitment by the Cambodian government to conservation and sustainable development in the Tonle Sap basin, an ADB press release said.

The Tonle Sap Initiative is a suite of programs designed to restore the environment and improve the livelihood of communities in the Tonle Sap Great Lake, the press release said.

The forum was organized by ADB and the Cambodian government and attended by more than 200 people, including representatives from local communities, provincial and national authorities and civil society organizations, it added.

Source: Xinhua