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Chinese Bank an Opportunity for Aid Reform, Fulbright Scholar Says


Chinese Finance Minister Lou Jiwei, right, toasts with guests at the signing ceremony of the Asian Infrastructure Investment Bank in Beijing, Oct. 24, 2014.

Chinese Finance Minister Lou Jiwei, right, toasts with guests at the signing ceremony of the Asian Infrastructure Investment Bank in Beijing, Oct. 24, 2014.

China’s newly proposed, yet controversial, regional investment bank could be an opportunity for Cambodia to​ prove it can use foreign aid more effectively, a Cambodian Fulbright scholar says.

Sok Vanseka, a Fulbright master’s student in international business and economic law at Georgetown University, is currently interning at the International Monetary Fund in Washington.

She told the “New Voices” radio call-in show on Monday that while there are concerns that the new bank could worsen Cambodia’s aid dependency, the alternative source of funds, if well managed, could be beneficial. (Listen to full show in Khmer here.)

“It depends on how the [Cambodian] government responds to the new bank,” she said in an interview in Washington. “Cambodia started reforming its management of public funds at least since 2008 and has since put in place policies and best practices relating to use of loans, which is a positive step. I don’t think the creation of the new bank in 2015 or 2016 will hinder ongoing financial reform.”​

Ms. Sok Vanseka, Fulbright Student of Master of Laws (International Business and Economic Law) at Georgetown University, Washington, DC at VOA Khmer's to talk on New Voices radio call-in show about “Impacts of China's new AIIB Development Bank on Developm

Ms. Sok Vanseka, Fulbright Student of Master of Laws (International Business and Economic Law) at Georgetown University, Washington, DC at VOA Khmer's to talk on New Voices radio call-in show about “Impacts of China's new AIIB Development Bank on Developm

The Chinese-led Asia Infrastructure Investment Bank was launched in Beijing by 22 countries in October 2014 and is expected to take shape at the end of this year. The bank is expected to have funds of up to $100 billion and is seen as a rival to the Western-dominated World Bank and Asian Development Bank.

Recent interest by European countries to join the Chinese-led AIIB bank has rankled Washington.

Cambodia, a founding member of the bank, has already been receiving large amounts of Chinese investment and development loans. Between 1994 and 2012, China invested a total of $9.17 billion, and by 2012, Chinese aid amounted to $2.7 billion, according to the East Asia Forum.

Civil society groups have criticized such large amounts of money as undermining the West’s ability to push for governance reforms and greater respect for human rights.

Sok Vanseka said Cambodia’s effective use of any future funding from the new bank would largely depend on its own political will, though China would also play a role.

“If the provider can follow the standards set by the World Bank or the Asian Development Bank, which have conditions for sustainable development, to promote human rights and protection of the environment, such conditions would have to be met by the receiving country,” she said.

Critics of the AIIB are concerned that no such standards will be imposed by the new bank. If no such aid effectiveness conditions are imposed, the burden of self-management will rest on Cambodia, Sok Vanseka said.

Cambodia’s main sources of infrastructure funding have come from foreign aid, especially Western donors who put conditions on aid, while Chinese bilateral aid generally comes with no official strings attached.

Despite concerns about competition between regional financial institutions, Sok Vanseka said cooperation with the AIIB could help free up current ADB funds to focus on more specialized projects, away from infrastructure and into areas like education and health, which would mean more funds for developing countries like Cambodia.

In 2009, the Asian Development Bank estimated the region would need $8 trillion in infrastructure investment by 2020, a demand its own funds cannot meet.

Cambodia has to focus on long-term development, Sok Vanseka said, and effective use of alternative sources of loans may be a rare chance to develop its economy. “It’s advantageous for Cambodia but only if Cambodia is prepared, meaning it will continue the current reforms,” she said.

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