(Photo: Phnom Penh’s main market, Phsar Thmey, being renovated with funds from the French Development Agency. 19 November 2008. By Isabelle Roughol)

By Isabelle Roughol

and Tim Sturrock

Despite continued complaints about the slow pace of reforms, international donors are pledging more than $900 million in aid to Cambodia for 2009, a substantial increase from previous years and from the government’s request of $500 million, a senior Finance Ministry official said Thursday.

Government officials and donor representatives met behind closed doors Thursday for the start of the Cambodia Development Cooperation Forum. Official aid figures will be released at the end of the conference today.

Asked if the pledge figure topped $900 million on Thursday, the Finance Ministry official confirmed that this was the case: “More than $900 million,” he said, speaking on condition of anonymity because he was not authorized to announce any aid totals until the end of the forum.

“I was surprised for the first time [at a donor meeting]-because of the global financial crisis,” the official said, adding that he saw the increased funding as a sign of approval of the government’s actions.

Despite opening their wallets, donors were more reserved in their praise of the government. They expressed satisfaction about the country’s impressive economic growth and advancements in health and education, but noted the continuation of slow progress on judicial and institutional reforms.

In his keynote address to the meeting, Prime Minister Hun Sen touted the country’s economic success, including double-digit growth in the past four years. He also reaffirmed support for judicial reforms and for the anti-corruption law, which has remained stuck in the drafting process for 14 years and is a constant demand of donors.

“[T]he Royal Government is strongly committed to ensure rapid conclusion and adoption of this law,” Hun Sen said.

The anti-corruption law was discussed at a Thursday session, but aid levels weren’t tied to its passage, UN Resident Coordinator Douglas Broderick said.

“There was no notion at all of boycotting…absolutely not,” Broderick said, adding that donors clearly wanted to see anti-corruption measures in place but that it would be a long process.

Rafael Dochao Moreno, chargé d’affaires of the European Commission, which has already committed in a multi-year plan to donate about $35 million next year, said the government told him the law would be passed next summer.

“We’re never happy 100 percent, in any country, even in our own European countries, but the fact that there is a reform, it’s already good news,” he said.

Eva Gibson Smedberg, resident representative of the Swedish International Development Cooperation Agency, expressed stronger criticism. She said the government was “lacking the real urge to go ahead” in passing the anti-corruption law and should also reform the courts and implement the Land Law.  Donors, too, should propose other solutions to fight graft instead of “making a statement and hoping something will happen,” she said.

Swedish aid, she said, is not a stamp of approval for the government.

“It’s more a show that there is a need, and we are there to help, not approval,” she said.

Other reasons can also push countries to increase their aid, said Volker Karl, director of the Phnom Penh office of KFW Bankengruppe, a German financial cooperation institution. Germany, for instance, has increased its aid worldwide to respect previous commitments to the G-8 summit, he said.

International Monetary Fund Resident Representative John Nelmes warned against attempts to increase military spending-which Hun Sen has previously announced he would like to do. Rather, the government should focus on infrastructure building, Nelmes said.

“When you put infrastructure in place, it creates the capacity for the economy to grow at a faster rate without creating inflation pressure,” he said.

Piper Campbell, chargé d’affaires at the US Embassy, said she was impressed by the frankness of Hun Sen’s speech and the range of issues he covered, adding it was a “good starting point.”

The US will not make a pledge during this conference because of the presidential transition in Washington and will announce figures later, Campbell said.

Once aid figures from the US and the Global Fund To Fight Aids, Tuberculosis and Malaria are announced, international aid to Cambodia for 2009 could surpass $1 billion, the Finance Ministry official said.

That figure, however, could be misleading.

For the second year running, China’s aid was included in the government figure, even though China does not participate in the donor meeting, according to the Finance Ministry official.

The government unveiled Wednesday a financial package of $215 million from China, only $7.3 million of which is aid and the rest loans that will need to be repaid.

Prime Minister Hun Sen has previously praised China for giving aid without the reform conditions imposed by other donors.

“It’s clear that for instance there are points of difference of opinion between the European Union and China. That means we advocate that the EU always has policies on democracy, on good governance and other countries don’t,” Dochao Moreno said.

China’s deep pockets and no-questions-asked attitude could be weighing on the donor conference.

“It’s true that emerging donors are making the environment different,” said Alain Goffeau, project implementation specialist at the Asian Development Bank, when asked if China’s position could be forcing donors to hold back in criticizing the government.

Chinese Embassy spokesman Qian Hai could not be reached for comment.

The political opposition held a news conference ahead of the donor meeting on Wednesday, wherein SRP President Sam Rainsy said that the government was “cheating” donors by not carrying out necessary reforms.

Mu Sochua, the SRP deputy secretary-general, said Thursday that she was disappointed the donors had decided to pledge more money than ever while also not being aggressive enough in seeking real change from the ruling party.

“It’s so much money when the reforms that have been promised have not been implemented,” she said, calling on donors to seek more oversight and set solid benchmarks for reform.

(Additional reporting by Yun Samean)

(Photo: Inauguration of a donated school in Prey Veng province, Cambodia. 26 December 2008. By Isabelle Roughol)

By Isabelle Roughol

Cambodia should in the next few years start relying less on international aid and more on private investors, European officials said Thursday.

The $7.855 billion given to Cambodia by foreign governments since 1992 was justified by the country’s huge reconstruction needs, but now that the economy is fast-growing, profit-making enterprises should take over, French Ambassador Jean-Francois Desmazieres said at a roundtable discussion on political and economic cooperation between the EU and Cambodia, which was organized by the Club of Cambodian Journalists.

“Cambodia remains one of the four least advanced countries in Asia, but it has progressed enormously. It is therefore important-and that is one of the themes we’ll approach with the government-that private investment, the investments of businesses, take over from [foreign] taxpayers’ money,” said Desmazieres, who also represents the EU during France’s presidency of the regional grouping.

“International aid should no longer be the sole engine of growth,” the ambassador said, adding that fighting corruption was key to attracting major foreign companies to Cambodia.

The government is scheduled to meet next Thursday and Friday with international aid donors to set their pledges for the next fiscal year and beyond.

Desmazieres declined to specify a figure or a trend for France’s aid ahead of the meeting, but he said that there would be no “dramatic change” and that the global financial crisis would not alter France’s commitment to Cambodia. In 2007, France had pledged $201 million, he said.

Rafael Dochao Moreno, chargé d’affaires of the European Commission, the top provider of aid to Cambodia, also echoed the ambassador’s wishes for more private investment over aid handouts.

“Cambodia is a country that has received non-refundable aid for a certain number of years. Now it must be a country that starts having other sources of funding, including foreign investment,” Dochao Moreno said.

Government officials responded cautiously.

Cambodia wants to be economically independent, but the country has only been stable 10 years and still needs help, Council of Minister spokesman Phay Siphan said.

“We are a small baby, and the challenge is huge,” he said, adding the country still needs funds for the many reforms engaged in education and government for instance.

The global financial crisis is another obstacle that could discourage private investors, making aid that much more needed, Phay Siphan added.

Cambodia has received about $690 million in foreign aid in 2008 and will request more than $500 million for 2009 at next week’s meeting, said CPP lawmaker Cheam Yeap, chairman of the National Assembly finance commission.

“I am optimistic that the international community will still provide aid to Cambodia, even if there is a global financial crisis, because they believe in Samdech [Prime Minister] Hun Sen,” Cheam Yeap said.

But the continuing corruption in the use of aid could push donors to reduce their pledges, even though aid is still needed, said SRP lawmaker Yim Sovann, citing the example of the recent accusations of systematic corruption in the distribution by local officials of emergency rice funded by the Asian Development Bank.

Also present at the forum, German Ambassador Frank Marcus Mann said good governance was a constant concern of the donor community and would be discussed with the government next week.

“As much as we talk about the progress and development, we have to address at the same time deficiencies and encourage the government to improve its record on certain topics, and corruption is one of them,” Mann said.

The US is still working on its own pledge and figures are not available because of the political transition in Washington, said John Johnson, spokesman of the US Embassy in Phnom Penh.

“I think it’s the ambition of all donors that the countries they’re giving aid and assistance to graduate. As far as Cambodia is concerned, it’s a multistage process and it’s difficult to pin down exactly where we’re at right now,” Johnson said.

(Additional reporting by Neou Vannarin)