A threat to Kingdom’s FDI

Friday, 14 October 2011 12:02
May Kunmakara
The Phnom Penh Post

Tokyo - Cambodia needs more than an estimated US$13 billion in infrastructure works by 2020 if the country intends to continue attracting foreign investment, a joint survey by some of the world's top financial institution indicated on Wednesday.

During a conference held by the Japan International Cooperation Agency and the International Monetary Fund, experts from the two institutions urged Asia's 16 low-income countries – which need some $358 billion in infrastructure projects by 2020 – to adopt public-private partnerships as a source of infrastructure investment and bank stability. Investment in the Kingdom's roads, bridges and power facilities will create prime conditions for continued high-level foreign direct investment, experts said. The survey – which drew from JICA, IMF, Asian Development Bank and World Bank data – called for $1.2 billion in infrastructure spending per year in Cambodia, with about half going to new projects and the other half to maintenance.

Ministry of Economy and Finance secretary general Vongsey Vissoth said public-private partnerships will play a key role in the country's financial and infrastructure development.

"We're hoping for private-sector [investment], which includes public-private partnerships. And we've already done this kind of partnership," he said. "In the future, we need a system which is much better [to handle these investments] and we need a bigger source of funds for bigger projects."

Several large infrastructure investment projects from China, Korea and Japan will lower Cambodia's power and transportation costs, Vongsey Sissoth added.

"It's the ability to attract this kind of significant development investment that will have a positive impact on the competitiveness of the Cambodian economy."

Faisal Ahmed, IMF's representative in Cambodia, said it is crucial to safeguard banks in terms of improving supervision and reducing interferences in lending decisions – a practice often seen in state-owned banks. "The financial stability risks need to be minimised by strengthening the quality of and coordination among banking and capital market supervisory agencies given the nexus between banks and capital markets," Ahmed said, stressing the importance of sound macroeconomic policy.

Japan Center for International Finance president Takatoshi Kato explained that there is a need for donors and multilateral development banks to provide support to low-income countries' projects through the funding of the preparation process to ensure that the right projects and right project specifications are chosen.