Considering Public Financial Resources

Considering Public Financial Resources

This Saturday, we reported [3]: "According to a recent notification from the Council of Ministers, the Royal Government decided to suspend all promotions for government positions in 2010. If a promotion in any position is planned, it has to wait until 2011." That was even more surprising than another report [4] which the Mirror carried on 10.11.2009: "The Government Cuts Salaries of Advisers" - which, in a way, was only the correction of a violation of common sense (and economic justice): Why should only some public servants, employed full time, get a second salary for an additional function as adviser, a task to be adhered to during working hours which are already covered by another salary? But such double, or even multiple payments for some persons, seem to have gone on for years. In many other countries, the Auditor General – being an independent position without special loyalties – might have intervened many years ago.

When working to select and to present texts for the Mirror, related to some new millions of dollars "to help Cambodia," it is surprising that quite often the text does not specify whether this refers to a credit to be paid back, or to a grant. Even some statements of preference, from where it is more agreeable to receive funds – whether there are conditions of transparency or of human rights adherence part of the agreement, or whether funds come without such expectations – do not distinguish between grants and loans. Though the latter have a minor condition: they have to be paid back.

The Mirror referred last month to the loans [3] of about US$ 1 billion Cambodia had contracted with China in 2008 and 2009, continuing: “We are not aware that details about the timing and the terms of the re-payment obligations were published. Neither did we see any evaluation of the situation in terms of what is called a "sustainable external debt" – which is defined by some scholars of economics as "a situation where a country is expected to be able to meet its current and future debt obligations in full, without recourse to debt relief, rescheduling of debts, or the accumulation of arrears, and without unduly compromising growth."

Some old debts did received special attention in recent reporting. On 11 November 2009, one paper had reported, supposedly based on information from high ranking Cambodian officials, that the Russian Government is considering to cancel the US$1.5 billion debt that Cambodia owes to Russia. But this had to be corrected on the basis what high ranking Russian officials said: when the president of the National Assembly and his delegation returned without success from Russia: “Russia Refuses to Cancel Debt” - it was clear that in spite of similar efforts in 2006 and 2008, the Russian government had not agreed to wipe out these old debts from the 1980ies. While we did not see details about the related negotiations, it is interesting to remember what had been reported formerly in 2007 [5]: that the Russian government is prepared to consider arrangements for the old debts under three conditions:

1. Russia asks for the resumption of Moscow-Phnom Penh flights, for the promotion partly of tourism, and partly of investment.
2. Russia asks Cambodia to strengthen military relations between the two countries by asking the ministries of defense of the two countries to have good relations again, because so many members of the Cambodian armed forces studied in Russia; therefore, the Cambodian Government should accept the request and organize those who studied military affairs in Russia again, and Russia, in turn, promises to accept Cambodian students to study in Russia.
3. Russia sees the possibility to exploit natural gas in Cambodia, and asks the Cambodian National Assembly to facilitate relations, so that Russia can come to invest in oil drilling, because Russia has long years of experience in [oil and] gas drilling and hopes that Cambodia will allow Russian investors to come to invest in natural gas exploitation in Cambodia.

We do not remember that these points – especially as they relate also to untapped oil resources – have ever been mentioned in the more recent reports about maritime oil resource negotiations with a number of other countries. It should therefore be no surprise that the latest delegation to Russia to discuss the old debts did not bring the expected solution: that Russia would simply write off US$1.5 billion.

Another old, much much smaller debt, also shows up from time to time. We quote old headlines as a reminder:

• 16.2.2008: US Demanded Debt [of approx. $154 million out of the debt of $339 million], Cambodia Said the Debt Was Owed by an Illegal Government [of the Khmer Republic]
• 18.2.2008: US Discusses Debt Owed by Lon Nol Era; General Opinion Says US Should Better Cancel the Debt
• 8.9.2009: America Hopes that an Agreement on the Cambodian Debt to the USA Will Be Achieved Soon to Cancel the Cambodian Debt
• 23.9.2009: The Minister of Foreign Affairs and International Cooperation Mr. Hor Namhong Will Discuss Possible Solutions to the Debt from the Time of General Lon Nol’s Regime [the Khmer Republic] of More Than US$300 Million That Cambodia Owes America

To look forward to comprehensive information about all debt obligations, in light of what economic theories say about an appropriate “sustainable external debt” ratio is not unreasonable.

The recent dramatic decisions, to cut the salaries of the large number of advisers, and to freeze all promotions in the civilian and uniformed services, “aiming to save state resources in 2010,” is a signal of a new approach to handle public funds.

This article was first published by The Mirror, Vol. 13, No. 639 - Sunday, 22.11.2009

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