Cambodia obtains $70M loan from ADB as Infrastructure Investment

ADB lends $70M to Cambodia for transportation development

The ADB has approved a $70 million loan to be used for developing Cambodia’s transportation infrastructure system. This comes under the ADB initiative to increase Asia trade and trade between ASEAN countries, where the organization aims to link Ho Chi Minh City, Phnom Penh and Bangkok in order to increase efficiency of cross-border trade.

Funds from this infrastructure investment loan will be allocated to improving a total of 147 kilometers of unsafe and flood prone national roads and constructing it into all-season appropriate, namely in Prey Veng, Siem Reap and Svay Rieng province. With these provinces located along the Greater Mekong Subregion Southern Economic Corridor, infrastructure development in this area will increase efficiency in border-trade.

Despite the nation’s reliance on roads for transportation purposes, the under-developed road networks in Cambodia have resulted it in being inefficient and having low connectivity levels. Reasons for this are, but not limited to:

  1. Incomplete regulatory frameworks
  2. Low institutional capacity
  3. Limited private sector participation
  4. Lack of sustainability of road assets

With infrastructure investment funds available for transportation infrastructure improvements, connectivity with ASEAN countries in the Greater Mekong Subregion can be increased.

ADB and Greater Mekong Subregion (GMS)

Not just limited to Cambodia, as part of the initiative run by ADB, the infrastructure investment loans by the organization aims to ease trade between countries in GMS. With constant developments made in trade and investment linkages, which have resulted in the increase of Asia trade in ASEAN countries and other countries in the Pacific, this has allowed an increase in resilience in the region despite uncertain global economy and trade policies.

Conversely, despite the improvements, according to the Asian Economic Integration Report 2017 by ADB there is a need for countries located in GMS to make greater progress in Asia trade through multilateral agreements. One of aforementioned agreements is the Cross-Border Transport Facilitation Agreement (CBTA), which aims to increase trade in GMS. Countries in the GMS region include Cambodia, Laos, Thailand, the Yunnan province in Southern China, Vietnam and Myanmar.

However, with the lack of implementation of the CBTA, this has hindered Asia trade from fully achieving its maximum potential. Notwithstanding the challenge posed in executing the CBTA, the report hopes that it can be fully implemented in 2019.

Asian Economic Integration Report 2017 (AEIR)

According to the newly released AEIR 2017 report, there is a lack of $6.4 billion near term infrastructure investment spending in the region. However, the report also states how increasing private sector participation can fill this gap. Hence, to increase infrastructure investment spending, it is necessary for governments in the GMS region to attract the private sector. Several methods that can be used includes:

  1. Strengthening PPP policy frameworks
  2. Bidding
  3. Risk allocation

Despite the lack of infrastructure in the region’s transportation system, the region saw $19.1 billion worth of bilateral and multilateral investments at the end of 2016. With these investments between ASEAN countries, ADB states how this has allowed the region to gain benefits.

 

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