South Korea to Approve $1.5b Loan to Develop Cambodia’s Economy

A signing ceremony will see South Korea approve a $1.5 billion loan to improve electricity in Sihanoukville and build a bridge connecting Phnom Penh with Areyksat
One of the lookalike bridges that is planned to be built. Kiripost via TVK
One of the lookalike bridges that is planned to be built. Kiripost via TVK

Cambodia is preparing to ink a deal that will see South Korea offer $1.5 billion in loans to further develop the kingdom’s energy sector and infrastructure.

On December 9, Prime Minister Hun Sen will preside over the signing ceremony at the Peace Palace in Phnom Penh.

During the ceremony, Prak Sokhonn, Minister of Foreign Affairs and International Cooperation of Cambodia, and Park Heung-kyeong, Ambassador of the Republic of Korea to Cambodia, will sign the Framework Arrangement between the Government of the Kingdom of Cambodia and the Government of the Republic of Korea concerning Loans from the Economic Development Cooperation Fund (EDCF) up to $1.5 billion for the years 2022 through 2026, according to the press release from the Ministry.

Aun Pornmoniroth, Minister of Economy and Finance, and Minnie Chey, Country Director of Korea Economic Development Cooperation Fund (EDCF) for Cambodia, will sign Loan Agreements for the two projects. These are the Grid Reinforcement Project in Sihanoukville up to a maximum amount of $70 million and Cambodia-Korea Friendship Bridge Project up to a maximum amount of $245 million.

These loans will contribute to the Cambodian government's efforts to stimulate economic development in the Kingdom and further strengthen the existing good relations between the two nations.

Hong Vannak, Economic Researcher at Royal Academy of Cambodia, told Kiripost on Thursday that $1.5 billion is an enormous loan to receive from South Korea and will play a significant role in developing Cambodia’s economy.

“With the Korean counterpart having confidence and trust in the leadership of the Cambodian government, it also decided to provide loans upon the request of the Royal Government of Cambodia to be used in response to the current situation in Cambodia and create a competitive advantage of Cambodia in the Asian region and the world,” he said.

He clarified that the Cambodian government has submitted major project proposals to the Korean side. Before providing any assistance, whether economic concessions or grants, checks are carried out in advance on practical achievements with the economic system, including peace in Cambodia.

“Before [Korea] offered [loans] to the Royal Government of Cambodia, they had already done a thorough examination by examining Cambodia's economic strength, resilience, accuracy, certainty of the system of repayment of Cambodia's initial interest rates which has borrowed from other counterparts and previously borrowed from the Korean side and other financial institutions, such as World Bank, ADB, IMF, AIIB and so on,” he said.

He added, “Second, they also inspected the achievements that Cambodia has implemented in practice and responsibly.”

Sihanoukville province is considered a second potential province and capital after Phnom Penh city on multi-purpose economic development. Therefore, the need of reliable electricity is necessary, especially as the population, industries, SMEs, factories, and many other companies grow there, he mentioned.

“As the Cambodian government realized that there is an urgent need of this province in using electricity, they need to borrow from the Korean side,” he said.

He believes that the construction of Phsar Chas-Chrouy Changva and Chrouy Changva-Areyksat project that Cambodia plans to construct under the Korean loans of Korea is important to connect from one potential satellite city area to another, hence further elevating the economy.

“This is the priority project [Cambodia-Korea Friendship Bridge Project] and is extremely important to connect from Phnom Penh to the Areyksat area, which is close to Phnom Penh and possibly can become a satellite city. Then Phnom Penh city will emerge as a luxurious city in that area [Areyksat].”

These bridges will aid Cambodia’s tourism potential, as well as improve transportation for citizens and boost the price of real estate.