Relations with US snagged over debt issue

via CAAI

Wednesday, 06 October 2010 15:02 Thomas Miller

DESPITE signs of progress in areas ranging from military cooperation to development aid, comments in recent weeks from Cambodian and American officials underscore the fact that bilateral relations remain snagged on an issue some three decades old: Cambodia’s wartime debt.

Before the US-ASEAN summit two weeks ago, Prime Minister Hun Sen called upon the United States to cancel the debt, calling it “dirty”. But a US State Department official said last week the US would not do so for fear of setting a “bad precedent” for countries in similar positions.

The principal sum of the debt, according to the US State Department and the International Monetary Fund, is US$162 million for shipments of cotton, rice, wheat flour and other agricultural commodities in the 1970s. Interest has ballooned the total debt to $445 million.

The Kingdom had an overall debt burden of $3.2 billion in 2009, according to the IMF, which noted in an assessment that year that Cambodia is at “moderate risk of debt distress”.

In congressional testimony Friday, Joe Yun, deputy assistant secretary for the US state department’s bureau of East Asian and Pacific affairs,

said the US would not forgive Cambodia’s debt because it considers Cambodia both able to pay and obligated to do so under international law.

Officials at the Ministry of Economy and Finance did not respond this week to requests for comment about the debt.

Beyond the debt issue, Yun observed a “generally positive trend” in bilateral relations in his remarks last week, noting that the US has been Cambodia’s top trading partner since 1998. Moreover, under President Barack Obama, he said, the US would provide US$72 million to Cambodia this year, making it the fourth-largest recipient of foreign aid in the East Asia-Pacific region. But the debt could be a “spoiler” in the countries’ relationship, said Carlyle Thayer, a professor at the Australian Defense Force Academy who called on the US to forgive it.

Cambodia incurred the debt under Lon Nol, who came to power in a 1970 coup d’etat. The US subsequently supported Lon Nol with economic, food and military aid, including an infamous bombing campaign.

Historians have long said that the bombs, believed to have killed tens of thousands of civilians while devastating the Cambodian countryside, may have slowed the Khmer Rouge in the short term, but also likely strengthened them as well.

Kenton Clymer, a professor at Northern Illinois University and an expert on US-Cambodia relations, said in an email yesterday that a reduction of the debt would be appropriate in view of the countries’ tumultuous history. “I suspect that the American legal position is correct, that a change of government does not relieve a country of previous debts. On the other hand, US bombing of Cambodia and American policy during the Khmer Republic did help create conditions that made a Khmer Rouge victory more likely,” Clymer said.

The US dropped 2,756,941 tons of ordnance in Cambodia, according to historians Ben Kiernan and Owen Taylor. William Shawcross put the cost of the bombing at $7 billion.

But an argument based on the historical injustice of the debt in view of the American legacy in the region was “not going to work politically” in negotiations with the US, Thayer said.

Phay Siphan, a spokesman for the Council of Ministers, indicated yesterday that the government viewed debt forgiveness as a potential way to move beyond their contentious past.

“We don’t want to put the blame and point a figure at each other,” he said. “Right now we have a new chapter.”