English | 中文版 |  Русский

Breaking News:

Source: www.asiaecon.org |

HUNGARY TO PROVIDE CAMBODIA WITH $50 MILLION IN SOFT LOANS


Since the 1980's, Cambodia and Hungary have experienced growing bilateral relations fueled by  complementary economies and similar ideologies. Economic relations between the two countries although not always strong, will receive a boost as Hungary unveils a plan to provide Cambodia with a $50 million soft loan by the end of the year. The loan will significantly boost Cambodia's economy, as well as provide mutual benefits as both countries utilize their comparative advantages amid the global financial crisis.



Since the 1980’s, Cambodia and Hungary have experienced growing bilateral relations fueled by  complementary economies and similar ideologies. Economic relations between the two countries although not always strong, will receive a boost as Hungary unveils a plan to provide Cambodia with a $50 million soft loan by the end of the year. The loan will significantly boost Cambodia’s economy, as well as provide mutual benefits as both countries utilize their comparative advantages amid the global financial crisis.

Cambodia’s economy is struggling as external trade declines amid the global financial crisis. The country’s main growth engines -garment exports and tourism- have drastically slowed in the last few months. Cambodia has also experienced a slowdown in foreign investments and construction, which experts predict, is likely to continue into 2010. Moreover, Cambodia suffers from widespread poverty, with 35% of its 14 million person population living on less than $0.50 a day.

The IMF forecasts a 0.5 % contraction for Cambodia in 2009, a large contrast from the 4.8% growth predicted last November. Cambodia’s foreign direct investment (FDI)  reached $800 million in 2008 according to the World Bank, however, the organization forecasts FDI to drop below $600 million this year.

Hungary’s loan will be allocated towards infrastructure development for water related industries such as in Cambodia, as well as agricultural productivity.  Cambodia’s agricultural sector has great potential, however, growth has been hindered by the lack of irrigation systems, training for farmers and infrastructure.

“We want to focus on those areas in which Hungary has great expertise and advantages, and we have to negotiate those projects that Hungary can bring [to ensure] the most added value for Cambodia,” said Abel Garamhegyi, the state secretary at Hungary’s Ministry of National development and Economy. 

The agreement is expected to be signed this year, and will likely have a loan term of 25- 30 years with a zero interest rate. Both countries will further discuss the terms of the agreement in May during the Asia-Europe meeting held in Siem Reap.

The European country has also pledged to help with the $433,000 debt Cambodia owes Hungary since the 1980’s, when both countries were member of the communist bloc. Hungary is considering writing off half of the debt in May, and transferring the rest into a development fund. The debt relief package proposed by Hungary would considerably further economic cooperation between the two countries.

The extensive loan comes as Hungary is recovering from intense government and private debt over the last couple of years. In 2008, Hungary’s currency collapsed as the country faced deep economic pressures. The IMF, EU and World Bank have since then agreed to a $25 billion loan, as Hungary struggled to overcome its reduced banking liquidity and overwhelming credit crunch. The loan although helpful, might not be enough to ensure macroeconomic and financial stability in the country. In fact, economists forecast a 4% GDP contraction for Hungary in 2009. 

The recent loan to Cambodia will boost growth in both regions and significantly strengthen economic cooperation between the two countries. Hungary  has also stated that the amount loaned could potentially be doubled if the agreement is successfully signed. The expanded loan would be directed at research and development facilities in Cambodia.  Negotiations for a loan increase, as well as other financial programs potentially implemented by Hungary, are already taking place.


Source: www.AsiaEcon.org
Please send comments and constructive suggestions to feedback@AsiaEcon.org

Source: www.asiaecon.org |


More Special Articles - Asia Business & Economy Articles