Cambodia's Vietnam War-Era Debt to the U.S.: A Contentious Issue

April 25, 2008
Currency Trader Counts Cambodian Money

A few months ago, members of the public sent me nearly 150 questions on the U.S.-Cambodia Bilateral Relationship as part of the "Ask the Ambassador" program. I was very surprised, however, that one rather thorny subject was not raised: Cambodia's debt to the U.S. This issue has been a contentious one in our bilateral relationship for more than 15 years, and with the recent passage by the House of Representatives of the "Jubilee Act" for debt relief, I felt this was an opportune time to discuss this issue with DipNote's readers. An excellent primer on the topic is DAS Scott Marciel's recent testimony before Congress, but here's how the situation stands in brief.

Cambodia’s debt to the U.S. totals $162 million, but with arrears factored in could reach approximately $339 million. This debt stems from shipments of U.S. agricultural commodities (e.g., cotton, rice, wheat flour) to Cambodia in the early 1970s -- during the Vietnam War and Cambodia’s Lon Nol era -- and financed with USDA loans. When the country fell to the Khmer Rouge in 1975, the regime ceased servicing this debt, and interest accumulated over the next three decades. In February 2006 -- after many years of deadlock followed by a fruitful series of negotiations -- an agreement in principle was reached on the amount of Cambodian principal owed to the U.S.

The Cambodian government, however, remains reluctant to sign a bilateral re-payment agreement due to domestic political obstacles on accepting responsibility for debts incurred by the Lon Nol regime, viewed by many Cambodians as an illegal and illegitimate government. Furthermore, many Cambodian observers believe a good deal of this assistance never arrived. They contend that Cambodia only served as a conduit for moving the USDA-financed commodities to other locations in Asia and that the Cambodian government and the Cambodian people did not benefit from the loans, even if some Cambodian individuals did gain. Finally, some argue that it is fundamentally unfair that Vietnam, which is far better off economically and was America’s major adversary in the war, was granted a form of debt forgiveness from the United States, while an innocent bystander to that conflict—Cambodia—is offered nothing.

The U.S. has on its side the international law principle that governments are generally responsible for the obligations of their predecessors. And while Cambodia is a poor country, it’s economic and financial situation does not merit debt reduction because the country is neither heavily indebted nor experiencing an external balance of payments crisis. The U.S. Government is concerned that creating a special debt reduction program for a country that is unwilling, rather than unable, to pay its debts, sets a poor precedent for other counties in similar circumstances and sends the wrong message about prudent debt management. Every year, the U.S. Government reviews and declines requests for debt forgiveness from debtor countries that are both current on their debt service and may owe billions of dollars of debt.

As a possible compromise, the Cambodian Government has expressed an interest in a debt-swap program similar to debt-for-assistance measures that were enacted for Vietnam in 2000. With this program, Congress created the Vietnam Education Foundation, which refunds to the Foundation's programs about 40 percent of Vietnam’s total debt payments to USAID and USDA. While observers often compare Vietnam and Cambodia for geographic and historical reasons, it is important to note that, before Congress set up this arrangement, Vietnam signed a bilateral implementing agreement with the U.S. in 1997, resumed making scheduled payments, and was in good financial standing with the U.S. The same is not currently true with Cambodia.

It is my hope that an agreement to resolve Cambodia's debt to the U.S. can be reached soon in order to eliminate this long-standing dispute in the midst of otherwise improving bilateral relations. Such an agreement would also enhance Cambodia’s creditworthiness and its ability to access international capital markets, thus contributing to the country's economic development. Please let me know your thoughts on this issue.

Comments

Comments

VANTHOUEN S.
|
Virginia, USA
April 26, 2008

Vanthouen in Virginia writes:

Cambodian government have to come to compromise make the arrangement payment with us government.

If U.S. congress rethinking that Cambodia is the poorest country might debt forgiveness.

Cambodia
|
Cambodia
April 26, 2008

C in Cambodia writes:

The latest news from Cambodia on : http://www.netvibes.com/cambodia

Peter A.
|
California, USA
April 26, 2008

Peter in California writes:

It's really incredible that having invaded and bombed that country when it was neutral, and thereby killing many thousands of Cambodian peasants, the United States should have the audacity to claim that Cambodia owes it anything - when the truth is that the U.S. owes Cambodia reparations at least as much as the Germans owed France and Belgium for the harm they did there in WW1.

Sean
|
Lebanon
April 29, 2008

Sean in Lebanon writes:

Considering the fact that the covert American bombing campaign of Cambodia that killed tens or hundreds of thousands of people was also one of the factors that led to the rise of the Khmer Rouge who killed literally millions of people, you'd think that we could give Phnom Penh a pass on their paltry $339 million debt, incurred after a pro-American military putsch, by the way.

Given the context in which the debt was incurred, and that more than half of the debt is interest, and since we're currently spending over $400 million every day in Iraq, you'd think we could be a good sport and forgive the Cambodian tab. Honestly, I think we can afford to let it slide this time.

Diane
|
California, USA
April 29, 2008

Diane in California writes:

I agree with Peter.

Not to mention that the U.S. turned a blind eye to the Khmer rouge massacres in 1975-1978 that killed 3 million people. Then, in early 1979, Washington even offered Peking military intelligence during the Chinese attack on Vietnam intended to "punish" Hanoi for having overthrown the Pol Pot regime. And in the 80s Washington went so far as to support the seat of the overthrown Pol Pot regime in the UN.

Here's a book I recommend: "American-Vietnamese Relations in the Wake of War: Diplomacy after the Fall of Saigon, 1975-1979" by C. Menetrey-Monchau

By the way, how much the U.S. is spending in Iraq?

Andy B.
|
California, USA
April 30, 2008

Andy in California writes:

This is unbelievable!

You've managed to disregard our country's history and responsibility for the plight of Cambodia. Lon Nol's Republic was installed with our tacit approval, if not explicit support. Our secret, illegal, unconstitutional saturation bombing of Cambodia in 1973 killed many tens of thousands of civilians, and lead directly to the success of the Khmer Rouge and its murderous regime.

During the nearly 4 years of their reign the Khmer Rouge executed, starved, and worked to death at least 1.7 million Cambodians out of a population of 7 million. We continued to support the Khmer Rouge as the lawful government of Cambodia throughout the 1980s, though Vietnam had invaded and overthrown them, and put an end to the terror. This was our cynical effort to court favor with China (patron of the Khmer Rouge) against the Soviet Union (backer of Vietnam). Once again, we did not let human rights considerations cloud our self-interested, cold-war politics.

Our country has blood on its hands. Forgiving this debt is the least we can do to make amends. Shame on us, if we don't.

Eric
|
New Mexico, USA
May 1, 2008

Eric in New Mexico writes:

Dear Ambassador Mussomeli,

Being a fellow who likes to find creative solutions, there may be some merit in restructuring Cambodia's debt with benefit for all concerned.

We provide hundreds of millions per year in food aid globally, w/ a recent 200 mil additionaly allocated by the President to address global food prices leading to shortages, among those food products affected being rice.

Cambodia seeks to become a leading world supplier, according to the following article (hat tip to C in Cambodia for providing a great news link)

http://news.google.com/news/url?sa=T&ct=uk/0-0&fd=A&url=http://www.radio...

(excerpt)

Although Cambodia remains one of Asia's poorest countries, the head of the Cambodian centre for the study and development of Agriculture, Yang Saing Koma, has told Radio Australia's Connect Asia program the prospect of becoming a leading rice exporter is a distinct possibility.

"There is the potential to increase the rice production of Cambodia," he said.

"Of course, we still have big land areas and the rice productivity in Cambodia is still low in those areas, and there is still the potential to expand the cultivated area."

---end---

Sir, my idea's pretty concurrent with the premis of debt relief to African nations, despite an ability to pay on Cambodia's part. The premis in that case of course being that a nation not saddled with huge arrears and interest will be better able to invest in its infrastructure and people, and eventually become self sufficiant without humanitarian aid.

Seems to be a sound policy that is achieving lasting results, so I suggest we make the following deal with the Cambodian Gov.

a) Cambodia restructures it's debt by investing the total amount of principal owed ("$162 million") into its own agriculture base to increase export potential, and then upon results in increased yields, then b)provides to world relief agencies that the U.S. generally donates to, the sum total of the debt as it stands now ( "approximately $339 million") , frozen with no additional interest or arrears accruing from the time the agreement is signed, with a target date set ( based on the variables in agriculture production generally), for first delivery of rice shipments towards fullfilling and completion of the contract over a reasonable period of time.

Results? Cambodia pays its debt in full, but not directly to the US gov., perhaps eliminating in all parties the need to negotiate contentious issues of the past that are now "talking points" of a seemingly intractable debate since before the Vietnam war ended. They will also have at the end of the day, a much improved agricultural economic base to work with.

We're going to spend money on food aid for quite awhile into the future, and their payment in full "to the world" will simply add to our ongoing aid efforts globally. Thus the US taxpayer gets a bigger bang for his buck, and U.S. foreign policy goals in multiple aspects are furthered in partnership.

Look forward to your thoughts on this, and how best to create a coalition of nations in the global war on hunger.

Best Regards.

Pat
|
United States
May 1, 2008

Pat in U.S. writes:

In early 1970, I spent several months as the RSO in Cambodia, with the responsibility of protecting the American Embassy and the Americans in Cambodia. I witnessed Cambodians, particularly, a Major Rodan and his staff of the Provost Militare protect American Interests in Cambodia, which placed themselves and their families at great risk. The Cambodian government and people were not a direct part of the Vietnam war until we bought them into the conflict on our side, where they remained between 1970 and 1975, when we departed, leaving the Cambodian's to fend for themselves. Unlike our unwilling allies in Vietnam, we did not take them with us to the United States at the end in April 1975. We left them in Cambodia, where many were killed by the terrorist government that followed. I recalled being assigned to the American Embassy in Korea at the time ot the evacuation in April 1975, and volunteeering to return to Cambodia to help with the evacuation, particularly to assist those Cambodians, who directly assisted the Americans, and was told my services were not needed as the evacuation was going well and all would be taken care of. The cable I received informing me of this decision, should have started off with "once upon a time..." as I would have appreciated a fairy tale rather than the BS, that I received, declaring that all those on our side, would be taken care of. Many Cambodians, who supported America died under the government that followed our evacuation and now we want our money back. As someone who was there, I say forgive the debt and give the survivors all the assistance they need to make a good life in the future. America and I, as a U.S. citizen who was there, owe the survivors that possibility and we should over look this debt - it is only money, they received for following the BS/U.S. promises made by Dr. Kissenger and others in power at the time. We have washed larger amounts owed to us by others, particularly former enemies, so let's forgive this debt to people who gave up much for their support of the Americans.

DipNote
|
District Of Columbia, USA
May 1, 2008

U.S. Ambassador to Cambodia Joseph A. Mussomeli writes:

I would like to thank everyone who has responded so far for their thoughtful comments. A number of historians and other observers would agree with your opinions that the United States' involvement in Cambodia has been, to use a diplomatic phrase, "checkered." Certainly for many Cambodians our past history here makes the issue of Cambodia's bilateral debt to the U.S. even more contentious.

Something that some of you have mentioned is the idea of reparations. What I find remarkable -- and laudable -- is that the Cambodian government has never made any such request of the U.S. government. It is not that some Cambodians don't believe they were wronged by the U.S. -- they do -- but most prefer to focus on our current improving relations and the future. Moreover, and more poignantly, several older Cambodians have told me, "What the U.S. did in the 1960s and 1970s may have been bad, but the worst thing you ever did was to leave us. What followed was so much worse."

This friendly, forthright attitude is most apparent in Cambodia's refusal to ever raise the issue of reparations as a quid pro quo for allowing the U.S. military to conduct searches for the remains of missing U.S. servicemen. Since we began our searches here in the 1990s, the Cambodian government has always considered this an exclusively humanitarian issue, and there is no country in this region that cooperates as closely with us on the recovery of American servicemen's remains as Cambodia. Indeed, as far as cooperation on MIA searches go, Cambodia is often characterized as the "gold standard" for other countries to aspire to.

Again, thank you for all your comments. Please keep them coming!

Pat
|
New Jersey, USA
May 2, 2008

Pat in New Jersey writes:

Correction and addition to my earlier message: (Pat in U.S.):

I started the message off by advising that I was in Cambodia in early 1970 as RSO. I was actually there in early 1971, as the TDY (from Saigon) Regional Security Officer, for approximately 5 months. The Ambassador was Ambasssador Swank, who was an excellent and dedicated American Ambassador who was fighting an uphill battle to do the right thing for the American and Cambodian people - Delivery of military aid and other aid was a major program -now we want payment for this aid. How much did the Germans and Japanese repay after World War II and how much was forgiven? Unlike the Germans and Japanese, the Cambodians were not involved in a war against America until we, the U.S. government talked them into it - please forgive and forget this debt. Move on, the war is over. I fully agree with Ambassador Mussomeli's thoughts and comments and I am particularly affected by his quote of a Cambodian, who noted that the worse thing we did was to leave them - I know we did as when I volunteered to return to assist those who assisted in our security, I was deniede country clearance. After 32 years, I still feel the regret and sadness - it was not our finest hour.

Over my career with the Department, I often felt that many of our Ambassadors suffered from "clientitus" - meaning that they represented the host country to America, rather than representing the American people to the host government. In this case, I fully agree with Ambassador Mussomeli calling for doing the right thing for the Cambodian people, rather than collecting funds for the American people. Lets do the right thing!

Pat in New Jersey - Retired U.S. Department of State DSS Special Agent.

Sandy
|
California, USA
May 5, 2008

Sandy in California writes:

I find it outrageous that the U.S. is demanding that Cambodia pay this debt. It is way past time for the U.S. to give some serious thought to the harm it has caused to Cambodia. The alleged debt is from the same period of time (1969-1970 and then again in 1973) when the U.S. was bombing Cambodia, which caused extensive economic losses to the people of Cambodia -- thousands of Cambodian citizens were killed, crops were destroyed, buildings destroyed, fields rendered unsafe, and many many thousands had to flee their homes, becoming homeless refugees. It seems to me that Cambodia should be billing the U.S. for these costs. The right thing to do is simply drop the claim for payments from Cambodia in recognition of the costs Cambodians incurred because of US bombing of the country in the seventies (as well as a land invasion in 1970...). If any more justification is needed, the U.S. could recognize its error in voting to recognize the Khmer Rouge as Cambodia's legitimate representative in the UN throughout the 1980s, after the Khmer Rouge was responsible for the death of at least 1.6 million Cambodians. This too was a very costly decision for the Cambodian people.

DN
|
District Of Columbia, USA
May 5, 2008

U.S. Ambassador to Cambodia Joseph A. Mussomeli writes

@ Eric in New Mexico -- Eric, I just saw your entry, and I wanted to thank you for the well thought out suggestion you made. With the current world food crisis, your idea is an intriguing one to add to the mix. Although I can't predict what the final resolution will be -- whether it be full repayment by Cambodia or a form of debt-for-assistance like an education fund -- you have certainly given everyone something new to think about.

Eric
|
New Mexico, USA
May 5, 2008

Eric in New Mexico writes:

@ U.S. Ambassador to Cambodia Joseph A. Mussomeli -- Dear Ambassador Mussomeli,

I appreciate you kind words sir, and I have a followup..

Having read the testimony in the following..

BUILDING ON INTERNATIONAL DEBT RELIEF INITIATIVES
http://foreign.senate.gov/hearings/2008/hrg080424p.html

...and noting that the U.S. has provided debt relief to nations for simply preserving rain forests to reduce the global carbon footprint of man's activities on the planet, I thnk it is fair to say that debt relief involves some effort on the part of recipients of it to invest in their own people and infrastructure for the greater good of all. Debt relief is not without cost nor responsibility to see results.

The President has just called for an additional 730 million increase in global food aid to be approved by Congress, and obviously the issue is important to him.

I'm not opposed to Cambodia's debt being forgiven 100%, but the opportunity exists to transform a liability into an asset if the Cambodian government sees the common sense in what my idea entails for them in the long run.

On a personal note Ambassador, If you think the idea has legs, will you please walk it into the Oval office for me?

I need your advice about something else if you have a moment, and that's due to the fact that I've taken the FSO written exam a few times facing incredible odds, and come to the conclusion I'm just not FSO material. No talent for languages for one, no formal higher education for another. But sir, I do have a pretty fair track record of research and analysis over the last eight years or so, and I would like to persue that on a more formal basis (like actually getting paid to do R&A as my job description) w/ State.

Would you be able to email me a point of contact?

Thanks so much for your consideration, I'm a little more than curious what ideas would pop up if I had all the information at my disposal I could possibly absorb.

This one was pretty "off the cuff", actually. Gut instinct mostly.

Best Regards.

Eric
|
New Mexico, USA
May 5, 2008

Eric in New Mexico writes:

(correction to previous post) That should have read 770 million additional "to support food aid and development programs."

http://www.whitehouse.gov/news/releases/2008/05/20080501-5.html

Zharkov
|
United States
May 6, 2008

Zharkov in U.S.A. writes:

Cambodia's debt should be 100% forgiven for the reasons offered by Pat and others who find U.S. repayment demands offensive to common sense and justice.

Even if there exists a legal agreement with a discredited former government to repay a debt which was never voted upon by the citizens of Cambodia, when those citizens suffered horribly as a result of the transaction, justice demands the debt be forgiven. In fairness, only the former Cambodian officials who contracted the debt should be forced to repay the obligation because an illegal government has no authority from the voters to borrow.

If the U.S. government continues to pretend it is racially non-discriminatory, and if Cambodia must pay, then why not Kuwait, Saudi Arabia, and others for the military protection they received?

America has military bases in over 120 countries - some say as many as 160 countries - and how many of these nations are repaying America for protecting them?

Our federal officials obviously enjoy playing Santa Claus with U.S. tax dollars for the middle east and Africa, so why exclude Cambodia from enjoying an early Christmas present - a present the Cambodian people have certainly earned the hard way!

Eric
|
New Mexico, USA
May 6, 2008

Eric in New Mexico writes:

I'm not altogether sure anyone could have anticipated what Pol Pot was capable of prior, with the exception of those supplying his minions the weapons to commit genocide.

I think it's fair to say karma can be spread around being that it was allowed to happen by all nations.

Karma is a lot more involved than simply a scorecard of +'s and -'s one scribbles on the chalkboard of the universe.

And it makes me wonder if the Cambodian people feel they have a karmic duty to make sure their national tragedy happens to no other peoples and cultures.

That's why I believe the people of Cambodia may rationalize the premise of feeding a lot of starving folks with the US as a partner. Clearing the slate is a good way to start one.

And in so doing, leave any attachment the parties may have to conflict past, in the past.

Sam J.
|
Illinois, USA
May 7, 2008

Sam in Illinois writes:

Every debt that we made shall be paid whatever it is. It takes time review the law, but it is necessary for us to use rules build by laws.

Latest Stories

April 17, 2014

The Way Forward in Ukraine

Secretary of State John Kerry traveled to Geneva, Switzerland, on April 16-17 to participate in bilateral meetings and a multilateral… more

Pages