by Prahok » Thu May 02, 2024 9:39 am
Guest9999 wrote: ↑Wed May 01, 2024 11:03 pm
the Cambodian Government took on no debt, has no/little skin in the game and the Cambodian people have little financial risk, even if it loses $ the next 10-20 years.
Not entirely. The asset is a key component to a significant contributor to the Cambodian economy. If it doesn't function, or function well, then the economy suffers. If the company defaults, then depending on loan terms the Chinese bank may take possession (which they would not like at all), or the Cambodian Government may have to step in and adopt the debt and the operational mess (if they are a guarantor, which is possible).
they will be straining every single day to send cash home, extracting it at every opportunity rather than spending it on enhancements or maintenance.
That is a real risk if the business model fails. It's in everyone's interest that it doesn't.
In the end, debt itself isn't a problem if it is invested in activities that provide a greater return.
This has been the issue with BRI investments; poor investment choices driven by politics rather than financial acumen. This appears to be changing as Chinese banks have badly burned their fingers, contributing to the current credit crunch within China.
[quote=Guest9999 post_id=1070903 time=1714579425]the Cambodian Government took on no debt, has no/little skin in the game and the Cambodian people have little financial risk, even if it loses $ the next 10-20 years.[/quote]
Not entirely. The asset is a key component to a significant contributor to the Cambodian economy. If it doesn't function, or function well, then the economy suffers. If the company defaults, then depending on loan terms the Chinese bank may take possession (which they would not like at all), or the Cambodian Government may have to step in and adopt the debt and the operational mess (if they are a guarantor, which is possible).
[quote]they will be straining every single day to send cash home, extracting it at every opportunity rather than spending it on enhancements or maintenance.[/quote]
That is a real risk if the business model fails. It's in everyone's interest that it doesn't.
In the end, debt itself isn't a problem if it is invested in activities that provide a greater return.
This has been the issue with BRI investments; poor investment choices driven by politics rather than financial acumen. This appears to be changing as Chinese banks have badly burned their fingers, contributing to the current credit crunch within China.