Cambodia donors pledge $690 mln in 2007 aid

PHNOM PENH, June 20 (Reuters) - Cambodia's international donors pledged $690 million in aid for 2007 on Wednesday, a 15 percent increase on the previous year that reflected recognition of government and economic reforms, a Cambodian official said.

"We received more than we expected. This is a reward for Cambodia's good performance over the last year," senior Finance Ministry official Hang Choun Naron said after a donor conference in Phnom Penh.

A breakdown revealed that much of the increase was accounted for by $91 million from China, which has shunned the collective donor process in previous years, preferring to offer bilateral assistance instead.

Japan remained the biggest contributor, with $112 million.

Twenty percent of the aid was in the form of loans and the rest in grants. Historically, Phnom Penh has relied on foreign aid for more than 60 percent of government spending.

The assistance should provide another boost to the war-scarred southeast Asian nation's economy, which is enjoying near double-digit growth due to relative political stability and booms in the tourism, clothing and construction sectors.

"We are going to spend this money on education, health care, improving infrastructure, rural development and agriculture," Hang Choun Naron said.

The economy grew 10.4 percent last year, according to the International Monetary Fund (IMF), which expects growth of 9 percent in 2007 and 7.5-8 percent in 2008, making it one of the world's fastest-growing economies, albeit worth only $7 billion.

In a big push to banish the legacy of Pol Pot's "Year Zero" revolution and its estimated 1.7 million victims, Phnom Penh has obtained a B+ credit rating from Standard and Poor's and a B2 from Moodys this year.

Earlier this month, Prime Minister Hun Sen, a former Khmer Rouge soldier who has been in charge for more than 20 years, announced plans for a stock market in 2009, another sign of the accelerating recovery from the horrors of the "Killing Fields".

Despite this, donors also called for greater commitment to reform of a notoriously corrupt and political judiciary, and swift enactment of draft anti-graft laws that have been gathering dust on the shelves of parliament for years.

Hun Sen's critics accuse him of being an autocrat who has brought stability at the expense of human rights and openness.

Eight Westerners were arrested outside the meeting on Tuesday for campaigning for the release of two men whom rights groups say were framed for the 2004 murder of a prominent union leader.

Phnom Penh police chief Touch Naruth said the group -- three Americans, two Canadians, one New Zealander, one Briton and one Dane -- had been arrested for "protesting illegally".

They were released after signing an agreement not to do so again, police said.