China's growing influence in
Cambodia David Fullbrook
PHNOM PENH - The Cambodian capital is
becoming China's Casablanca. While China's giant
state corporations have recently dropped billions
of dollars in oilfields and mines across Africa
and South America, low-profile, family-run Chinese
firms have come to dominate approved investment in
Cambodia.
China topped Cambodia's
investment charts in 2005 with projects worth
US$448 million and is on pace to repeat that feat
this year with Sino-Hydropower Corp's $280
million 193-megawatt
Kamchay hydropower station,
the largest foreign investment in Cambodian
history.
In 2004, the Cambodian Investment
Board, which doles out tax holidays and other
privileges for foreign investments, approved for
the first time more investment from China than any
other country. That year Chinese investors
accounted for $89 million of the total $217
million approved, while Malaysians ran a distant
second at $23 million. In 2003, approvals for
Chinese-invested projects had just started to flow
in at $45 million.
Cambodian Investment
Board data show that 9.18% of total approved
investment from August 1994 to June 2006
originated from China, accounting for 243
different projects with a fixed-asset value of
$925 million over a diverse cross-section of
industries, including agriculture, mining, oil
refining, metals production, vehicle
manufacturing, garments, hotels and tourism. Only
Malaysia and South Korea made deeper inroads into
the country over that period.
Yet those
investments represent only what is counted on the
official ledger; how many actual Chinese-invested
projects materialized over that period is unknown,
as local observers contend that many enter the
country unbeknownst to Cambodia's underfunded,
overstretched bureaucracy. Projects not qualifying
for investment privileges are not registered with
the Investment Board, which has less influence
over Cambodia's underdeveloped rural provinces.
Provincial governors also have a free hand
to approve investments worth less than $2 million,
though they are believed to under-report the value
of investments in their regions to get a cut on
the deal. No currency controls and failure to
collect more than $1 of every $4 of tax due are a
lure for many smaller-scale Chinese investors, who
see opportunity in the rural deprivation that
scares away most Western and more developed Asian
investors.
"Because the economy in
Cambodia only started to develop 10 or 15 years
before, the range for things for Chinese investors
to look into is quite wide," said Jimmy Guo,
president of the Chinese Chamber of Commerce in
Phnom Penh. "We look back to our experience in
recovering from poverty. More and more people know
Cambodia. We are finding investment in Cambodia is
an attractive topic because the political
situation here is quite stable now."
Guo,
whose personal primary interests in Cambodia are
travel and hotels, says Chinese government
support, including the so-called "Go Out" policy,
has helped larger Chinese firms to access
government-backed soft loans and export credits to
start up ventures in Cambodia.
That's
evident in the brisk Cambodian trade of Chinese
manufactured goods. In 2003, 11.3% of the
country's imports originated from China, which in
turn bought just 1.1% of Cambodia's meager
merchandise exports, according to International
Monetary Fund statistics. By 2004, 16.5% of
Cambodia's imports valued at $527 million came
from China - a statistic that excludes the 19.9%
of total imports that came from Hong Kong worth
$615 million.
Garment production has long
been the backbone of Cambodia's export sector,
which is heavily invested in by Chinese producers.
Now, as global commodity prices spike, Chinese
investors are starting to pour more money into
Cambodia's underdeveloped natural resources,
including pulp, palm oil, rubber, and oil and gas.
For instance, China Cooperative State Farm
Group invested $70 million in 2001 via a soft loan
from China's Export-import Bank with Cambodian
pulp-and-paper producer Pheapimex to establish
pulp plantations in Kompong Chhnang and Pursat
provinces. Green Rich, another Chinese firm,
allegedly cleared national-park forest lands in
Koh Kong province to establish acacia plantations
in 2004.
More significant, China National
Overseas Oil Corp (CNOOC) this July met with Sok
An, a cabinet minister close to Prime Minister Hun
Sen, and Cambodia's National Petroleum Authority
to discuss possible joint exploration and
production. Cambodia's hydrocarbon reserves are
rumored to be more promising than previously
thought, and no doubt look more viable with global
oil prices hovering over $60 per barrel. America's
Chevron and Thailand's PTT Exploration and
Production are already exploring Cambodia's seabed
for natural gas in a joint arrangement.
Following the money Accompanying
the flood of Chinese trade and investment is a
deluge of Chinese migrants, especially from
Guangdong and Fujian provinces. Observers estimate
the number of recent Chinese migrants to Cambodia
to be anywhere from 50,000 to 300,000 - exact
figures, they say, are impossible to get because
of the inaccessibility of Cambodia's many remote
provincial areas. With the recent development of
roads linking the two countries through Laos,
speedy bus trips between Yunnan and Cambodia open
the way for Chinese laborers and hawkers to move
south.
Chinese investors and migrants
alike have safe passage from the silky political
ties Beijing has recently cultivated with Phnom
Penh. China over the years has backed Cambodia's
king, the Maoist Khmer Rouge, and now strongman
Hun Sen, who was a junior Khmer Rouge cadre before
becoming a Vietnamese puppet. Nowadays he dances
more to his own beat thanks to China's economic
and political support.
With closer
economic relations, political ties are
strengthening. Chinese Premier Wen Jiabao visited
Cambodia this April, the most senior Chinese
visitor since then-president Jiang Zemin made the
trip in November 2000. Ministers and delegations
from Beijing and the provinces regularly visit
Phnom Penh for business-related meetings.
Cambodia is strategically vital to China
because it overlooks crucial sea lanes and could
conceivably share a maritime border if China's
military eventually enforces Beijing's claims to
disputed, energy-rich atolls in the South China
Sea. Beijing currently gives more civil aid to
Cambodia, more than $2 billion since the 1970s,
than any other country, according to Sophie
Richardson, author of a recent doctoral thesis on
China's relations with Cambodia at the University
of Virginia.
That long-standing
arrangement pays Chinese firms to provide roads,
bridges, weapons, patrol boats and offices,
including the $12.4 million loan it extended the
government in July for construction of Cambodia's
new $49 million Council of Ministers building.
Since April, Hun Sen has been favorably comparing
a no-strings Chinese aid package worth $600
million with the $601 million of conditional aid
Cambodia receives from the Western-led
Consultative Group (CG). Chinese aid is less
impressive than it seems on the surface, however,
as its spread across three or four years while the
CG's budget is disbursed annually.
All
this money and migration raise nationalistic
suspicions in some quarters. "China's grant is to
pressure the [Cambodian] government to follow
[China's] ideology," said Eng Chhay, an member of
parliament in the opposition Sam Rainsy Party, as
reported in the Cambodia Daily in July.
Critics complain that the warm relations
give Beijing a free hand in Cambodia. For
instance, Chinese police have been able to lead
joint operations to arrest and deport alleged
Chinese criminals from Cambodia, often with no
regard for standard extradition proceedings
through the Cambodian justice system.
Moreover, Chinese diplomats have been
known to complain bitterly to the Ministry of
Information and the editors of local newspapers
when they discover unfriendly reports about
Chinese interests in the Malaysian-owned,
Chinese-language Sin Chew Daily newspaper.
Free-speech advocates note that this is a seeming
contradiction with China's policy of not
interfering in other countries' internal affairs.
Meanwhile, two other Chinese-language
newspapers blatantly back Beijing's influence over
the country, though both insist they maintain
independent editorial policies. "Many Cambodian
Chinese are pro-Beijing, so they like reading our
paper," Liu Xiaoguang, editor-in-chief of Huashang
Ribao, said in a July Phnom Penh Post interview.
"We report Chinese-friendly news, so being
completely neutral is impossible."
No
doubt many of the Chinese-language newspapers'
12,000 copies sold daily are purchased by
Cambodia's estimated 350,000 ethnic-Chinese
citizens. Beijing has made strong inroads with
that local community by paying for new school
buildings, sending teachers from China, and
delivering new textbooks published by the
respected Jinan University.
Still, China's
growing soft power and influence are clearly a
worry for many Cambodians and foreign agencies. In
2002, the then United Nations high commissioner
for refugees, Mary Robinson, accused the Cambodian
government of bowing to Chinese pressure to hand
over two practitioners of Falungong, a harshly
suppressed group inside China that opposes the
Communist Party's rule through non-violent
meditation exercises.
Further concerns
were sparked when Cambodia's National Assembly
voted this July 26 to guarantee profits with
government cash for Sino-Hydro's new Kamchay
hydropower plant - even if the new facility
underperforms. Opposition politicians and
investment consultants privately contend that
Beijing has already lent the funds to Hun Sen to
ensure that the Chinese state-owned utility's
investment at least appears financially viable
during its start-up phase.
Those concerns
come on top of suspicions that other
Cambodia-based Chinese firms receive preferential
treatment over other foreign investors.
For example, Chinese-owned logging
concerns such as Wuzhishan LS Group face detailed
accusations of reckless - and in some cases
illegal - cutting from groups like Global Witness,
a global environmental watchdog that has on
occasion openly clashed with Hun Sen. Still, they
say, Cambodian officials have failed to pursue the
case, despite Cambodia's clear forestry laws.
Questions of undue influence, political or
otherwise, will grow if CNOOC's tentative interest
in offshore and onshore Cambodian oilfields
results in unusually generous concessions. Time
will tell if Cambodia today is a glimpse of
tomorrow's world, a place where China's investors
loom large, and its political influence runs deep.
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