David Fullbrook
Asia Times
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.
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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