ANALYSIS: So long, ambassador, and thanks for all the cash

Zhang Jinfeng (C) toasting with Hun Xen (R) and Xi Jinping (L)

Wed, 10 Mar 2010
DPA

Phnom Penh - Beijing's ambassador to Cambodia returned home this week after four years in the post. Her time in the South-East Asian country was certainly lucrative for Cambodia: During Zhang Jinfeng's stint, China became the country's largest foreign investor with more than 6 billion US dollars approved since her arrival. That sum - which represents about half of all Cambodia's approved external investment - excludes 1.2 billion dollars of economic aid concessions announced by the visiting Chinese vice president in December as well as 880 million dollars China has provided in loans and grants since 2006.

Although this is small beer for China, which has 2.4 trillion dollars in reserves, it is a lot of money for impoverished Cambodia whose gross domestic product is around 10 billion dollars. But an increasing number of analysts are questioning what kind of influence China's money has bought.

Donald E Weatherbee, a professor from the University of South Carolina who specializes in the politics and international relations of South-East Asia, said much of China's investment in Cambodia is in infrastructure and goes straight back to Chinese construction companies with dam and road contracts.

"Of course, it is hard to separate out investment from assistance since aid in the form of concessional loans is often tied to Chinese state-owned companies," Weatherbee told the US Congress last month in hearings on China's activities in South-East Asia.

"With Chinese assistance and investment comes an ever-larger Chinese presence and influence," Weatherbee added. "The pace of China's economic penetration of Cambodia is accelerating."

Weatherbee also raised Cambodia's much-criticized expulsion of 20 asylum seekers from China's Uighur ethnic minority in December, days before the arrival of Chinese Vice President Xi Jinping, who signed the 1.2-billion-dollar aid deal.

As expected, Cambodia denied a link between the two events, but analysts said they worried it showed Chinese investment could further erode human rights in Cambodia.

And Cambodian Prime Minister Hun Sen has made it clear that China is his kind of friend.

"China respects the political decisions of Cambodia. They build bridges and roads, and there are no complicated conditions," Hun Sen said last year, welcoming the hands-off approach to human rights and environmental concerns that some donors have to take into account.

Cambodia certainly needs the help. Its infrastructure is still in relatively poor shape from decades of conflict although it has improved markedly in the past 10 years, helped by loans from multilateral organizations and from nations such as China.

Being a favoured nation certainly seems to have helped Chinese businesses. Rural21, a magazine on international rural development, reported that China received 200,000 hectares of land concessions in Cambodia from 1998 to 2006 - more than any other country.

That allocation has certainly increased since then as swathes of Cambodia's countryside are parcelled out to foreign investors.

Cheang Vannarith, director of a Phnom Penh research body called the Cambodian Institute for Cooperation and Peace, termed the growing embrace a "win-win" for both nations.

While Cambodia sorely needs infrastructure, he said, China is looking to expand its influence in the region from its former glory days as "the centre of the universe."

"Cambodia looks to China as an economic hub in the region," Cheang Vannarith said. "China can bring Cambodia to more developed and more advanced countries."

But Cambodian opposition party legislator Son Chhay said he feels Cambodia is paying the price of increasing indebtedness to China, claiming that Phnom Penh has "to talk like a parrot" in backing Beijing's positions on Myanmar and Taiwan.

He added that when it comes to China's development deals, there is a lot more going on under the surface. He said he believes China is exploiting Cambodia's weaknesses and said there is rampant graft in its aid.

"This is not transparent," Son Chhay said of the process of awarding contracts to China. "There is a lot of corruption."

One of his concerns is that Beijing insisted on - and got - guaranteed minimum payments from Phnom Penh for the electricity generated by Chinese-built dams.

Those payments of 6 to 8 US cents per kilowatt hour run for the 30-year duration of the dam agreements, and Son Chhay said he worries the Cambodian government has transferred the commercial risk of these huge projects to future generations.

It is not just the opposition that is concerned about Phnom Penh's willingness to take on long-term liabilities. In its latest country report, the International Monetary Fund warned the opaque dam agreements could "negatively affect debt sustainability and jeopardize poverty reduction efforts."

But where some see danger, Cheang Vannarith said he sees opportunity. As China and the United States dance inevitably closer in the coming years, he said Cambodia would benefit from its China embrace.

"Why should Cambodia not get closer to China?" he asked, arguing that doing so would also bring it closer to the US, and that could only benefit Phnom Penh.

Regardless of the concerns raised by others, China's influence is unlikely to stop growing. At a farewell meeting for Zhang last month, Cambodian Deputy Prime Minister Sok An asked China to invest more, highlighting the potential in agribusiness.

Zhang told him that Chinese investors continue to look favourably on Cambodia and said one company alone was keen on getting a 60,000-hectare concession on which to grow rubber.

Before she left Monday, Zhang was awarded one of Cambodia's highest honours - the Royal Order of Sahametrei. Cambodia's Foreign Ministry said the medal of "fraternity and friendship" was bestowed in part due to the level of inward investment from China during her mission. Time will tell which side got the better deal.