Corporate: China powers its way through Cambodia

By Marwaan Macan
Source: http://www.hydroworld.com/news/2013/02/18/corporate-china-powers-its-way-through-cambodia.html

"Hun Sen feels more confident now that he has so much Chinese help," added Mu Sochua, an opposition lawmaker. "It does not seem to matter to him that these development projects are not based on equity and that they help to strengthen lawlessness."

In the hilly wilderness across southwestern Cambodia, the foundations of the country's strengthening bonds with China are taking root. It is there that large dams supported by Chinese money are being built to literally bring the impoverished Southeast Asian nation out of darkness.

The largest of them so far, the US$280 million (RM865.2 million) Kamchay Dam in Kampot province, came to life a year ago, helping to brighten the nights in Phnom Penh. It is one of five dams backed by Chinese investments aimed at easing the electricity deficit in the country of 14.9 million people - where only a quarter of the population has access to power from the national grid.

The howls of protests from villagers and green groups have not deterred China's dam builders, which have committed a total investment of US$1.6 billion to produce an estimated 915mw of power by harnessing the untamed rivers that gush down that remote terrain. The largest symbol of this Cambodian-Chinese alliance is the 338mw Russei Chrum Krom hydropower project, which is being built at a cost of US$500 million.

On the back of these hydropower projects, China has emerged as Cambodia's biggest foreign investor, the Council for the Development of Cambodia, the government's investment agency, revealed early this year. Total investment from the Asian powerhouse to Cambodia over two decades came to nearly US$8.8 billion.

But just as Cambodia was digesting the highs of this Chinese investment portfolio came news that threw into stark relief the financial flow. A deal signed around the dawn of the New Year, involving two Chinese companies, pledged to build a 400km rail line, a steel plant and a seaport in the country for US$11.2 billion, breaking the country's previous foreign direct investment (FDI) records.

Such a boom in Chinese FDI is being viewed by some Phnom Penh-based diplomats as a further sign of Cambodia being drawn into Beijing's sphere of influence. "China wants to have a dependable ally in Asean and it has sought Cambodia for this role," an Asian diplomat noted. "Chinese investments have certainly edged out any designs the US may have had or even through Washington's allies in the region such as Japan and South Korea."

Such Chinese support is also helping a poverty-stricken country like Cambodia, where over one-third of its population live in poverty, to be more assertive against politically strong neighbours such as Thailand. That has been manifest, at times, in the strident tone of Prime Minister Hun Sen, the region's longest-serving leader, who has held the post of premier since 1985.

'Strategically speaking, Cambodia has become an important player in the region for China,' says Chea Vannath, a Phnom Penh-based political analyst. "It has given Cambodia more confidence on the international stage."

"Hun Sen feels more confident now that he has so much Chinese help," added Mu Sochua, an opposition lawmaker. "It does not seem to matter to him that these development projects are not based on equity and that they help to strengthen lawlessness."

The extent of this bilateral relationship, in fact, has come under more scrutiny in the region. It has unnerved some Southeast Asian governments following Cambodia's performance last year, when it served as Asean's chair. Often referred to is the mid-2012 Asean Foreign Ministers Meeting (AMM) in Phnom Penh, which ended on an acrimonious tone. On that occasion, the 10-member bloc failed to issue its customary bland and noncommittal joint communiqué for the first time in its 45-year history.

The Hun Sen administration was faulted for taking China's side in the disputes related to the South China Sea than weighing in on the side of Asean. Members led by the Philippines and Vietnam and other countries that share this body of water, including Malaysia and Brunei, had sought a united Asean position to be mentioned in the joint communiqué.

A senior Southeast Asian foreign ministry even admitted that China's ties with Cambodia had resulted in a breach in diplomatic protocol within Asean. At last year's AMM, there were signs of Cambodian officials seeking clarification from a ranking Chinese foreign ministry official who was at the annual sessions before they agreed or disagreed with the text of the communiqué, he said.

Another diplomat pointed to a similar habit when Asean diplomats posted to the United Nations in New York conferred on regional issues. "The Chinese would learn what we discussed through the Cambodian," he revealed. "This hurts regional solidarity."

But this strengthening Chinese-Cambodian relationship - that received another shot in the arm in late January when Beijing signed a deal to train Cambodian troops and supply it with new weapons - was far from cordial in the early 1990s. After the 1991 Paris Peace Accords, which brought an end to decades of bloody conflict, the blueprint for the ravaged country's revival was chartered by Western donor agencies like the World Bank and Western governments.

China was tainted at the time for its role in supporting the genocidal Khmer Rouge regime, which was responsible for 1.7 million deaths, nearly one-fifth of the population, from execution, forced labour and starvation during its rule of terror from April 1975 to January 1979.

China, in fact, was a late arrival to the development industry in Cambodia. In 2003, the Chinese had only committed US$45 million in FDI. The dominant players included Japan, which opened its coffers to aid the country, including millions of dollars for the national budget.

Yet in the past decade, as China began to reach out to Cambodia and cement bilateral ties as it had done with other Asean countries, it did so through economic offerings. Besides the big ticket infrastructure projects, Chinese investments also flowed into Cambodia's growing garment sector - the country's only industry now accounting for 75% of its exports, valued at US$4 billion annually.

The political nature of these bilateral ties was exposed in December 2009, when Beijing signed 14 deals with Phnom Penh worth US$1 billion two days after Cambodia deported 20 asylum seekers from China's ethnic Muslim Uighur minority. China had pressured the Hun Sen government to do so, despite protests from the US government, UN agencies and human rights groups, it was revealed at the time.

'Since then, Cambodia has moved deeper into China's arms,'says a Cambodia watcher living in Siem Reap, the town near the historic Angkor temples. "It was initially an economic relationship, but now it is more political and strategic."

"[US President Barack] Obama's visit to Phnom Penh for the Asean summit last November did not go down well with the Cambodians,'she added. "His statements that were hostile to Hun Sen and showing no sympathy to a country in national mourning (following the death of the former monarch) sealed the deal for Cambodia and China."

Marwaan Macan-Markar is a Bangkok-based correspondent reporting on Indochina affairs for The Edge