Damming Public Opinion: The Risks of China’s Economic Diplomacy in Cambodia

Life on the Mekong, Cambodia, by Tharum Bun

April 4, 2008
Devin T. Stewart
Carnegie Council

In this increasingly interconnected age, the role of public opinion has grown in many areas of life—from corporate valuations in the form of brands to political influence in the form of soft power. With these trends in mind, China's approach to dealing with global public opinion, be it over Tibet or Darfur, carries risks.

Symbols of Control

China's style of economic diplomacy may become one of the greatest questions of our time. While the rich democratic countries attempt to pursue development strategies that are people friendly, emphasizing human rights and environmental standards, China is said to be following a strategy that is regime friendly, focusing on local practices, practical results, and infrastructure development. For this reason, some observers have argued that China's approach may be more appealing to the elite in less democratic countries in Africa and Asia.

Unfortunately, the enormous dams that China is constructing both inside its borders and in the countries where it invests may become a symbol for a flawed approach to coping with an increasingly powerful public opinion. From the Three Gorges Dam to the "Great Firewall" of Internet censors in China to the planned dams of the Mekong River, China hopes dams can provide growth and stability. For how long can China dam public opinion?

Money First, Governance Later

A potentially powerful dynamic playing out in China's relations with the developing world emerged during a recent trip I took to Cambodia. Looking at the potential oil and gas boom in Cambodia, my research investigated the possible impact of natural resource revenue on Cambodian society and governance.

It is widely known that China is willing to deal with authoritarian regimes, but these relationships may end up sparking a backlash against China in the developing world. As UNDP head Kemal Dervis said at a recent conference at New York's New School, the greatest threats to development may be social instability from inequality and environmental degradation, not macroeconomic stress. This sentiment was a major theme in many of my interviews in Phnom Penh.

"China is making Cambodia move backward," said Son Chhay, a Cambodian opposition party lawmaker. He explained that China's involvement with Cambodia's authoritarian regime is erasing the progress the country made in human rights and democratic development. One effect is that Western donors may have to weaken their demands for better governance just to keep up with the growing influence of Chinese investment.

During the last decade, the main source of foreign influence had been nongovernmental organizations (NGOs) working with aid donors. Now, China's presence is shifting the balance, potentially exacerbating the two risks that worry Dervis. For example, China's distaste for making aid contingent on policy indicators may worsen the already rampant corruption in Cambodia. Most observers predict that at least half of the oil and gas revenue would go into the personal bank accounts of corrupt officials.

Hydro Power without People's Power

"You could have a people power movement in the next two to three years if the government fails to create the million jobs needed. The youth will go to the street because they have nothing to lose," Son Chhay said. He predicts upcoming elections will fail to be democratic. Half of the population is young and unhappy with the government, and they have no memory of the genocide of Pol Pot and therefore no fear of authority. One target could be Chinese-owned businesses.

While my trip to Cambodia was to examine the impact of possible oil and gas revenue, it became clear that the planned Mekong dam and its symbolic implications were at least as important. "The big story is hydropower. Cambodia relies on the Mekong and damming will have devastating consequences on food and welfare," said a Western diplomat based in Cambodia.

Civil society groups such as Cambodia's NGO Forum are questioning the country's plan to become "the battery of Southeast Asia," especially for energy-hungry Thailand and Vietnam, with the help of Chinese state companies, which are in turn financed by Chinese state financial institutions. Without thorough and transparent social and environmental impact assessments, NGO groups worry that the dam projects in Cambodia and Laos could disrupt fish migration patterns in the Mekong River. Indeed, the dams that the Chinese have already built on the Mekong inside Chinese territory are causing unprecedented water fluctuations downstream in Cambodia.

The Coming Fallout

"Cambodia's future rests on a knife's edge," as one senior economic researcher put it. The path the country will take depends on the foreign influence coming to Cambodia, he explained. If Chevron decides that the energy resources off of Cambodia's coast are worth pursuing, the American company could possibly bring more transparency and accountability to Cambodia's economy. If not, China will become the dominant source of external influence given that its total investment in the country now exceeds that of any other donor.

In the long-term, when the voice of the people is stifled, it hurts the advancement that can come through the positive interaction between civil society and corporations. This problem will haunt China's development strategies both within its borders and in its relations with other countries.

It seems cracks are forming in China's dams, literally and metaphorically. "China cannot survive the system it is creating," Son Chhay concluded. "I predict a crisis in China before they enter the real world."

Related Resources:

• Ethics Be Dammed? China's Water Projects (Carnegie Ethics Online)
• Book Review: Charm Offensive (Carnegie Ethics Online)

Cambodia Keeps Taking, Gives Little

A Cambodian beggar with her sister walks in a market in search of alms in the capital city Phnom Penh. (Photo: Khem Sovannarak/AFP/Getty)

Friday, Jun. 22, 2007
By Hannah Beech/Bangkok
Time Magazine (USA)

Why do the rich nations keep funneling millions of dollars every year to a corrupt country like Cambodia? Each summer, at around this time, for more than a decade, international donors have pledged huge sums to prop up the impoverished Southeast Asian nation. The donors unveil a goody bag of financial aid contingent on the country tackling endemic problems like corruption, human-rights violations and environmental degradation. And each year, like ritual, longtime Cambodian Prime Minister Hun Sen dutifully pledges to clean up the government's act. Alas, also like ritual, little or nothing happens. Yet somehow the entire ceremony repeats itself year after year.

On Wednesday, June 20, foreign donors — a collection of foreign governments, multinational banks and various U.N. agencies — promised to funnel $689 million of aid to Cambodia, a 15% increase from last year and an amount roughly equivalent to half the nation's annual budget. This year, they did issue statements chastising the Hun Sen government for failing to adequately battle widespread graft. Cambodia ranks No. 151 out of 163 nations surveyed in Transparency International's 2006 government corruption index. Addressing donor representatives gathered in the Cambodian capital Phnom Penh this month, Hun Sen promised that long-delayed anti-corruption legislation would be passed "as soon as possible." The statement was a virtual carbon copy of what he had pledged last year.

Foreign aid has long been employed as a political tool, with varying levels of success. Rich economies get to feel good about sharing their wealth with the less fortunate. At the same time, western nations dole out cash to poorer economies in hopes of encouraging budding democratization efforts. But if anything, Cambodia has continued to backslide. A Hun Sen-backed coup in 1997 removed Co-Prime Minister Prince Norodom Ranariddh. Opposition party members are regularly harassed. And a July 2006 deadline imposed by Hun Sen himself for introducing a draft of anti-corruption legislation passed with no evidence of any such document.

The country's economy has grown (more than 10% last year, due in part to tourism and the textile industry). But wealth appears to be concentrated in the hands of the few. Earlier this month, the international watchdog organization Global Witness released the findings of a three-year investigation that accuses a network of Hun Sen's relatives and friends of having made tens of millions of dollars from illegal logging. (Several of those implicated by Global Witness have denied the allegations, and the watchdog's report itself has been banned from domestic distribution by the Cambodian government.) In the report, Global Witness castigates the international donor community for facilitating what it labels a deeply corrupt Cambodian ruling class: "Donor support has failed to produce reforms that would make the government more accountable to its citizens. Instead, the government is successfully exploiting international aid as a source of political legitimacy."

The trouble is that Cambodia does not have to depend only on Western donors to help it patch together its economy and government. There is China. Unlike other foreign governments, China puts few strings on its aid, and its generosity in doling out funds for the Cambodian government now rivals Western munificence. Last year, Hun Sen publicly praised Cambodia's "most trustworthy friend" China for its pledge of $600 million in aid and loans; this month, the Cambodian Prime Minister went on to thank the Communist giant for giving money without "order[ing] us to do this or that" — presumably in contrast to pesky requests for reform from other international benefactors. "China has changed the game," says Sok Hach, director of the independent Economic Institute of Cambodia. "Their attitude toward aid has decreased the leverage of the rest of the world."

Further diluting international influence is the potential of oil and gas revenues to transform Cambodia's still largely agrarian economy. Two years ago, Chevron announced the discovery of offshore oil reserves in Cambodia. If natural-resources dollars do start flowing in 2010, as some expect, the country may for the first time enjoy a major revenue source that could help it stand on its own feet. Yet, in countries like Nigeria, oil money has only served to enrich a tiny minority while leaving the rest of the country impoverished. And the alternate source of income may only make it more difficult for Western efforts to tie aid to improved Cambodian governance.

Nevertheless, some human-rights groups blame the donor community for their consistent unwillingness to pull aid when their pleas for reform aren't met. "The donors' list of conditions hardly changes over time, and the government simply ignores them year after year," says Brad Adams, Asia director of New York-based Human Rights Watch. "Hun Sen continues to run circles around the donors, making the same empty promises every year and laughing all the way to the bank."