Cambodia Gets Even Closer to China With New Raft of Aid, Investment

China pledged further aid and investment to Cambodia and signed a raft of cooperation agreements with the Southeast Asian nation during Prime Minister Hun Sen’s four-day trip to Beijing this week, providing support for a regime increasingly shunned by other international donors.

While they do not share a physical border, Cambodia has a strong case for being the Southeast Asia country closest to China. The long-serving Cambodian prime minister has grown increasingly warm toward Beijing in the last two decades, providing a useful friend in a region wary of its larger neighbor’s intentions. To help address these concerns, China and Singapore agreed Thursday to set up a panel of international mediators to help resolve disputes arising from China’s Belt and Road Initiative infrastructure initiative.

The Sino-Cambodian relationship was reinforced this week during Hun Sen’s four-day trip to Beijing, with China pledging 4 billion yuan ($589 million) in aid over the next three years, promising further Chinese investment, and setting a target of increasing bilateral trade to $10 billion by 2023, according to a post (link in Khmer) on the prime minister’s Facebook account.

Investment was promised in Cambodia’s burgeoning textiles industry, a sector which has largely migrated away from China in the last decade due to rising labor costs, while the two countries also pledged greater coordination concerning the Association of Southeast Asian Nations (ASEAN), a regional body of 10 states in which Cambodia allegedly often supports China’s interests.

Nominally a democracy, Hun Sen’s Cambodia has taken an authoritarian turn over the last two years, human rights groups allege, with the main opposition party dissolved in 2017 for allegedly working with foreign agents to instigate a coup. The country’s once-vibrant press has also seen newspaper closures and threats against journalists. The EU Trade Commission is looking to reintroduce tariff barriers to the country’s goods as a punishment, while the U.S. cut development aid early last year.

This has made friendship with China even more vital for the country. China has invested over $2 billion in Cambodia’s transport infrastructure as part of the Belt and Road Initiative, building 2,000 kilometers (1,240 miles) of road, several bridges and at least 2 gigawatts of power generation, according to Chinese state media outlet Xinhua News Agency.

Yet many projects have proved controversial with the local population, particularly those involving land sales to Chinese investors. Locals in coastal Koh Kong province have complained of being forcibly removed from their homes to make way for the Dara Sakor Beachside Resort, a complex being built by Chinese real estate company Tianjin Union Development Group. The company has been granted a 99-year lease to 45,000 acres of land, where it also plans to construct an airport and other facilities at a cost of $3.8 billion.

Similarly, the once-relatively quiet coastal city of Sihanoukville has rapidly transformed into a building site of casinos and hotels catering to the Chinese tourist market, with some estimates projecting that Chinese now make up a fifth of the city’s population.

Yet Cambodia was ASEAN’s second-poorest country in gross domestic product per capita terms in 2017, according to the World Bank. Chinese infrastructure investment could prove a lifeline. “Cambodia can benefit enormously from this highly ambitious (Belt and Road Initiative) in such areas as physical infrastructure development, foreign direct investment, economic development and integration,” said a report by the University of Cambodia. Yet unaccounted investment “may facilitate corruption and nepotism, further the exploitation of natural resources, and worsen human rights records in Cambodia,” the report warns.

Contact reporter David Kirton (davidkirton@caixin.com)