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The Belt and Road in Cambodia: Successes and Challenges
Cambodian Prime Minister Hun Sen, second from left, meets with Chinese President Xi Jinping, right, at the Diaoyutai state guesthouse in Beijing, China, Jan. 21, 2019.
Image Credit: AP Photo/Ng Han Guan, Pool

The Belt and Road in Cambodia: Successes and Challenges

 
 

The Second Belt and Road Forum was held in Beijing from April 25-27 this year. Some 5,000 participants from more than 150 countries and 90 international organizations, including 36 heads of states and government, were reported to attend the forum. With Cambodia being a staunch supporter of the Belt and Road Initiative (BRI), it was no surprise that Prime Minister Hun Sen and his delegation were among the participants. Cambodians across the country, who have an increasing interest in the course of the relationship between Cambodia and China, kept an eye out for newly signed agreements that the delegation would bring home after the trip.

By many accounts, Cambodia is one of China’s closest allies in the Southeast Asian region. Politics aside, China has undeniably become Cambodia’s largest economic influencer, being the largest foreign investor, largest bilateral donor, largest trading partner, largest buyer of Cambodian rice, and the largest source of foreign tourists in the country. Since the inception of the BRI in 2013, Cambodia has embraced this China-led initiative and hopes to transform it into a source of national development. From connectivity to cross-border trade to tourism, Cambodia has benefited greatly from cooperation with China under the BRI framework and future enhancement of cooperation between the two countries will lead to even greater potential.

Bilateral cooperation in physical infrastructure and connectivity development has been in the spotlight in Cambodia. Two ideal examples of BRI-linked projects are the Sihanoukville Special Economic Zone (SSEZ) and the planned Phnom Penh-Sihanoukville Expressway.

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The SSEZ alone has helped generate income by directly employing over 20,000 Cambodian workers and promoting the social and economic inclusion of mostly low-skilled and female workers from Sihanoukville and other surrounding provinces. Over 100 factories currently in operation within the zone hire these Cambodian workers to produce garment, textiles, bags, leather products, hardware, machinery, wooden products, and other light manufacturing products for exports. With the second phase of development underway, the zone will be able to host up to 300 enterprises employing up to 100,000 Cambodian workers. The SSEZ also offered to host a government-backed vocational training center, which is currently in operation and provides training in specific technical skills to workers and students in and around the coastal town, free of charge. The income generation and empowerment benefits are substantial, especially considering the extent of indirect employment and income generation (i.e., the benefits for the immediate families of the workers, the need for other businesses to support the livelihood of the workers, etc.).

With the merchandise trade becoming the key driver supporting the country’s growth, the logistics sector has become even more crucial. Presently, Cambodia has inadequate infrastructure capacity and significantly lower performance in logistics than others in the region, resulting in higher costs that subsequently affect the country’s economic competitiveness. The expressway project has big potential to enhance connectivity and logistics within Cambodia and beyond, improving logistical efficiency and reducing trade costs. This new infrastructure will complement the existing national road connecting Phnom Penh and Sihanoukville Port, Cambodia’s only international deep-sea port, which handled more than 90 percent of Cambodia’s total container traffic in 2017. China’s state-owned China Communications Construction Company (CCCC) is responsible for the construction and costs of this $1.9 billion expressway project. Under the concession agreement with the government, CCCC will collect tolls on the road through its subsidiary company China Road and Bridge Corporation (CRBC) in order to recoup its investment. This expressway project demonstrates the increasing importance of multi-stakeholder partnerships such as public-private partnerships in delivering necessary physical infrastructure, and the Cambodian government has aimed to promote such mechanisms.

These two projects work complementarily to promote synergy between the BRI and Cambodia’s most recent economic growth strategy, the Industrial Development Policy 2015–2025 (IDP). The IDP laid out key concrete measures to strengthen and diversify Cambodia’s industrial sector and increase and diversify exports by enhancing connectivity in transport and logistics and improving the labor market and skills.

That said, Cambodia’s increasing dependency on China needs to be taken into consideration and BRI-linked projects need to be well-managed to ensure a better balance and shared benefit among the Cambodian population. Any overdependence on China poses certain constraints on Cambodia’s foreign policy options. Cambodia has seen this dependency increase over the last year as the government’s relationships with the United States and Europe have become strained due to the conflicting perceptions of political development in the country after the 2018 election. Some view China as an opportunist acting to exploit this situation and cultivate stronger relationships with government elites. After all, this elite-courting relationship has effectively worked in favor of China and the BRI-linked projects in Cambodia. Many perceive Beijing’s political backing to have facilitated the approval of China-funded and China-initiated projects.

There are also unfavorable views among the locals toward Chinese investments in terms of quality and transparency, especially compared to investment projects funded by other donors and development partners. The minimal trickle-down benefits for and adverse effects on the people on the ground have often become a case in point. Some NGOs and civil society groups have frequently raised concerns on issues ranging from resettlement and compensation to environmental damage to land grabbing.

In fact, the Cambodian government has formulated a variety of laws and regulations regarding safeguard policies and is accommodating safeguard policies and development partners’ procedures when carrying out infrastructure investment projects. For example, the government promulgated the Standard Operating Procedures (SOP) for Externally Financed Projects in Cambodia in February 2018 to increase awareness, serve as a reference and guideline for the planning and implementation of land acquisition and resettlement (LAR) activities, and ensure that all safeguard matters relating to LAR are addressed in a consistent, transparent, and fair manner. China, for its part, has established the Guidelines on Environmental Protection and Cooperation for Chinese overseas investments. It sets out basic principles for Chinese enterprises to adhere to regarding the integration of environmental protection into their corporate governance strategies and requirements to address the concerns of host countries’ governments and communities. Cambodian NGOs and experts have reported being consulted regarding the development of this guideline. It is a good sign and one that represents the Chinese government’s commitment to social and environmental safeguards.

However, mitigating public discontent depends on the extent of SOP implementation. It really comes down to governance and public capacity, which have been viewed as constraints in themselves, in terms of coordination, accountability, government effectiveness, rule of law enforcement, and corruption. The extent to which the Chinese guidelines are effectively adopted in Cambodia is also a concern because they seem to mainly target big state-owned enterprises but are nonbinding, providing essentially soft and moral regulation.

To conclude, the BRI and associated projects present many potential benefits for Cambodia. Synergizing them with Cambodia’s national development programs and policies as well as other development programs and initiatives in the country and region will only optimize these potential benefits. Under the BRI, Cambodia and China have a great interest in bringing their cooperation to a higher level of partnerships. These “partnerships,” however, do not concern governments alone. They must be formed by all levels of society working together to ensure sustainability and maximize and share benefits while minimizing the negative impact to the greatest extent possible. Based on a people-centered approach, the foundation of the partnerships must build, strengthen, and consistently promote people-to-people interactions and cultural exchange while enhancing tolerance and understanding of each other.  Only then can China secure broader support, beyond Cambodia’s chief executives, for its “peaceful rise.” Only then can we also ensure a more durable foothold and successful implementation of the BRI and its associated projects in Cambodia.

Sok Kha is a consultant currently engaged as a regional cooperation specialist for the ADB’s Study of the Belt and Road Initiative.

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