Should Cambodia be wary of China’s Belt and Road Initiative?

Content image - Phnom Penh Post
‘investment in physical infrastructure is the right option for the Kingdom’. Heng Chivoan

China’s Belt and Road Initiative (BRI) has gained support from more than 70 countries around the world, who represent nearly 40 per cent of the world’s gross domestic product.

This suggests the great relevance of the BRI.

However, it has been criticised for creating a debt trap for some countries like Sri Lanka and Pakistan.

There is a concern, especially among Western scholars, that Cambodia could face a similar debt trap given that the influx of Chinese loans to Cambodia have not been effectively and transparently managed.

This article argues that Cambodia is still in the safe zone with regards to external debt management and that BRI provides more opportunities than risks to Cambodian economy and society.

Of course, there are some shortcomings that need to be addressed, particularly skills and technology transfers and the local community’s perception of and participation in BRI projects.

Cambodia is undoubtedly thirsty for building a strong physical infrastructure connectivity nationwide.

Such a connectivity will help to reduce the cost of transportation, and facilitate trade and tourist activities inside the country.

Indeed, investing in so-called physical infrastructure is not a totally new thing, for the Cambodian government has been doing it for years.

This can be evidenced by the government’s rectangular strategies in phases I, II, III and IV.

As a result, the Kingdom has enjoyed an unprecedented economic growth rate of seven per cent annually.

Simply put, investment in physical infrastructure is apparently the right option for the Kingdom so far.

Private investment in infrastructure development in the Cambodian ports of Sihanoukville and Koh Kong may generate a significant amount of revenues.

Tangible benefit

Having a strategic location adjacent to one of the world’s busiest commercial lanes, Cambodian ports will be likely to attract more commercial shipping, thus generating significant revenues for the country.

Another tangible benefit of the BRI for Cambodia is the development of the digital technology.

The Kingdom has regarded the development of this technology as a crucial driving force to transform itself from an agriculture-based to an industry and service-based economy.

While China has become one of the world’s leading innovators in such technology, linking with China through the BRI will help the Kingdom to achieve the above-mentioned goal more quickly.

Cambodian Prime Minister Hun Sen said at the 13th annual outlook conference on Digital Transformation Towards Industry 4.0 last March that “Cambodia has experienced economic structural transformation ̶ from mainly an agriculture-based to an industry-and service-based economy . .

“The digital economy can drive growth and efficiency . . . Things such as smartphones, cloud computing, robotics, blockchain and the Internet of Things have been generating vast possibilities for improving people-to-people connectivity, creating new start-ups with new ideas, facilitating trade, reducing market barriers and creating opportunities for innovative ideas and entrepreneurial activities . . .”

Despite the aforementioned economic benefits, the BRI has apparently created an economic disparity to a certain extent.

Some Cambodians, especially those that possess land, are likely to benefit most from the initiative, whereas some others have somehow suffered.

In recent years, the significant inflows of Chinese investment in Sihanoukville has spurred land prices there. While this can be good news for those who own land, people who mainly rely on their labour and tourism have apparently suffered.

Overcome shortcomings

The mass influx of Chinese tourists in the area has apparently led to a significant increase in prices of commodities and services there – therefore, the locals, who mainly make their living from their labour, have found it hard to pay the rent and buy groceries.

Moreover, Chinese tourists have reportedly used services provided by their own nationals rather than by local Cambodians, creating a significant pressure on Cambodian small and medium producers or service providers.

In order to overcome these shortcomings, the Cambodian government should discuss with its Chinese counterpart in order to readjust the BRI policy to better serves the interests of local Cambodians.

Leng Thearith is Director of the Mekong Centre for Strategic Studies (MCSS), Asian Vision Institute (AVI).