Saturday, August 17, 2024 In May 2024, Cambodia marked a significant moment in its relationship with China by renaming one of Phnom Penh’s major roads as ‘Xi Jinping Boulevard.’ This gesture underscored the critical role that China’s economic and political support has played in Cambodia’s development. While this partnership has undeniably contributed to Cambodia’s growth and stability, it also raises several concerns that could have far-reaching implications for the country’s future.
China has been a major financier of Cambodia’s infrastructure projects, contributing to several key developments, including the Phnom Penh-Sihanoukville Expressway, the Phnom Penh Ring Road, the Funan Techo Canal, and the Siem Reap–Angkor International Airport. These projects have significantly enhanced Cambodia’s connectivity and overall economic situation. However, the reliance on Chinese funding for large-scale infrastructure has sparked concerns about the potential for a debt trap, given that China now accounts for over 40 percent of Cambodia’s external debt, which totals approximately US$11 billion.
The U.S. government has raised alarms about the Belt and Road Initiative, labeling it a debt trap that could lead to countries losing sovereignty over strategic assets offered to China as collateral.
The example of Sri Lanka, where the Hambantota International Port was leased to a Chinese state-owned enterprise for 99 years in 2017, is frequently cited as a cautionary tale. Despite these concerns, Cambodian Prime Minister Hun Manet has defended the use of Chinese funding, asserting that Cambodia’s annual budget laws provide clear debt limits, safeguarding the country from falling into a debt trap. Economic Growth and Rising Real Estate Prices in Sihanoukville Sihanoukville, a key area for foreign investment in Cambodia, exemplifies the complex impact of Chinese investment.
The Sihanoukville Special Economic Zone, capable of accommodating up to 300 factories and expected to create around 100,000 jobs, has been a significant driver of economic growth. However, this influx of Chinese investment has also led to a sharp increase in real estate and land prices, driven by foreign investors and migrant workers flooding into the area. While Sihanoukville’s economy has diversified from a heavy reliance on tourism to include a robust industrial base, the impact on local businesses has been significant.
By 2019, an estimated 90 percent of businesses in Sihanoukville were owned by Chinese citizens, a shift that has displaced many local enterprises. This transformation, while economically beneficial in some respects, has also led to social and economic tensions within the local community. Broader Implications of Chinese Support in Cambodia Beyond infrastructure and economic growth, Chinese support has extended to various sectors in Cambodia, including tourism, education, and healthcare.
The Cambodia–China People-to-People Exchange Year 2024 is expected to strengthen cultural ties and attract more visitors to Cambodia. Additionally, Chinese funding has facilitated the construction of educational institutions like the University of Kratie and the Cambodian–Chinese Traditional Medicine Research Centre at Preah Kossamak Friendship Hospital, enhancing both educational and healthcare services in the country. China has also committed to aiding Cambodia in landmine and unexploded ordnance removal, having provided US$14.
4 million in grants since 2018. This assistance has led to the clearance of over 107 square kilometers of minefields, benefiting local communities and contributing to Cambodia’s overall development. However, the geopolitical implications of Cambodia’s close ties with China cannot be overlooked.
Cambodia’s alignment with China’s stance on the South China Sea has strained its relations with ASEAN, highlighting broader regional tensions. The controversy surrounding the Funan Techo Canal project, which has raised concerns in Vietnam about potential water flow reduction in the Mekong Delta, is a prime example of how economic cooperation with China can intersect with geopolitical challenges. Need for a Balanced Approach to Foreign Investment The growing economic relationship between China and Cambodia, characterized by massive infrastructure projects and consistent financial assistance, has raised important questions about Cambodia’s external debt and geopolitical alignment.
To ensure sustainable development, the Cambodian government must maintain control over its debt and seek to diversify its sources of investment. Establishing new partnerships with regional and global actors will be crucial in achieving balanced and long-term development. By adopting a balanced approach, Cambodia can maximize the benefits of its cooperation with China while minimizing potential risks, thereby ensuring continued growth and regional stability.
This strategy is essential not only for Cambodia’s future but also for maintaining stability in the broader Southeast Asian region. Scant Bullet Points:.
