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What impact has the Belt & Road had on Cambodia a decade on?

Samuel Ng


Source: Council on Foreign Relations

Cambodia was among the first nations to eagerly sign up to China’s economic initiative - touted to rival the great post-war American Marshall Plan. A decade later, how has the Belt & Road Initiative impacted the Cambodian people?


Nearly a decade ago, the Cambodian government embraced China’s Belt & Road Initiative (BRI) in hopes of transforming the much needed investment into a vital source of national development. From new hydroelectric dams to the re-invention of Sihanoukville, and from skyrocketing bilateral trade to enhancing domestic interconnectivity, Cambodia has undergone nothing short of an economic and infrastructure revolution under the BRI framework.


The flood of Chinese capital; however, combined with a poor regulatory regime in Cambodia, has culminated in a perfect storm, leaving many ordinary Cambodians neglected, sidelined, and some even displaced by BRI-linked projects.


Ten years since Phnom Penh joined the BRI, have Cambodians missed out on BRI-linked benefits, and who has the responsibility to ensure real change takes place?


Seaside Sihanoukville


Looking at Sihanoukville, once known for its pristine beaches on the Gulf of Thailand, the city has since become the epicentre of Chinese cash and infrastructure projects in Cambodia. The designation of the area as the Sihanoukville Special Economic Zone (SSEZ) under the BRI has led to an immense influx of Chinese capital accompanied by waves of tourists, businesspeople and workers. Vast Chinese-run construction projects dominate the skyline and streets are now lined with Chinese signs and restaurants.


In 2018, an estimated 20 percent of the population of Preah Sihanouk province, where Sihanoukville is located, were Chinese nationals. At the peak of the population influx, there were 200,000 Chinese living in Sihanoukville. This mass migration has upturned and upended the economic and social fabric of the community.


Locals were priced out of their own homes and neighbourhoods, while others were evicted by new Chinese investors with the blessing of the Cambodian government. Although some have been left better off by the BRI-linked investment, minimal trick-down benefits remain for the majority of Cambodians.


Between 2017-2018, Sihanoukville received US$1.3 billion worth of foreign investment, with US$1.1 billion coming from China alone. Much of this capital injection flowed to the Chinese-dominated SSEZ. Chinese enterprises there continued to generate employment, but most workers were flown in directly from China, and local Cambodian businesses had, and still have, limited interactions with the SSEZ. The narrow target of investment in Cambodia has translated to few opportunities for long-term skills development among the miniscule Cambodian workforce there, and benefits were restricted to businesses in the SSEZ.


In the tourism and casino sectors, the vast majority of money the Chinese spent was exclusive within a ‘Chinese bubble’. By 2020, an estimated 80 to 90 percent of Sihanoukville’s businesses were owned by Chinese nationals. Goods consumed and services rendered were all imported from China. The only direct benefits to Cambodia were restricted to the elite and political classes.


Lower Sesan 2 Dam


Moving to the rural areas of Cambodia, the effects of Chinese investment are equally profound. Similar to Sihanoukville, the Lower Sesan 2 dam (LS2) has attracted controversy over its disregard for community concerns, its immense negative environmental impacts and the lack of transparency. Unsurprisingly, none of the hydropower projects involving Chinese companies, including the LS2, have conducted a full environmental and social impact assessment.

LS2’s construction displaced around 5,000 people and an innumerable more affected by its

impacts on fish migration and water quality. While those faced with inundation were coerced into accepting relocation and token compensation from the Chinese companies, others who relied on the river’s fisheries for income and sustenance were left without anything. To add insult to injury, due to Cambodia’s weak regulatory system, displaced villagers were compensated for a fraction of what a similar resettlement would have cost in China.

Given that average Cambodians depend on fish for 60 to 75 percent of their protein intake, the dam’s effects are especially profound. The decrease in fishery yields have also flowed on to affect tens of millions across the Mekong River system in Cambodia, Vietnam, Laos and Thailand.

Adding insult to injury, Cambodian firms operated by local elites and business moguls quickly started to begin the logging of 16,000 hectares of natural forests earmarked to be flooded by the dam’s reservoir. This legally questionable move began almost immediately after the LS2 agreement was signed.

The sheer devastation and ramification of the LS2 dam led the Human Rights Watch to go as far as labelling its construction a human rights “disaster”. Yet, despite all the controversy and criticism, construction was completed. Prime Minister Hun Sen continually pushed the project forward under the guise of benefitting development and poverty reduction efforts in the country’s northeast.

In the midst of this scenario, Chinese dam-construction companies have pocketed the majority of revenue generated by hydropower projects, including the LS2. The Cambodian government, themselves lobbying for these projects, struggled to finance the costly price tag associated, and turned to 50-year ‘Build, Operate, Transfer’ (BOT) contracts with Chinese companies.

Under BOT contracts, all revenue generated by the dam is directly debited to the Chinese dam operators. It is upon the expiry of the 50-year deal that profits flow to the Cambodian government as they take ownership of the plants. Before this half century mark, these dams will generate little to no income for Cambodia, yet its people and environment bear the brunt of its effects.

While hydropower projects are not explicitly listed in any official BRI documents between China and Cambodia, dams such as the LS2 are clearly the “fruits” of the BRI.

Whose responsibility?


All the above-mentioned negative effects could have been prevented. Environmental and economic impact assessments were conducted, only to be buried by the Cambodian government. Regulatory measures could have been enacted to prevent the devastating impacts of BRI-linked projects on the social, economic, welfare and environment of Cambodia.


The Cambodian government bears the paramount responsibility to ensure the welfare and human rights of the population are upheld and ensure that all projects adhere to international and domestic standards. Under the Cambodian Constitution and international law, all Cambodians are afforded an adequate standard of living, housing, access to water, health and education, and sanitation.


However, responsibility to ensure these rights does not only rest on Cambodian authorities. The Chinese government has the obligation to oversee the actions of its state-owned and private companies, including conduct both abroad and within China. Similar human rights violations and utter disregard for local livelihoods have been observed in another BRI project across the globe in Guinea, where the Souapiti Dam caused similar mass displacement destroying food security and entire communities.


The Chinese government has not taken necessary steps to ensure all companies involved in large-scale BRI projects abroad properly conduct and disclose social and environmental impact statements; nor does it meaningfully consult local communities affected by such BRI projects during the planning and construction phases. No evidence suggests the Chinese government had imposed any obligations on Chinese and Cambodian enterprises involved with the SSEZ and the LS2 dam to follow corporate social responsibility standards, provide adequate and equitable compensation, nor even adhere to basic Chinese domestic standards.


By offering huge sums of infrastructure funding through the BRI and combining these with the lax standards protecting communities and their rights, these conditions are ripe for widespread abuses to occur.


Cambodia’s ever-increasing economic and political dependence on China should not exclusively consider the upsides the BRI brings, but also its negative effects. The benefits must be shared among the Cambodian population. As intended when joining the BRI, the Cambodian government has a responsibility to ensure that the use of China-backed resources align with Cambodian citizens' own developmental needs, and that projects have a concrete, positive effect on the country.


Despite its high-profile projects, macro-level positives and touted "aim" to better Cambodia, the BRI has overwhelmingly worsened the country's social cohesion, deepened income disparity, and upended entire ecosystems and environments.


The Cambodian government can begin by shifting its approach to BRI projects by establishing recognised transparency and community consultation standards as a prerequisite for awards and tenders. China also needs to step up if it wishes to secure broader public support that extends beyond Cambodia's business and political executives. Only when this is in place can both nations ensure a more sustainable, viable and durable BRI and shape public perception of China to a positive one.


In determining whether, after a decade, the BRI has improved Cambodia, the answer is mixed. China and the BRI have strengthened the Hun Sen regime, removed political opposition and streamlined governance. For the Cambodian government, the BRI has worked wonders for their power and position. For the everyday Cambodian, the BRI has only benefited a few, leaving little trickle-down positives for the bulk of the population.


At a macro level, the BRI is a useful steppingstone for Cambodia to improve national development and expand its role in the global economy. However, such a trajectory must inherently consider local voices, and Cambodian officials should remain cautious of the risks of over-reliance and undertake comprehensive consultations to determine how the BRI affects citizens across all socio-economic levels.


 

Samuel Ng is currently in his final year of a dual Bachelor of Laws (Honours) and Bachelor of International Business at the Queensland University of Technology in Australia. He is also a Westpac Asian Exchange Scholar for Taiwan, previously studying at the National Chengchi University having undertaken units in Taiwanese international relations, diplomacy, and political history.

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