China presence in Cambodia grows

PHNOM PENH - China, hungry for strategic influence and natural resources, is asserting itself as a major investor in Cambodia, sparking concerns that a huge inflow of Chinese cash will fuel existing corruption and exploitation in one of the world's poorest countries.

The relationship between the two countries is long and mixed, given Maoist China's unflagging support for the late supreme Khmer Rouge leader Pol Pot, whose Marxist faction is blamed for the deaths of more than a million Cambodians from 1975-79.

But in recent years, ethnic Chinese families close to Cambodian Prime Minister Hun Sen have played a key role in putting Chinese companies, often with the backing of the Chinese state, in touch with top Cambodian officials, economists and activists said.

"China needs Cambodia," US-based Cambodian economist Tith Naranhkiri said. "If a security problem occurs, for example, a war with Taiwan, China may need Cambodia ... Secondly, for economic reasons, it needs gas and oil."

According to the official China News Agency, China has become one of the biggest investors in Cambodia, with 3,016 Chinese companies making cumulative investments of US$1.58 billion to the end of 2007. Bilateral trade last year rose by 30% from 2006, to $730 million.

Since the signing of an investment protection agreement in July 1996, a further $350 million has been pledged, mostly in the forestry sector, power, textiles, construction materials, and agricultural development.

Major role for China
"China now plays a crucial role in our economy. It is both an important donor and an investor, and it's also a big market for Cambodian products," Khmer Economists' Association president Chan Sophal said. "Our agricultural products are exported to China but through Thailand and Vietnam. We are also a market for Chinese products. China’s role in the Cambodian economy is growing," he said.

Chinese Foreign Minister Yang Jiechi visited Cambodia in February, pledging a further $55 million in aid and investments of $1 billion in the country's power industry. He also waived import tariffs on 400 Cambodian products.

Besides investment and assistance, China has also granted military assistance to Cambodia, providing the country’s dilapidated navy with nine patrol boats in November 2007 and five warships in 2005.

But rights activists and anti-corruption campaigners point to a huge increase in illegal logging, land-grabbing, and worker exploitation as a secondary consequence of Chinese money.

"The effect of lots of money coming in with few strings attached, going to a lot of people in the government, is generally exacerbating corruption," Simon Taylor, director of the international anti-corruption group Global Witness, said.

Land grabs, illegal logging
"This manifests itself as land-grabbing, massive plantations and illegal logging, unregulated mining, the building of dams, and so on," Taylor said.

Meanwhile, workers' rights are often sidestepped in Chinese-invested factories, especially in the textile industry, activists said.

"The Chinese companies, especially garment factories, today have a lot of problems with Cambodian workers," Chan Saveth, of the rights advocacy group Adhoc, said. "Today, we see that China dominates garment factories in Cambodia. Workers suffer a lot, and the Chinese garment factories have mostly restricted workers' freedom."

Hundreds of thousands of workers - the majority of whom are women - are employed in Cambodia’s textile industry, which generates annual revenue of more than US$1 billion.

They have described an atmosphere in which they are constantly pressed into unpaid overtime, with too many financial worries and too little spare time to cause trouble for management. Unauthorized deductions from pay-packets are common, and paid sick leave is rare.

Protests in the forest
Chinese money has been tied up with massive agricultural and forestry exploitation projects, which are destroying traditional ways of life such as bamboo-harvesting and resin-tapping, activists said.

The Cambodian government granted a Mondulkiri forest concession of 200,000 hectares - 20 times the legal limit - acquired secretly by Pheapimex, an ethnic-Chinese owned Cambodian conglomerate with close ties to Prime Minister Hun Sen.

Pheapimex formed a joint venture with China's Wuzhishan plantation firm to exploit the region, displacing indigenous minority people who rely on the forests for their traditional livelihoods.

Global Witness said bigger deals involving Chinese state-backed companies were likely the least transparent and the most strongly defended by government security forces, who responded with military force to anti-logging protests by villagers in Mondulkiri.

"From the perspective of people in Cambodia who might want to ask questions about the process ... it's even more difficult with some of these recent deals that have totally been brokered behind closed doors," Taylor said.

He said the outcome of such deals for people living in rural areas was disastrous. "They know nothing until the moment that the bulldozers turn up and start pushing down their houses."

Loans, grants from Beijing
"If they protest, they get the full force of the state mechanism ... suppressing their efforts to get their voices heard," he added.

Hun Sen has banned illegal logging and called anarchic logging "the biggest mistake" of his political career, and his views have been backed up by anti-logging speeches by ministers, but with little apparent effect.

Chan Sophal said China's interests in Cambodia were clear. "They help us, but they also look into the resources we have, such as mines, oil, gold, iron, and land. They need land to grow agricultural and agro-industrial crops to meet the demands of the [China's] population."

Difficult history
Sino-Khmer relations began in 1958. During the 1970s, Maoist China for Pol Pot gave steadfast support to Khmer Rouge leader Pol Pot, whose faction is blamed for deaths of more than a million people.

Closer ties developed after the fall of the Khmer Rouge in 1979 through former Cambodian King Norodom Sihanouk, who maintained a second home in China and close ties with Beijing.

China wrote off significant loans to the Cambodian government six years ago, making new loans and grants worth $600 million during the visit to Cambodia of Chinese Premier Wen Jiabao in April 2006.

While no conditions were attached, analysts say Beijing is keen to secure access to the southern port of Sihanoukville for strategic reasons, particularly as a delivery point for imported oil.