Is Chinese investment going to swamp Cambodia in debt?

YUAN

Direct foreign investment from China into Cambodia now outstrips that from all other sources combined. Is this a problem?

Right now the biggest national issue that everyone is talking about in Cambodia must surely be the topic of Chinese investment. Due to sizeable land transfers particularly around Sihanoukvlle, and with the instant-high-rise nature of Phnom Penh there is a strong and palpable perception that China is disenfranchising local Khmer people.

Property and real estate are the leading forms of foreign investment. In part because the effort going into starting an actual new business (such as a clothes or bicycle factory,) is still harder work in Cambodia than in most of its Asian neighbors. The World Bank puts Cambodia 138th on their Ease of Business Index – with neighboring Vietnam 69th and Thailand 27th by comparison. Cambodia lacks clear business laws and is penalised for the level of paperwork required.

So a big hotel is simpler. Sold as a property development – on a land concession made simple by the Government – the advent of Chinese-built hotels, run for Chinese tourists, with minimal wages going to local Khmer staff (who work 12 hour shifts) and with profits going straight back to China is a highly visible form of direct foreign investment that is hardly leading to a wealthier populace.

The Government has already overturned morality based laws (gambling for money is illegal in Cambodia but has been legalised for visitors to the little-Macau Chinese casinos of Sihanoukville.) So much for sovereignty.

Land concessions are also a big part of the perceived problem. Human Rights Watchdog LICADHO estimate that 2 million hectares of land have been made available for developers, local and foreign, but often at the cost to local land owners who have been kicked off their farms.Dispossessed, (as the ABC of Australia reported of farmers who lost their land to a Sofitel development in March 2016) protestors were shot and wounded by armed forces on behalf of the hotel group.

Here is a map detail land concessions across Cambodia. Concession awarded to Chinese interests are marked in red, local interests are in blue while Vietnamese interests are in green.  Source map is bigger, clearer and interactive. Click here.

CAMBODIAN LAND CONCESSIONS

But is Chinese money exposing Cambodia to a future of debt-laden servitude? Right now Cambodia’s foreign debt as a proportion of GDP is relatively modest, though climbing quickly. There are two prices to be paid though.  One is the social debt – the idea that Cambodians are becoming, and will remain, in a cheap labour economy.

Then there is the fiscal debt. Here Cambodia needs to watch itself. The question is: who owns the infrastructure. Historically this has always been the business of Government, but China has the capital and human resource to come in and extend the sea port, put in hydro schemes and develop the currently struggling road network – then the ‘rates’ must surely get paid to the country that funded these things.

This from the Hong Kong Trade Development Council website: August 2018.

At the end of last month, Cambodia’s Ministry of Public Works and Transport (MPWT) announced that work had been completed on 2,000 kilometres of new roads, seven major bridges and a container terminal servicing the Phnom Penh Autonomous Port. All these initiatives had largely been backed by the Chinese mainland, with funding provided from within the framework of the Belt and Road Initiative (BRI).

In an article published by the Phnom Penh Post, on March 27th, 2018, journalist Robin Spiess noted that China’s financing and investment of the Belt & Road projects in Cambodia could lead to a significant rise in public debt, and even take it to ‘distress’ levels.

According to a policy paper released by the Center for Global Development, Cambodia will likely see a significant rise in debt to China as a result of the Belt and Road Initiative. At the end of 2016, Cambodia’s total public and publicly guaranteed debt was $6.5 billion, a relatively low percent of the country’s $20 billion GDP. About half of that $6.5 billion debt was owed to China, according to the report.

Miguel Chanco, lead Southeast Asia analyst for the Economist Intelligence Unit (EIU), noted that the report was accurate regarding the risks to Cambodia, but also said any prediction of future debt levels was complicated by the overall lack of transparency of BRI projects.

“Our estimates put the country’s public debt stock at around 35 percent of GDP, which is well below the median for Asean and emerging markets at large,” Chanco said. “Having said that, I am concerned about the lack of transparency in many of China’s projects in Cambodia, as it makes it difficult to determine the latter’s overall sovereign debt commitments.”

Publicly declared projects at the end of 2016 were predicted to leave Cambodia indebted to China by an additional $3.5 billion though this figure might well be much higher.

One example is China’s proposal to develop over two million kilometers of national expressways [in Cambodia] by 2040”, which is a broad-brush swoop of a figure to begin with, and given the geo-technical engineering risks of building on a flat, sand-based terrain could easily blow out beyond the estimated cost of around $26 billion. A blow-out could leave the Kingdom significantly more in debt to China.

Meanwhile estimates of the national debt to 2020 is less fuzzy.

The EIU forecasted a rapid rise in Cambodia’s external debt in the next few years, according to Chanco. “We expect the country’s total foreign debt stock to rise to $17 billion by 2020,” he said.

Right now Chinese investment hasn’t pushed Cambodian debt prospects over the brink, unless you factor in the very real human rights costs. But in pure money terms Cambodia is going for the quick and easy path to economic growth.  It has a long wayto go however, before it becomes an economy – like that of Singapore – where business is easy to conduct and where locals are not in underpaid jobs. Current policy is growing the economy, but it is a recipe for dissatisfaction and a real sense of disenfranchisement.

I write these blogs as an observer of changing Cambodia. I’ve been involved in a small NGO since 2004 back when the tallest building in Phnom Penh was 8 storeys high. I hope expats, volunteers and others in the Cambodian community find these reports useful.  I try to compile hard data from credible sources.

Meanwhile: China and the US square-off in dispute over recent history.  Click here.

 

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Holidays in Cambodia – 2017

January 01 International New Year Day
January 07 Victory over Genocide Day
February 11 Meak Bochea Day
March 08 International Women’s Day
April 14, 15, 16 Khmer New Year Day
May 01 International Labor Day
May 10 Visak Bochea Day
May 13, 14, 15 King’s Birthday, Norodom Sihamoni
May 14 Royal Plowing Ceremony
June 01 International Children Day
June 18 King’s Mother Birthday, Norodom Monineath Sihanouk
September 19, 20, 21 Pchum Ben Day
September 24 Constitutional Day
October 15 Commemoration Day of King’s Father, Norodom Sihanouk
October 23 Anniversary of the Paris Peace Accord
October 29 King’s Coronation Day, Norodom Sihamoni
November 02, 03, 04 Water Festival Ceremony
November 09 Independence Day
December 10 International Human Rights Day

CAMBODIA PLUS BACK TO WORK MAY 09 174.JPG

Holidays in Cambodia, 2016

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Religious holidays, UN nominated days, national commemorations – visitors are often confused by unexpected holidays.

Confused by all the unexpected holidays in Cambodia? Booking a journey and wanting to include Pchum Ben?  Here’s an official list of holidays in Cambodia – 2016

January 01 International New Year Day
January 07 Victory over Genocide Day
February 22 Meak Bochea Day
March 08 International Women Day
April 13, 14, 15, 16 Khmer New Year Day
May 01 International Labor Day
May 13, 14, 15 King’s Birthday, Norodom Sihamoni
May 20 Visak Bochea Day
May 24 Royal Plowing Ceremony
June 01 International Children Day
June 18 King’s Mother Birthday, Norodom Monineath Sihanouk
September 24 Constitutional Day
September 30, October 01, 02 (Note, some sources include October 3rd as well.)
Pchum Ben Day – or Ancestors Day
October 15 Commemoration Day of King’s Father, Norodom Sihanouk
October 23 Paris Peace Agreements Day
October 29 King’s Coronation Day, Norodom Sihamoni
November 09 Independence Day
November 13, 14, 15 Water Festival Ceremony
December 10 International Human Rights Day

In Cambodia, on a Galaxy not so far away

CAMBO CHARTSMART

One pair of figures from the Asia Foundation study into mobile and internet in Cambodia, sums up the growth of smart-phone usage. In two years smart-phones doubled in market share, and if anything that growth is accelerating. By the end of this year more than half of all mobiles will be smart-phones.

Below we see who is getting the business: Samsung, for now, has half the smart-phone market, spearheaded with its Galaxy phones.

CAMBOCHART1

According to the report smart-phones are becoming increasingly a preferred source of news, weather and information.

Cambodia may have made a late start, but most of the country have skipped landline technology, PC computing and have jumped straight into the possibilities of 4G. A process that took the west at least 5 decades.

For more mobile phone facts and figures – click here.

 

 

Cambodia needs more than wells to achieve universal clean water access

FRESH WATER

UNICEF reports that 6 million Cambodians do not have access to safe, clean, drinkable water.  The problem is not just lack of wells.

The latest drought across Cambodia has shone the spotlight on the need for clean fresh water.  State initiatives to bring clean bottled water to drought-stricken villages has been useful, but only for the short term. What every Cambodian needs is steady, reliable access to clean fresh water. A recent UNICEF report, dated 2014, calculated that 6.3 million out of Cambodia’s 14.9 million population lacked access to clean drinking water. The problem is, in particular, a rural problem (80% of Phnom Penh’s population has access to clean drinking water,) and the main reason for the problem – the report stated – was that the Government has simply made other developments a higher priority. New roads have higher priority than access to water.

  • Some 40 percent of primary schools and 35 percent of health centers in the country do not have access to safe water and sanitation.
  • The lack of access to clean water leaves Cambodian children vulnerable to diseases such as diarrhea, which is the second leading cause of death among children under five, according to UNICEF.
  • According to WaterAid at least 380 children die each year from diarrhoeal diseases caused by unsafe water and poor sanitation.

Since 2014, according to international aid agency WaterAid there is now a national strategy, outlined by the Government, of reaching universal access to clean water by 2025: an objective that will not only play catch-up with the 6 million who lack adequate water supplies today, but will need to also reach the expanding population projected to reach at least 17.5 million by 2025.  Can they achieve this?

The digging of wells is the main solution in the rural villages though for the cities the provision of mains supply water is the main emphasis: treating lake, river sourced or well-sourced waters with full filtration systems as well as chemical treatment such as flouridation or chlorination.

Compounding the problem is the presence of two hazards in the ground and surface waters usually drawn upon by villages.  One hazard is naturally occurring arsenic: an issue that affects the whole Mekong delta region.  On this front Cambodia’s official ‘acceptable’ limit is 50 parts per million – in contrast to 30ppm in most Western countries.

An even more significant hazard is the presence of TTCs (thermo-tolerant coliform bacteria). For these bacteria, water treatment is needed.

Today in the face of drought, now and in the future, the provision of wells is a laudable initiative, and their are many agencies engaged with this – and worth supporting. My friend Savong has helped many well-building projects in rural Siem Reap.

But Cambodia also needs more reservoirs to effectively store water gathered during peak rainy periods and create a top-up for groundwater which, many experts believe, is sinking significantly.

The more wells or holes dug into the groundwater, the more pressure it loses causing well water levels to drop. That’s according to Mekong River Commission technical adviser Ian Thomas as reported in the Phnom Penh Post, last March 4th. A February Stanford University study found the more wells Cambodians dig, the harder it will be to extract water.

The building of reservoirs, (Angkor’s  East and West Baray are good examples from 1,000 years ago,)  would provide greater eco-stability for farming, fishing, and general water supply.

But for now, reservoirs and wells are just the start. Treating the water is also necessary. Water filters are a big part of the story. If you are supporting a water project, ask about the need for water filtration and treatment.

  • Sixty dollars will by a good basic bio-sand filter via Water for Cambodia.
  • Or Ceramic Filters, (they look like clay pots,) which are also recommended, are available through Resource Development International – who also supply water testing kits if you are worried about arsenic levels.

Further reading in this blog:

For more on the politics of water in Cambodia Who owns the Mekong? The intricate politics of water.

Also about the 2016 Drought

For other Facts and Figures about Cambodia

 

 

 

How safe is Cambodia’s airline?

Below average. The air safety infrastructure lets the ratings down.

Below average. The air safety infrastructure lets the ratings down.

You can find everything on the web, and recently a friend of mine, Dennis Weng, and I were discussing airline safety. He’s a statistician and we were discussing international standards. The conversation led me to the Airline Ratings Website which posts a safety rating out of 7 for every significant airline in the world. Cambodia Angkor Air gets a…er…3 out of 7.

Admittedly the audit was updated as far back as 2009, almost 6 years ago, so things have doubtless improved. What really pulls the safety rating downward is the poor Cambodian infrastructure. Should a plane go down there is inadequate air accident investigation resource, and as it stands, a weak air navigation network and emergency response at the airports.

Still things could be worse. In 2004 I flew out of Phnom Penh airport. They had an amnesty bin in which travellers could drop pocket knives or other items deemed unfit for air travel. Right there is the perspex container I saw it: an old hand grenade, found apparently by an American hippie tourist who thought it would make a great souvenir.

Imagine sitting on a plane next to that guy!

The 7 star safety assessment criteria for all airlines is as follows

Is the airline IOSA certified? If yes two stars are awarded; if not, no star is given.
What is IOSA Certification? The IATA* Operational Safety Audit (IOSA) certification audit is an internationally recognised and accepted evaluation system designed to assess the operational management and control systems of an airline. IOSA uses internationally recognised audit principles and is designed to conduct audits in a standardised and consistent manner. Airlines are re evaluated every two years. Registering for IOSA certification and auditing is not mandatory therefore an airline that does not have IOSA certification may have either failed the IOSA audit or alternatively chosen not to participate. *IATA (International Air Transport Association)

Is the airline on the European Union (EU) Blacklist? If no a full star is awarded; if yes then no star is given.
What is the EU Blacklist? A list of airlines banned from flying into European airspace due to safety concerns arising from alleged poor aircraft maintenance and/or regulatory oversight. Airlines banned by the EU may have a flawless safety record however the potential risk towards passenger safety is deemed by the EU as too high and a ban is put in place

Has the airline maintained a fatality free record for the past 10 years? If yes the airline are awarded a full star; if not then no star is given.
A fatality is deemed as the death of crew and/or passengers whilst on board the aircraft due to an accident. If deaths occurred through acts of terrorism or highjackings they have not been included. If an airline suffered a fatal accident through no fault of their own such as a runway incursion on the active runway (an incident where an unauthorized aircraft, vehicle or person is on a runway) this has also not been included.

Is the airline FAA endorsed? If yes a full star is awarded; if not, no star is given.
What is FAA endorsement? In the United States, the Federal Aviation Authority (FAA) has a list that bans countries (not airlines) from flying into American Airspace. The ban arises from a deemed inability to adhere to international aviation standards for aircraft operations and maintenance. According to the FAA Web site, “those that do not meet these international standards cannot initiate new service and are restricted to current levels of any existing service to the United States while corrective actions are underway.” An airline or airlines from a prohibited country may have a flawless safety record however the potential risk to safety is deemed too high by the FAA to allow operations in American airspace.

Does the country of airline origin meet all 8 ICAO safety parameters? If yes TWO stars are awarded to the airline. However, if the one criteria that is below the average is so by less than 15 per cent it is considered a pass. If 5 to 7 of the criteria are met one star is awarded. If the country only meets up to four criteria no star is given.
What is ICAO and what are the 8 parameters? The International Civil Aviation Organization (ICAO) was created to promote the safe and orderly development of international civil aviation throughout the world. It sets standards and regulations necessary for aviation safety, security, efficiency and regularity, as well as for aviation environmental protection. The 8 ICAO audit parameters that pertain to safety are; Legislation, Organization, Licensing, Operations, Airworthiness, Accident Investigation, Air Navigation Service and Aerodromes. For more information on a particular country visit: http://www.icao.int/safety/Pages/USOAP-Results.aspx.

Has the airline’s fleet been grounded by the country’s governing aviation safety authority due to safety concerns? If yes an additional star will be taken off the total for five years from the time of grounding

Does the airline operate only Russian built aircraft? If yes an additional star will be taken off the total.
– See more at: http://www.airlineratings.com/safety_rating_per_airline.php?l=C#sthash.AUhiB4NW.dpuf