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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Revision exercise? China and USA argue over recent Cambodian history

During the years of the Vietnam War, and for some time afterwards I used to view the Voice of America (VoA) news services with deep suspicion. It was propaganda. In recent years my respect for their service as an independent and fair news provider has climbed.  I really think they’re offering a much needed service, especially since the Phnom Penh Post has been degutted to become, shamefully,  little more than a government mouthpiece. The VoA keeps its eye on stories that matter.

Today 11/01/2019 I saw a piece on their website that caught my eye. It concerned the current tit for tat between the US and China over who did, or didn’t drive the fall of Sihanouk at the hands of Lon Nol and the subsequent rise of the Khmer Rouge in the 1970s. Says the VoA in their report:

The online skirmish began when the U.S. Embassy posted a statement on its Facebook page, Jan. 30, saying the Khmer Rouge “ignorantly depended on a superpower,” an apparent reference to China. The embassy later issued comments claiming Washington was not involved in the coup led by Lon Nol that ousted Sihanouk.

The inference is that China was boots and all involved in supporting Pol Pot and that US attitudes had little to do with the events that led, ultimately to the awful genocide.

China has responded said the VoA:

In response, the Chinese Embassy posted a statement on its Facebook page, Feb. 1, mocking the idea that the coup “was not related to the U.S., but the CIA.”

The truth is China and the USA were both instrumental in events. One history of Chairman Mao, I read, said even the Chinese viewed Pol Pot  as dangerously extreme, or even crazy. I need to check my references on that one – but the picture was clear: any backing by China was arms length, but included supply of landmines.

But the USA already had blood on its hands with Kissinger’s vast and illegal bombing campaign in Cambodia’s north east.  The closest the current embassy comes to acknowledging that is to state:

“The United States has addressed its war legacy by long-standing and substantial efforts for humanitarian de-mining and removing unexploded ordnance (UXO), including the removal of hundreds of thousands of Chinese-made mines, which have injured and killed people for decades,” she said in an email.

Even then, in reviewing its war legacy, the US takes a snipe at who made many (or most) of the 4-10 million landmines said to be laid in Cambodia. Journalists and commentators lay the blame for laying these landmines on several forces during Cambodia’s decades-long war: by the Cambodian army, the Vietnamese, the Khmer Rouge, the non-communist fighters and US forces.

cambodialandmine

Around 50% of all landmine fields have been cleared. Since Since 1979, more than 64,000 people have been killed or injured by landmines in Cambodia – 15,000 from Battambang province and 5,000 from Rattanak Mondul. (Al Jazeera)

In any case, the USA blotted its reputation by suddenly pulling out of landmine removal in late 2017.  “Well just have to raise the money ($2million annually) by going elsewhere,” said Hun Sen at the time.  To that date, the US had sent $132 in removing unexploded mines and bombs.

Why the war of words today?  It appears that the USA is trying to remind the China-leaning Hun Sen Government that they are the good guys here and that it is unwise to put 100% faith in China.  But the words may prove a cheap shot in a losing battle. If you follow the flow of money, then the US has very little to do with Cambodia relative to China. Phnom Penh is mushrooming with Chinese cash and large tracts of Sihanoukville are basically Chinese.  Moral arguments are not effective with this government: especially when they are flawed, revisionist or simply too cheap.

Link to the Voice of America

Landmine clearing organisations:

Landmine Monitor – relevant figures on mine clearance in Cambodia.  Click here.

Mine clearance is undertaken mainly by the national operator, CMAC, and two international mine action NGOs, The HALO Trust and MAG. A national NGO, Cambodian Self-help Demining (CSHD), has been active since 2011.

More discussion. Is China’s investment going to choke Cambodia? click here.

 

 

Poverty porn. It’s not okay.

photojournalist

Big applause to of the Phnom Penh Post for her article this last week on ‘poverty porn.’ and the murky ethics of poverty fundraising.  She wrote when Weh Yeoh, the director of OIC Cambodia, tweeted the images from an Australian fundraising ad that portrayed young children, Cambodian, as trafficked and homeless. The photos positively rubbed the readers’ noses in the children’s shame.“I’m pretty sure this breaches all kinds of standards around positive portrayal of children,” he wrote.logo_ppp It turned out the children in the adverts were child models, dirtied up and paid to look like victims – and the fundraising agency said the imagery had kickstarted a very successful fundraising campaign. They were angry to be called out by the media, and went on to attack critic via twitter, arguing that donors don’t respond to images of happy, employed children.

On that front I disagree, and I base my opinion on market research I’ve expressly carried out for the charitable sector which tested various children-need-your-help scenarios – without pictures.

But that’s hardly the issue. The main focus of the criticism was about ‘poverty porn’ and the portrayal of disadvantaged children for gain – whether charitable or otherwise.

“The ’80s are calling – they want their pics of fly-covered starving African children back,” wrote Celia Boyd of Phnom Penh’s SHE Investments, on Twitter, in response to the recent advertising.  “Just because it raises money, it doesn’t make it right,” said fellow Australian Leigh Mathews, of Re/Think Orphanage.  (I’m citing the PPP piece here.)

The ethics of how we use images of poverty is a blurry topic. Last week I taught a local high-school class in New Zealand and we discussed just this issue, and Exhibit A were a stack of slides I’d taken – photos of poor people in Cambodia.  Creepy or okay? I asked.

The students were really clear. If I knew the person being photographed, and if I asked for permission – then it was okay. “You have to be respectful.” one student told me.

What about if it was a poor person whom I saw on the street, or near a temple where I was taking photographs?  “Then don’t zoom in on them,” was the answer.

The core principle is respect, privacy and dignity.  I don’t buy that the portrayal of victims, whether actual or made-up, is the right way to go.

Anyone have any thoughts on the issue?

 

 

Rain returns to Siem Reap

ROOF

A ‘heavy downpour’ in Bakong.

After months of sustained drought conditions, rain has returned – at least at hopeful levels – for now. In fact Savong said the storm that brought the big downpour was strong enough to rip the roofing off at the SOC in Bakong.  Urgent repairs have been carried out this week.  Cambodian weather never goes anything by halves – unlike in my homeland of New Zealand where mad outbreaks of drizzle, or wild streaks of cloudiness break the usual sunshine.

Buildings in the countryside of Cambodia face a precarious architectural problem: being well ventilated for the heat versus being fully enclosed and typhoon proof.  In the city more and more homes and buildings are enclosed and – power outages aside – enjoy air conditioning via heat pumps.

roof2

The fix. New iron, tougher nails.

But in the countryside the architecture is lighter and more susceptible to extreme weather.

I think, long-term, climate change is going to be the dominant concern for rural Cambodia. Economically and architecturally the people are going to be at extreme risk of ruin. Risk has always been a part of rural life – but that marks the difference between advantaged versus disadvantaged nations: the degree of resilience in the face of risks.  In this respect Cambodia has a long way to go.

By the way, my name is Duncan Stuart, and I’ve been involved with Cambodia since 2004. I’m slowly getting to know the country and have been eagerly watching the ups and downs of its development. My blogs are usually about Cambodia in general, though my perspective is through the lens of supporting Savongs School in rural Siem Reap. 

 

 

The intricate politics of water

JINGHONG DAM

Rivers are commonly referred to as the lifeblood of nations. Rivers provide water but also sustain plant and animal life both on the banks and beneath the surface. Fish travel up rivers to spawn. Rivers feed the ground-water supply and help farmers keep an equilibrium between wet seasons and dry.

But who controls the river? What rights do various nations have when the river flows through their territory? One only has to look at the fate of the Colorado river in North America to see the downstream impact of up-stream actions. Thanks to the water consumption of California, the mighty Colorado no longer even makes it to Mexico where it flowed for thousands of years.

What if China did the same to the Mekong that flows through Cambodia, Laos, Thailand, and Vietnam?  Pictured above is the awesome Jinghong dam in China, built to generate much needed electricity. But this dam can effectively turn-off the Mekong tap, and limit the river flow – affecting water supply and fishing.

China is not alone here. Since 2006 some 11 dam sites have been nominated for hydro dam construction in Thailand, in Cambodia and – with 7 slated projects – in Laos. Everybody wants a slice of the resource.

In attempt to co-ordinate management of the Mekong resource, Cambodia, Laos, Vietnam and Thailand governments formed the Mekong River Commission with which Myanmar and China also confer. The MRC was formed in 1995, but this last year has faced serious internal problems through lack of funding and very divisive disagreements between the member nations. In particular, the dam projects planned by Laos threaten to seriously impact the fishing on the river – estimated by the MRC to be an annual 4.4 million tonne catch worth almost $17 billion. That represents around one eighth of the value of the world’s total freshwater fish catch.

Make no mistake, as China flexes its economic muscle in the region, downstream nations namely Cambodia and Vietnam have a lot to lose.  Decreased flows from the Mekong have already led to increasing salination – from salty sea water – of delta flats in Vietnam, rendering farms and local freshwater fisheries unsustainable.

This year, in the face of the SE Asian drought experienced by the Mekong nations, China scored a diplomatic coup by announcing to the MRC that the Jinghong dam would release a substantial flow of water to alleviate the drought situation downstream for one month to mid-April 2016.

It was a generous gesture, but it was also a reminder that what can be turned on can equally be turned off.  The Mekong River, more than ever before, is up for grabs.

If you find my blog entries informative and interesting, please click the FOLLOW button. You are welcome to join me in my discovery of this complex nation.

 

 

 

New Cambodian Movie – In the Life of Music

song

I love film, and I love music so I’m excited by the prospect of an upcoming Cambodian movie that uses a famous Sinn Sisamouth song to tie-together three parallel stories set at pivotal times in Cambodia’s recent history. Sisamouth was the legendary pop vocalist who was adored by Cambodian fans in the 60s and 70s but was killed by the Khmer Rouge. Today his music is still revered – a vibrant reminder of the unquenchability of love and of culture.

The film IN THE LIFE OF MUSIC is the creative child of the up and coming female Khmer/American Director Caylee So who is clearly tracing the footsteps of her parents with this drama; her first feature film.

I looked up the movie’s website and here’s what it says about Caylee:

Caylee So was born in a refugee camp in Thailand on September 17th 1981, just after her parent’s escape from the reign of Pol Pot’s Khmer Rouge regime in Cambodia. When she was just three years old, her family immigrated to the United States. She grew up in Northern Virginia where she spent most of her youth.

In 2000, soon after her high school graduation, Caylee joined the US armed forces and served in the Virginia Army National Guard for the next eight years. There, she wrote for a little column called Caylee’s Corner, a newsletter that was sent out to friends and families of deployed soldiers.

In between tour of duty, Caylee attended Northern Virginia Community College where she discovered her love of writing fiction. She later transferred to George Mason University to pursue a degree in creative writing. Creative writing led to theatre, and theatre led to film; all mediums that had one thing in common: they all captured stories.

In 2011, Caylee was awarded the Zonta’s Women in Film grant for Most Promising Young Filmmaker. In 2012 Caylee received her MFA in Film Production at Dodge College of Film and Media Arts, having won the Best Picture and Best Director at her school’s Cecil Awards that year.  She is also the winner of the Director’s Guild of America’s 18th annual Best Female Student Director award.  She is the co-founder of the 1st Cambodia Town Film Festival in Long Beach, CA and the winner of the Linda Mabelot’s New Directors/New Visions Award.

3 Chapters; 3 Generations; 3 Worlds: Changed by a Song.

Directed By: Caylee So / Sok Visal
Written By: Caylee So / Dane Styler
Produced By: Caylee So / Neardey Trinh

In the Life of Music tells the story of how one song “Champa Battambang,” a song made famous by Sinn Sisamouth (the King of Khmer Music), plays a role in the lives of three different generations. It is a feature narrative told in 3 chapters during 3 different decades, depicting the lives of people whose world is inevitably transformed by war. It is a powerful intergenerational tale that weaves through 38 years of Cambodia’s ever-changing landscape.

Chapter One: The Song of Love (1968)
In the small village, a group of musicians ride into town to give a rare impromptu fundraising concert, igniting profound excitement and wonder from all the townspeople. Bearing the burdens and responsibilities of traditions, two strangers: CHY, 16, and PHALLY, 15, seeks to overcome their obstacles, and find a way to attend the concert, a concert in which music and love will be forever intertwined.

Chapter Two: The Song of Death (1976)
Mith, 40’s, a famous singer now living under the terror of the Khmer Rouge Regime, struggles with surviving his own legacy.

Chapter Three: The Song of Birth (2007)
Hope, 26, a singer, songwriter, journeys to Cambodia, the place her mother calls “home” where along the way, relationships will be tested, and one’s quest for identity will give voice to a generation who must reconcile the past with the present in order to shape the music of our future.