Investment Anarchy in Cambodia: Moving Beyond the ‘Chinese Investment’ Narrative
Featured image: Chinese investment is visibly changing the skyline of Phnom Penh, Cambodia’s capital, with increasingly many high-rise buildings strewn across the city.
By Jan Bronauer
Kampuchea––this is the name Cambodia carried during the cruel rule of Pol Pot’s Khmer Rouge regime in the late 1970s. It was a time when forced labour, evictions, torture and executions were routine. Remembering the time when he walked for days from Phnom Penh to rural areas to work in the rice fields, Mr. Lim grows appreciative that times have changed. The government has become more peaceful; work is based on voluntary participation, for the most part. A survivor of four years of forced labour, Mr. Lim has witnessed the death of many of his compatriots who were unable to work fast or long enough. Even though his grandfather was Chinese, he does not speak or identify as Chinese at all. He is Cambodian and repeatedly calls Cambodia “my country”––an indicator that he belongs and identifies with those who share the same past as him.
Caption: Memorial sites such as the Tuol Sleng Genocide Museum seek to educate the public about Cambodia’s past, and to advocate for empathy and progress. Image courtesy of Shen Meng Fei.
Today, forty years after the Vietnamese ousted the Khmer Rouge regime, Cambodia is purportedly facing a decisive identity crisis. Since his childhood, Mr. Lim has taken on numerous jobs, from taxi driver to tour guide, but he finds himself unable to get other, more stable and lucrative jobs. Small businesses are increasingly taken over by Chinese immigrants who see an economic opportunity, and the market is flooded with labour and capital. Since height limits on buildings in Phnom Penh were abolished in 2010, multiple high-rise giants tower over the city’s skyline. Of all properties on the market, roughly 80% are purchased by Chinese investors. With 90% of Cambodia’s factories being for textile production, according to Mr. Lim, China has an outlet of excess manufacturing capacity with the benefit of cheaper labour cost. In short, Chinese investors and workers have been pulled into the country and have threatened Cambodian identity.
The Cambodian government under long-time ruler Hun Sen has attracted extensive criticism from the West, especially after it banned the main opposition party, the Cambodia National Rescue Party (CNRP), in 2017. To ensure economic development, the government is therefore increasingly forced to look towards China for its financing needs. Alongside major infrastructure projects such as the planned Sihanoukville Special Economic Zone (SSEZ) or the Phnom Penh-Sihanoukville Expressway,which are implemented with the participation of Chinese state-owned enterprises (SOEs), the Chinese private sector has laid eyes on Cambodia as well. Sihanoukville is a prime example of a city which has been flooded by Chinese investment at an unsustainable speed, accompanied by Chinese workers and companies that now pose substantial challenges for all actors involved.
Caption: Sihanoukville is struggling to keep up with solid waste treatment amidst rapid construction growth. Image courtesy of Shen Meng Fei.
Sihanoukville––formerly known as Kampong Som––was renamed after King Norodom Sihanouk and has long been a popular travel destination for Western tourists. Situated in the south of the country, Sihanoukville has access to the Gulf of Thailand and is home to a port that is growing increasingly busy. According to the director of the province’s Tourism Board, the makeup of people who visit the province has been changing in recent years to be more Chinese tourists and fewer local and Western tourists. One stroll along the city’s streets reveals why: strewn across the city are Chinese signs of hotels, restaurants, casinos and construction companies, and Chinese nationals fill the streets throughout day and night. Westerners are mostly found travelling to the islands just off the coast of Sihanoukville, according to Mr. San, a local taxi driver. However, the capital city has become a place of aspiration and is sometimes called the new Shenzhen or, as Mr. San calls it, the second Macau.
Growing up in the city, Mr. San witnessed Sihanoukville’s remarkable transformation from a relatively quiet town to a metropolis of entertainment and business opportunity. His son works as a dealer at a local online casino and earns a good living for local standards. Though Mr. San’s own taxi business suffers from the increasing Chinese population in Sihanoukville, he sees the overall benefit from higher local employment rates. However, he recognises that one important prerequisite for this benefit is speaking Chinese––a distinctly non-Cambodian condition. Because of this, many Cambodians and even Chinese-Cambodians who have been living in the country for years are critical of the recent influx of Chinese capital.
Mr. Luu Meng, a successful restaurant owner and businessman, describes how his family has been deeply rooted in Cambodia for generations. He emphasises culture in his business approach, stating that the most important condition for his business is to stay true to the traditional roots of his cuisine. Though his cuisine is Chinese, he does notprimarilyidentify as Chinese––he is a Cambodian first, and shares the same fate as his compatriots. The ‘new wave’ of Chinese immigrants, however, view Cambodia as a temporary stopover to economic success, according to Luu Meng. They often behave recklessly and rude, harming the reputation of all Chinese in Cambodia regardless of how long they have been living in the country. Paradoxically, many Chinese-Cambodians of the older generation don’t even speak Chinese because the Khmer Rouge regime persecuted elites of which Chinese were a large part. Mr. Luu himself would study Chinese secretly behind closed doors in order to protect himself from the government’s arbitrary killings. During that time, it was difficult to be proud of his heritage, says Mr. Luu. The recent influx of Chinese workers and investments is a new test to his heritage––one that will require a nuanced view of Chineseness in order to avoid turning against people who have long shared the same fate as Cambodians.
But what about those who have recently entered the country? Drawn by the fantasy of economic success, Mr. Liu, a business developer from Beijing, is contemplating opening an online casino which cansupposedly generate tens of millions of dollars in annual profit. Prospects like these are the reason why people from all over China leave their homes to come to Sihanoukville. The flooded labour market in China alongside more stringent law enforcement and crackdownson gambling are powerful push factors leading to Chinese migration to Cambodia. A bouncer at a local club flew to Sihanoukville from Chongqing after a friend had told him about the economic opportunities in the city. According to Mr. Liu, many Chinese are tricked into their jobs through pyramid schemes which are lucrative for those who pull the strings but not for the workers themselves. After his arrival in Sihanoukville, Mr. Liu realised how messy the local labour market was; workers are bound by contracts which require them to stay for a given period of time, and the promised utopia is far from reality once workers arrive.
One local industry that is heavily affected by the influx of Chinese workers is small-scale trade. A woman owning a small Chinese supermarket explains that her monthlyrent for barely 30 square metres runs at 4,000 USD, including a small room on the second floor where she lives. It is hard to make a profit under such high rent prices, she says. Locals often emphasise the importance of small trade for Cambodians, advocating for increased industry protection from Chinese competition. If Cambodians are deprived of this entryway into the local economy, it will be increasingly difficult for them to participate in the economy at all. So far, however, no restrictionson foreign investment in small-scale tradehave been put in place,and Chinese nationals continue to import low-cost Chinese goods for the increasing population.
Investors in Cambodia’s larger-scale industry are similarly unconstrained. With enough capital, investors can build factories, attract Chinese-speaking workers, and benefit from favourable export conditions to the EU and the U.S. Cambodia is classified as a least developed country (LDC) and, as such, benefits from the EU’s Everything But Arms scheme which grants duty-free market access. This scheme is particularly important for Cambodia’s rice and textile exports. While the country’s relationship with the U.S. has become strained after Hun Sen’s crackdown on thepolitical opposition, exports to the U.S. have remained on the rise in 2018, according to data from the International Trade Centre. Exports to China, however, are quickly catching up, standing at 2.1 billion USD vis-à-vis 2.6 billion USD for the United States. Cambodia is therefore well-positioned for foreign factories, and the planned SSEZ is likely to add to the country’s international competitiveness.
However, Sihanoukville city largely remains a tourist hub. As such, the province’s main strategy is to attract hotel investments for the growing share of Chinese nationals. Paradoxically, it seems that such investments have become too easy: casino licenses are granted in bulk, with more than 100 casinos built or planned, according to Mr. Liu. The growing demand for casinos, bars, restaurants and other entertainment infrastructures serves as a strong incentive for investors to look towards Sihanoukville for profit. It is a perfect storm: strong economic incentives coupled with a host of willing investors and accommodating local law enforcement have transformed the local labour market and wealth structure, and thereby changed not onlythe skyline but also the identity of Sihanoukville.
Amidst this storm, what role does the government play? Many locals say that it is the government’s responsibility to adequately administer the influx of investments and to safeguard crucial local industries such as small scale trading. According to Ratha Thun, a local environmental activist, the city is not ready for such enormous investments. Instead of reaping the benefits, citizens find that the already existing infrastructural problems have become exacerbated. Roads are flooded during rain, dust pollution is rampant, and sewage as well as solid waste treatment are lagging behind significantly. The government is aware of these issues, yet little has been done to alleviate them. Projects to expand infrastructure for waste treatment are underway, yet the successful implementation will ultimately depend on the pushback from local stakeholders and the financial viability of these projects.
Understanding the government’s position is crucial to gaining a full picture of Chinese investment in Cambodia. There is a fine line between pushing too hard to implement investment policies on the one hand, and being too hesitant to introduce much-needed regulationon the other. Insisting on environmental standards or restricting entire sectorsfrom foreign investment could alienate investors, leaving Sihanoukville and Cambodia without the necessary means to develop. In an effort to create jobs for the local population and achieve economic growth, the government takes a laissez-faire approach, granting some degree of anarchy for the initial stage of development. Whether this is indeed necessary to turn aleast developed country into a middle-income country remains highlydebated.
For people like Mr. Lim––a survivor of the country’s grim past––the influx of investment grants little benefit. Chinese influence is unmistakably changing what it means to be Cambodian, yet the country’s historical ties with China as well as the complex network of actors involved in the country’s development make it difficult to pinpoint what Cambodia’s identity looks like today or will look like in the future.
Mr. Lim ends his story by recounting how he knew that the Vietnamese had defeated the Khmer Rouge. When he woke up close to noon one day, when the sun was already in the sky, he knew that he was free because he was never allowed to sleep this long in the previous four years. Perhaps one day, his country will realise that it had been labouring hard to no avail like Mr. Lim had done for so long. Perhaps one day, the country will realise that it can push harder to define and enforce its own investment policies. However, the complex relationships between actors in this hodge podge of Chinese investment make it difficult to place the responsibility to act with any one particular actor.
From Venezuela to Ethiopia, Kenya and Pakistan—Chinese investment has become widespread and has created a large network of actors in this ‘new’ model of economic development. What this means for the future of Chinese investment is unclear. It will be important to closely watch places like Sihanoukville which will serve as examples from which governments all over the world can learn.
Jan Bronauer is a senior at Yale-NUS College. You can contact him at email@example.com.