April 19, 2018
A US think tank on Tuesday warned that spreading Chinese investment in the Indo-Pacific follows a pattern of leveraging geopolitical influence at the expense of the nations receiving investment.
The report looks at a sample of 15 Chinese port development projects, noting that the goal of the projects seems to be to “generate political influence” and “stealthily expand China’s military presence”. One of the three main case studies is the Union Development Group’s planned multi-billion-dollar tourism hub in Cambodia’s Koh Kong province.
The report, Harbored Ambitions, was co-authored by Devin Thorne and Ben Spevack for the Center for Advanced Defense Studies, a nonprofit research group.
Cambodia analysts said the report was largely accurate, although government spokesman Phay Siphan described the research group as “prejudiced.”
Union Development was awarded a concession of nearly 40,000 hectares, almost four times the amount allowed under the law, and has been in conflict ever since with villagers set to be displaced by its project.
“In an apparent violation of Cambodian law, corporate obfuscation helped China broker a deal with Phnom Penh for 20% of Cambodia’s coastline. Consequences of the Koh Kong mega-development include economic losses, environmental degradation, and reported human rights abuses,” the paper states.
While Union Development is ostensibly a private company, the report notes that representatives of the Chinese Communist Party have taken a vested interest in the project, periodically visiting the site and obtaining progress reports.
According to the study, the company was founded as a foreign corporation, but switched to a domestic company in order to receive a 99-year lease from the Cambodian government. Since then, it has reverted back to full Chinese ownership.
It was supported from its inception by the current head of the Belt and Road Initiative Leading Group, the steering committee in charge of Chinese President Xi Jinping’s ambitious plan to increase trade connections between China and nations in Asia and Europe.
“While the development in Koh Kong province has the potential to advance China’s domestic and international interests, it has come at the expense of the local population, the environment, and potential future income for Cambodia,” the report claims.
It goes on to note certain “strategic” benefits of the development that go far beyond economics. The coastline is located “directly opposite the proposed locations of the Thai Canal”, a planned route to bypass the Malacca Strait, giving China more privileged access to maritime trading routes.
A port at the site would also be large enough to house frigates and destroyers and their crews, or provide logistical support to nearby warships. On top of that, the paper theorises the facilities could be used to exploit cheap labour to address China’s growing food shortages.
While the development could theoretically be economically beneficial to Cambodia via tourism and taxes, the deal itself awards Cambodia minimal gains.
The lease, 100 percent owned by Union Development, allows the company to develop the area with no payment for the first 10 years of the 99-year lease. After the initial grace period, which ends this year, the lease will cost $1 million per year, increasing by $200,000 every five years.
“In essence, Hun Sen’s administration has valued the 36,000-hectare concession at less than 30 USD per hectare,” the report claims, adding that the development damages Cambodian industries like fishing, shopping, and tourism.
The development plan has also been subject to human rights controversies, with thousands of families evicted. Some claim they were never compensated, and holdouts report being forcibly removed while their crops and homes were destroyed.
“On the surface, the only objective of Chinese President Xi Jinping’s hallmark Initiative is to increase infrastructure connectivity within Asia and beyond so as to facilitate ‘win-win’ economic development,” the report states in its conclusion.
However, the strategic locations of the projects, Communist Party presence, government financial control, lack of transparency and seeming unprofitability of some projects all point to additional motives.
Government spokesman Phay Siphan said on Wednesday that he believes China’s investment will benefit Cambodia, which wants to help, and questioned the “prejudice” of an American think tank.
“We do need the investment from China,” he said.
But Miguel Chanco, lead regional analyst for the Economist Intelligence Unit, said the report’s characterisation of China’s economic policies was largely accurate.
“It is certainly a fair interpretation of China’s port projects in other countries,” he said via email, noting subsequent “difficult situations” following investment in Sri Lanka and Pakistan.
“The question for me is how desperate Cambodia is for such Chinese investment – I would say very because it has backed itself into a corner where it can no longer rely heavily on Western aid,” he said.
Bill Laurance, a research professor at James Cook University with 40 years of experience in the developing world, said China is “intensely self-interested”.
“I see China as having little real interest in developing or aiding other nations,” he said. “As China becomes bolder and more powerful, it is willing to use intimidation, threats, economic might, and even military pressure to achieve its aims.”