This article was published as Policy Brief Issue 3, 28 September 2018, Cambodia Development Centre.To download PDF version, please find the link below:
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Cambodia’s undertaking of Belt and Road Initiative and Industrial Development Policy
Cambodia is one of the strong supporters
of China’s BRI. In addition to cooperation agreement to further enhance
comprehensive strategic partnership signed during President Xi’s visit to Phnom
Penh in 2016, Cambodia and China agreed on an ‘Outline Cooperation Plan to
Jointly Build the Silk Road Economic Belt and the 21st Century
Maritime Silk Road’ a year later.
Cambodia’s firm support of BRI is driven by both strategic and
economic considerations. Strategically, the initiative represents opportunities
for Cambodia to reduce dependence on the development of Western donors whose
assistances in many cases frustrated the government via their strict conditions
attached. Since the 2000s China[1]
overtook some major Western donors including EC and USA and emerged as “the
largest single donor” to Cambodia. Equally important is the fact that the government of
Cambodia favours China’s non-interference policy on the ground that it enable
Cambodia to maintain sovereignty and pursue independent foreign policy on the
international stage.
Economically, BRI can be a new source of Cambodia’s next
stage of growth and development through ever increasing infrastructure
development, investment, trade and tourism. During the visit of State Councilor
Yang Jiechi in April 2017 in Phnom Penh, Prime Minister Hun Sen said: “the Belt
and Road Initiative is of great historical significance, which will surely
advance regional connectivity and the construction of regional integration, and
bring enormous opportunities to the development of countries in the region. The
Cambodian side hopes to realize better and faster development of its economy
through further deepening bilateral practical cooperation under the Belt and
Road framework” [2]. For China, Cambodia is its old and
close ally that can play important role in promoting regional and sub-regional
cooperation as well as the construction of its BRI (Pou 2017).
Cambodia
already has its own national development policies such as the Rectangular
Strategy Phase III and Industrial Development Policy (IDP). In consistency with
the goal of BRI in promoting policy synergy, Cambodia’s designed policies have
been fully used to shape direction of cooperation between Cambodia and China
within BRI framework.
Out of the 14
points of cooperation measures that have been laid out at the Belt and Road
Forum, Cambodia and China have clearly identified specific areas of cooperation
that best fit with Cambodian and Chinese national strategies. Based on the MoU
on Formulating the Outline of Bilateral Cooperation Plan, Cambodia and China
have identified 7 key areas namely infrastructure, agriculture, capacity
building, industrial cluster, culture and tourism, finance and eco-environment
protection. In the 7 key areas, there are 4 areas on the MoU that are in line
with priorities of the IDP namely promotion of agro-industry, stronger boost
for infrastructure, promotion of industrial cluster and industrial human
resource capacity building.
According to
the IDP, the strategic approach is to promote the development of the
manufacturing sector and agro-processing industry through integration into
regional and global production chain; positioning the development of industrial
zones so as to ensure critical mass, economic linkages and competitiveness;
development of economic corridors, streamlining the operational procedures for
Special Economic Zones (SEZs) and developing new industrial parks and
industrial clusters. With this policy, measures and action plans have been laid
out namely promoting FDI focusing on improving the development of SEZs and
preparation of industrial zones, promoting the agro-industrial sector and
coordinating and supporting of policy focusing on skills and human resource
development, science, technology and innovation promotion. This is in a sense
signified how Cambodia’s IDP has been utilized to guide the direction of the
policy engagement with the BRI.
Funding and
Working Mechanism
For Cambodia,
funding related to BRI are based on the expansion of the existing bilateral
mechanism. Specific BRI cooperation mechanism is still in institutional
building process. To be precise, both countries signed "Memorandum of Understanding on Formulating the Outline of
Bilateral Cooperation Plan to Jointly Build the Silk Road Economic Belt and the
21st Century Maritime Silk Road between the Kingdom of Cambodia and the
People's Republic of China" during the state visit of President Xi
Jinping to Cambodia from 13 to 14 October, 2016.
Seven months
later, the Outline of Bilateral
Cooperation Plan to Joint Build the Silk Road Economic Belt and the 21st
Century Maritime Silk Road was formulated and signed when Prime Minister
Hun Sen attended the Belt and Road Forum (BRF) for International
Cooperation and paid official visit to China in mid-May 2017. In the
Outline, both sides agreed to set up Cambodia-China
Cooperation Working Group of Jointly Building the Belt and Road. The
Working Group is in charge of the organization, coordination and implementation
of the Plan, identify the list of priority projects, discuss and consult major
issues during the implementation of the Plan and propose solutions and
measures. Both sides agreed to make full use of existing bilateral cooperation
mechanisms, and to jointly contribute to the implementation of the Plan and
construction of the Belt and Road.
For
IDP-specific mechanism, a new working group
had been set up to shape a long-term view to develop the industrial sector and
transform Sihanoukville into a multi-purpose industrial zone. Prime Minister Hun Sen made direct
mentioning about the establishment of this Working Group at the cabinet meeting
in late December 2017[3].
The government is planning to build a
massive economic zone in Preah Sihanouk province to accommodate up to 10,000
factories similar to Thailand’s eastern economic corridor. The joint working
group consists of officials from the ministries of industry and handicraft,
tourism, land management, environment, as well as economy and finance. The
first action of the new group will be to determine what areas of the province
are to be protected and preserved and which ones will be turned into industrial
spaces. They will then create a master plan to lay out in detail development
plans for the region.
Project
Formulation Process
The project
formulation process often evolves around specific points of official visits of
leaders. For example, during the visit of President Xi Jiping in October 2016,
Cambodia and China laid out the list of Priority Projects of Productivity
Capacity and Investment Cooperation by identifying eleven cooperation projects
including the development of new Siem Reap international airport, the
construction of Phnom Penh-Sihanoukville highway, the construction of new power
plants and development of agro-industrial Special Economic Zones (SEZ) in
Northeastern provinces, among others.
In terms of
agro-industry development, on 19 October 2016, Cambodia signed a Memorandum of
Understanding (MoU) on Agricultural Development with a Chinese company from
east China's Shandong province. According to the MoU, the company has planned
to invest about US$ 2 billion in developing a 300-hectare Special Economic Zone
in western Kampong Speu province, in which storage facilities, packaging factories,
and processing factories for agricultural products will be built. The firm
would also cooperate with the ministry to establish an Agricultural Research
and Development Center and a Center for Sanitary and Phytosanitary Control and
would try to attract more Chinese enterprises to invest in agricultural
processing factories in its special economic zone.
Non-government
level cooperation has also witnessed an increased enthusiasm along with the
promotion of BRI. After the visit of President Xi Jinping, the Chinese
government has encouraged well-known Chinese enterprises to redirect their
focus to Cambodia. Concretely, a forum was held in December 2016 under the
theme "Cambodia: The Kingdom of Opportunities Along the 'One Belt One
Road'" gathering more than 600 enterprises and resulting in the signing of
a US$ 1.5 billion deal to build a Cambodia-China Friendship City in Phnom
Penh's northern suburb.
Similarly, during
Premier Li Keqiang’s official visit to Cambodia on 11 January 2018,
major infrastructure development projects that support the multi-modal
transport and connectivity between Phnom Penh and strategic location of
Sihanoukville province, the only deep-sea port coastal area, has been further
developed. The latest deals were signed during the official visit of Premier Li
Keqiang to Cambodia on 11 January 2018, following the 2nd
Mekong-Lancang Leaders’ Meeting hosted by Cambodia a day earlier. Marking the
60th anniversary of diplomatic relations, Cambodia and China signed
19 agreements, amounting to billions of dollars in concessional loans on the
financing of projects like the expressway to Sihanoukville and the new airport
in Phnom Penh.
According to
the Ministry of Public Works and Transport, the construction of a 190-kilometer
(120-mile) highway from Phnom Penh to Sihanoukville will cost US$ 2 billion and
will take at least 44 months to complete after beginning construction this
year. The two prime ministers also witnessed the signing of Framework
Cooperation Agreement for Stung Hav Port and SEZ Project in Preah Sihanouk
province. Regarding this project, a month earlier before the visit of Premier
Li Keqiang, China Metallurgical Group Corporation has asked Prime Minister Hun
Sen to support its investing in a project at Preah Sihanouk’s Stung Hav
International Port and Special Economic Zone. Cooperating with local partner,
the company plans to expand the existing Sihanoukville SEZ and enlarge the port
so it can accommodate vessels of 50,000 tons[4].
Conclusion
China’s new
grand strategy, BRI, together with the rise of economic and political power
emerge as a new force that could have profound effects on regional economic
landscape. Cambodia sees BRI as a new source of economic growth via
infrastructure development, industrialization, and trade and investment
expansion and tourism sector; whereas China regards Cambodia as its closest and
strategic allies that can help achieve the BRI goal and vision.
From such evolution, it is clear that BRI is not a one-way
initiative but rather an interaction, adjustment and synergy of national
development policies from both sides. Cognizant of its relevance and
importance, both countries work closely together to advance the coordination
and implementation of BRI strategy through a number of endeavors including
reciprocal state-level visits, integration of the initiative into national
development plan, setting up Cambodia-China joint working, and expanding
non-governmental cooperation and exchanges. These initial cooperation outcomes
have been hailed as solid progress under BRI cooperation framework between
Cambodia and China.
Since BRI and
its associated mechanism can provide investment and financing support for
Cambodia’s much needed infrastructure development, industrial park and
productive capacity cooperation from China, it can expedite Cambodia’s
industrialization and diversification process. Doing so requires both
government formulates a concrete vision, implementation plan and action roadmap
as well as assign a strong leading institution to coordinate the working group.
(This paper is
part of the research publication under the project of the Cambodia 21st Century
Maritime Silk Road Research Center)
Sim Vireak,
Researcher, Cambodia
21st Century Maritime Silk Road Research Center
Visiting
Fellow, Cambodia Development Resource Institute (CDRI)
Hing Vutha
Research Fellow,
Cambodia Development Resource Institute (CDRI)
[1] According to the government’s Development Cooperation and Partnership
Report 2016, China supplied USD 486 million in aid and
loan during 2000-2009 and USD 2.075 billion during 2010-2015.
RGC (2016). Development Cooperation and
Partnership Report. Phnom Penh, Royal Government of Cambodia.
[3] Changes ahead for Sihanoukville, 25 December 2017,May Kunmakara,
Khmer Times
http://www.khmertimeskh.com/5097894/changes-ahead-sihanoukville/
[4] Chinese firm seeks PM’s support for S’ville port and SEZ project,
December 8, 2017, Ven Rathavong, Khmer Times http://www.khmertimeskh.com/5094794/chinese-firm-seeks-pms-support-sville-port-sez-project/