Editor's note: This story, originally published Feb. 1, is being reissued to clarify the characteristics of a potential funding arrangement between China and Cambodia for a railway in Cambodia.
PHNOM PENH — Cambodian Prime Minister Hun Sen is expected to visit Beijing this week seeking to finance a $4 billion high-speed railway line that will connect Cambodia’s capital with the economic hub on the Thai border.
The deal would be the latest symbol of the “ironclad” friendship between the two countries that has observers worried that Cambodia’s growing dependence on Chinese largesse could lead to a “debt trap” with long-term economic and geopolitical consequences.
“I hope that my upcoming visit [to China] will produce more new projects which we will have to depend on friend China to develop Cambodia, including the high-speed railroad,” Hun Sen said on January 14 in an annual meeting with journalists.
The prime minister’s trip is slated to begin on Thursday.
After an earlier version of this article characterized the potential financing for the railway line as a loan, the government clarified Monday that it is seeking a build-operate-transfer (BOT) deal in which the debt would be repaid through revenue generated by the project. The government termed this financing as an “investment.”
A spokesperson for the Cambodian Foreign Affairs Ministry on Monday criticized VOA’s original story, accusing VOA of being “unprofessional” and of “misleading the public with political intent.”
“The [VOA] report was that the prime minister’s visit, planned for next week, [Feb. 9] to China was aimed at looking into loans for the construction of a high-speed train project,” said the spokesperson, An Sokkhoeun. “This news is in contrast with the truth. The truth is that the project is not supported by any loans. The project will pay the way with investments in the form of BOT (build-operate-transfer).”
The spokesperson termed VOA’s reporting as “dirty politics in regard to Cambodia-China relations.”
The 382-kilometer rail line, with the speed of 160 kilometers per hour, has been studied by the China Road and Bridge Corporation (CRBC), according to the announcement of the Ministry of Public Works and Transport on January 23. The route runs from Phnom Penh to the Poipet area in the west.
It is envisioned to provide an economic boost to Cambodia, whose foreign debt now stands at almost $10 billion, 41% of which is owed to China, according to a Khmer document, Public Debt Statistical Bulletin, released by Cambodia’s Ministry of Economy and Finance in December last year.
However, it has become the latest flashpoint in the debate over whether China’s Belt and Road Initiative (BRI) could ultimately trap countries in Beijing’s orbit, particularly if the economic returns don’t materialize as predicted.
“Continued dependence on any one nation is risky. You don’t want to put all your eggs in one basket. Cambodia has been and continues to do this. Owing China nearly 50% of your public debt is not good,” Ear Sophal, a scholar of Cambodia’s politics and development at Arizona State University's Thunderbird School of Global Management, told VOA Khmer.
“It is absolutely too much and he [Hun Sen] is tying his political future to China. He has been for years and will continue full steam ahead,” he added.
US warning
The United States government, locked in a global rivalry with China, has warned countries against taking on large debts under China’s BRI infrastructure strategy.
Washington says the BRI initiative is a debt trap and can lead to countries losing control over vital infrastructure put up as collateral, pointing to Sri Lanka, which was “trapped” when Beijing gained control over its main port as debt repayment.
Hun Sen’s government argues that its borrowing remains under control. The Ministry of Economy and Finance said, according to last year’s Public Debt Statistical Bulletin, that Cambodia’s current foreign debt load of $9.47 billion (around 35% of a GDP of $27 billion) can safely increase to around $12.62 billion in 2023.
A report released by the Kiel Institute in Germany in 2019 estimated that Cambodia was the sixth-most-indebted country as a share of GDP among 50 recipients of Chinese government loans and private debt.
Cambodia and other Asian countries, like Laos and the Kyrgyz Republic were “highly exposed, small economies that are in geographic proximity to China,” researchers said.
By April 2019, 31 highways and eight bridges in Cambodia, totaling 3,000 kilometers in length, were Chinese-built and funded, according to a statement issued by the Chinese Embassy in Phnom Penh, which did not detail the total debt accrued for the projects.
One project — a toll road recently opened to traffic — cost a staggering $1.9 billion in loans financed by Chinese government which hired the China Road and Bridge Corporation (CRBC) to construct with a BOT (Build Operate Transfer) contract.
Sihanoukville has become a symbol of the risks and rewards of Chinese investment. While development and construction has skyrocketed, so, too, has crime and casinos.
One project — a toll road recently opened to traffic — cost $1.9 billion in financing from the Chinese government, which hired the China Road and Bridge Corporation (CRBC) to construct with a BOT (Build Operate Transfer) contract.
A double-edged sword
Downturns in China’s economy have also stalled many projects in the coastal city, while dozens of families forced out of their homes to make way for the projects have protested to demand better compensation.
Academics Jing Jing Luo and Kheang Un wrote last year in Contemporary Southeast Asia that China’s investment and aid were a double-edged sword for the Cambodian People’s Party (CPP).
“China’s engagement can both strengthen and undermine the CPP’s legitimacy: while it fuels economic growth, some Chinese investments have negative socio-economic repercussions on the Cambodian public and, thus, adversely affects the CPP’s legitimacy,” they wrote.
But if Hun Sen is concerned about the tightening financial ties with China, he isn’t showing it.
In the past decade, dozens of large-scale infrastructure projects were built across rural Cambodia with Chinese loans and investment, while massive Chinese investment flowed into real estate in urban and coastal areas.
Earlier in January, Hun Sen said he also plans to sign a deal during his upcoming trip on a Phnom Penh-Bavet Expressway, with an estimated price tag of $1.63 billion.
And while both China and Cambodia have rejected suggestions of diplomatic quid pro quo, Hun Sen has been a reliable supporter of China’s interests on the global stage, amid rising tensions over the South China Sea and Taiwan in the region.
In August last year, during a meeting with Chinese Foreign Minister Wang Yi in Phnom Penh, Hun Sen stressed that Cambodia is firmly committed to the one-China principle and holds that Taiwan is an inalienable part of China's territory.
“Cambodia resolutely opposes any words and deeds that infringe on China's sovereignty and territorial integrity, and will continue to firmly support China in safeguarding its core interests, and stand firm together with the 1.4 billion Chinese people,” read a release from the Chinese government.
Wang Yi said the cooperation between China and Cambodia “has kept burgeoning and borne fruitful results, showing broad prospects for development.”
The Chinese Embassy in Phnom Penh did not respond to an emailed request for comment for this story.
A call for transparency
Em Sovannara, a professor of political science at the Royal Academy of Cambodia, said that the Cambodian government should be transparent about its debts and make sure the loans “truly serve Cambodian people’s needs.”
The Cambodian government, he suggested, should consider getting loans from other countries to balance out its foreign debts.
“I want to see balanced loans taken from other countries like South Korea and Japan and other Western countries to China,” he said.
CPP spokesman Sok Eysan said the Hun Sen government has “clear principle” in borrowing from other countries.
“[Critics] say it is much, but it is now just 36% of Cambodia’s GDP, which the Cambodian government can control international debt and we have the ability to pay the debt. Nothing should cause worry,” he said.
Hun Sen has praised China’s “no-strings-attached” diplomacy as relations with the West have deteriorated over his crackdown on dissent and the accompanying legal assault on the political opposition.
Han Noy in Phnom Penh contributed to this report.
