An Introduction to Chinese Investments under the Belt and Road Initiative in Cambodia

Where China’s money has been spent and where are the Cambodian opportunities

By Chris Devonshire-Ellis

Cambodia has long been a Chinese partner, and this has accelerated in recent years as BRI projects have begun to take hold as China has expanded into Southeast Asia to develop both infrastructure, trade relations and improve local wealth. Cambodia’s development was an interesting example of how, in conjunction with the China-ASEAN Free Trade Agreement and the recent RCEP agreement – ​​Cambodia is a member of both – China has combined development and free trade.

Some of these developments have taken ingenious routes – the development of casinos to generate capital from mainland Chinese gamblers (often involved in money laundering or other illicit funds) which was then reinvested in infrastructure is an example original – but it worked.

In this new series, in which we examine China’s BRI investments in all ASEAN countries, we look at the impact of its financing and development on Cambodia and where future developments lie.

Context of the China-Cambodia BRI

From 2012 to 2017, China invested more than US$15 billion (£12.36 billion), including US$11 billion in the energy sector alone, in building Cambodia’s infrastructure. Infrastructure also included roads/highways, ports and airports. The $1.9 billion (£1.57 billion) highway that connects Phnom Penh to Sihanoukville, a port city and holiday destination, is located 12 km from the Sihanoukville Autonomous Port (PAS), the Cambodia’s only international and commercial seaport (where some 90% of Cambodian imports and exports transported by sea pass through).

In 2021, China-Cambodia bilateral trade reached $11.2 billion.

Casinos & Real Estate

Throughout 2015-2018, manufacturing (many of which relocate from China) and tourism – led by casinos – real estate boomed around the highway/corridor in the Sihanoukville SEZ ( SSEZ). It is partly a recreation of the China-Macau model.

The SSEZ is now recognized as a leading example of China-Cambodia cooperation under the BRI. Launched in 2008 as a future manufacturing house, led by apparel and textiles, SSEZ is now home to 170 businesses as well as university buildings, legal service centers, libraries and stores. By the end of 2021, the SSEZ offered nearly 30,000 job opportunities to residents. It should be noted that it was the original casino developments that prompted this development, with careful government planning then overseeing the financial benefits of this reinvestment in manufacturing, production, retail and educational facilities.

Investment in infrastructure

Airports in Cambodia

In November 2020, Cambodia Airport Investment (a Cambodian joint venture/OCIC) selected the Metallurgical Corporation of China (MCC) to design and construct the airfield at its US$1.5 billion (£1.24 billion) international airport. sterling) in Kandal province south of Phnom. Penh. The US$400m (£330m) deal, MCC’s biggest overseas contract of 2021, will be executed by its subsidiary Shanghai Baoye Group. The airport is expected to be completed by the end of 2022, allowing flights to begin in 2023.

  • Chinese investment is also planned in the Dara Sakor airport and resort, worth US$3.8bn (£3.13bn). About US$1.1bn (£910m) of the total cost of Takhmao Airport will come from the China Development Bank and US$280m (£231m) from OCIC.

Other Chinese investments

  • In June 2021, Celllcard (Cambodia) chose ZTE for its 5G partner
  • In 2018, Xiaomi partnered with SEATEL, a fast-growing nationwide telecommunications network
  • In March 2019, Alibaba announced plans to make Cambodia its logistics hub for the Grater Mekong region, which has a population of around 300 million.
  • In 2019, Alibaba announced a partnership with DaraPay to allow Chinese customers to use their Alipay wallets in Cambodia.
  • In 2022, Cellcard and Tencent announced plans to expand an esports platform, both nationally and regionally.
  • After the COVID-related downturn of 2020, the two countries aim to reach 5 million tourists by 2025 and 8 million by 2030.

Inward FDI from China (2021)

Chinese investment in Cambodia increased significantly in 2021 despite the negative effect of the COVID-19 pandemic. Cambodia attracted $2.32 billion in capital investment from China in 2021, up 67 percent from $1.39 billion in 2020, according to a report by the Cambodia Development Council. China remained the top foreign investor in Cambodia, accounting for 53.4 percent of the total $4.35 billion investment approved by the kingdom in 2020.

Look forward

Cambodia’s growth rebounded to around 3.0% in 2021 after contracting -3.1% in 2020. The government has implemented policies to mitigate the negative impact of COVID-19 on businesses and businesses. personal income and to support economic recovery. Growth is expected to be 5% in 2022, although there are inflationary concerns. According to the World Bank, over the past two decades, Cambodia has undergone a significant transition, achieving lower-middle-income status in 2015 and aspiring to achieve upper-middle-income status by 2030.

Investment Intelligence in Cambodia

Readers can use the ASEAN Briefing search function at the top of the homepage to find more information on Cambodia. Just type “Cambodia” in the subject box. We also provide investment assistance and research in Cambodia, please contact us at [email protected] help.

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