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World

As Cambodia launches $36.6bn building drive, China, Japan fight for spoils | Infrastructure


Phnom Penh, Cambodia – Cambodia is pushing for an infrastructural renaissance, but it will need some help from its friends abroad to chip away at an estimated price tag of $36.6bn.

That was the final sum calculated by the Cambodian government and published earlier this year in a 174-project master plan that would overhaul the national transportation and logistics network within an ambitious timeframe of just a decade.

The goal to crisscross the kingdom with expressways, high-speed rail lines and other works fits closely with the state’s longstanding wish of becoming an upper-middle-income country in 2030 and a high-income nation by 2050.

Since the unopposed ascension last year of Prime Minister Hun Manet – the son of former Prime Minister Hun Sen, the country’s leader of nearly 40 years – his new government of aspiring technocrats has pressed forward with the building campaign, beseeching foreign allies for closer ties and increased investment while assuring the public of big things to come.

“We shall not withdraw from setting our targets in building road and bridge infrastructure,” Hun Manet said at a February groundbreaking for a Phnom Penh bridge funded with a Chinese loan.

“Roads are like blood vessels to feed the organs wherever it goes … soon we will have the ability not only to just possess [material things] but also for Cambodians to build by themselves infrastructural marvels such as bridges, highways and subways.”

hun manet
Cambodian Prime Minister Hun Manet has embarked on a major infrastructure drive [Athit Perawongmetha/Reuters]

Cambodia has experienced more than two decades of rapid economic growth with some of the worst infrastructure in Southeast Asia, according to the World Bank’s logistics performance index.

With the bank predicting accelerating gross domestic product (GDP) growth for the years ahead, Cambodia’s already stretched transportation system could be strained to breaking point.

While the new prime minister looks to cement his own status after his father’s long rule, making progress on hard infrastructure will present a test for his governance as well as the traditional Cambodian balancing act of international relations.

Rolling out the master plan with a to-do list of projects large and small could present an opportunity to benefit from geopolitical rivalries as foreign partners jostle for influence – especially as competition intensifies between two of its largest benefactors, China and Japan.

“I think Cambodia’s government feels it is high time to maximise whatever they can get from the donors,” Chhengpor Aun, a research fellow at Future Forum, a Cambodian public policy think tank, told Al Jazeera.

“It’s logical that if an infrastructure project initiated by the Cambodian government is not accepted by a partner, they could still go to the other partner to fund it. It’s strategic and flexible in the way they play the big powers against themselves to try to extract benefits.”

The Cambodian government and private businesses do fund infrastructure projects in the kingdom, but China and Japan together account for much of that investment.

Both are also the only countries to hold Cambodia’s highest diplomatic designation of “comprehensive strategic partnership”, a status Japan gained just last year.

So far, China’s flagship Belt and Road Initiative (BRI) has led the infrastructure charge with major projects such as the kingdom’s first expressway, which runs from the inland capital of Phnom Penh to the coastal city of Sihanoukville.

Meanwhile, Japan has kept its own steady agenda, focusing on a range of projects such as new wastewater treatment facilities and upgrades to existing roads.

Perhaps most notable is a Japanese-led expansion that could more than triple the capacity of the international deep sea port of Sihanoukville, the sole facility of its kind in Cambodia.

The bustling facility handles about 60 percent of the country’s import and export traffic and is increasingly congested after more than a decade of steady growth.

Under the oversight of the Japan International Cooperation Agency (JICA), crews at the port broke ground on the expansion late last year.

The planned three-part, decade-long project is included in the new master plan and has a total estimated cost of about $750m.

Sihanoukville port
Sihanoukville port handles about 60 percent of Cambodia’s import and export traffic [Tang Chhin Sothy/AFP]

“Compared with Chinese [infrastructure] investment, the amount of Japanese investment is very limited,” Ryuichi Shibasaki, an associate professor and researcher of global logistics at the University of Tokyo who has studied Cambodia’s shipping industry, told Al Jazeera.

“We need to find niche markets since there is so much investment from China, to fill the gaps or adjust investment to a more broad viewpoint.”

In recent years, the BRI has tightened its focus.

Accusations of China ensnaring poorer countries in “debt traps” have caused Beijing to turn away from issuing large loans to countries to fund megaprojects – typically defined as those worth more than $1bn – in favour of a more investment-oriented tilt towards projects with good expected returns.

These are typically funded with “build-operate-transfer” agreements, in which the company overseeing the work takes on the expense of developing it in return for the revenues generated by the finished project over a predetermined period.

At the end of the agreement, which can span decades, ownership transfers to the government of the host country.

Key pieces of Cambodia’s big-picture vision will depend on that kind of financing.

‘Trying to be Cambodia’s best friend’

The kingdom’s master plan for infrastructure includes proposals for nine megaprojects worth an estimated total of more than $19.1bn.

While most of these are still being studied for feasibility, almost all have been touched at some point by JICA or the China Road and Bridge Corporation (CRBC), a subsidiary of the state-owned giant China Communications Construction Company.

CRBC previously led the construction of Cambodia’s first expressway, which came online in late 2022 and has generally been hailed as a success.

The company broke ground last year on a second, $1.35bn expressway between Phnom Penh and Bavet, a city on the Vietnamese border, which is among the nine envisaged megaprojects.

It is joined by such works as another CRBC-studied expressway system that would link Phnom Penh to the major tourism hub of Siem Reap and the city of Poipet on the Thai border.

Split into two parts, construction of that road system is estimated at a total expense of $4bn. There is also an upgrade of one existing railway line to Poipet to accommodate high-speed trains for $1.93bn, plus another to Sihanoukville for $1.33bn.

The plan later calls for a light rail and subway system for the capital Phnom Penh and part of Siem Reap, all packaged together for an estimated $3.5bn.

Shipping projects also feature heavily in the plan.

The largest of these is a 180-kilometre-long, 100-metre-wide shipping canal to link the Mekong River system at Phnom Penh directly to the Gulf of Thailand. The $1.7bn channel would bypass the current, less convenient river shipping route that runs the length of the Mekong through Vietnam.

The canal is currently being studied by CRBC for its economic feasibility.

Though little detail has yet come out from that process and no company has signed an official deal to actually build the project, the Cambodian government has announced it will break ground by the end of this year.

The magnitude of the proposal, and the government’s urgency to make it a reality, has caught positive attention from the logistics industry while raising ecological concerns for its potential effects on the transboundary river system.

Poor communication with the public on the details has left residents along the proposed route confused and apprehensive of their ability to stay in their homes.

The canal itself is expected by the Mekong-focused think tank Stimson Center to negatively impact a key floodplain that spans important agricultural regions of Cambodia and Vietnam.

later calls for a light rail and subway system for the capital Phnom Penh and part of Siem Reap, all packaged together for an estimated $3.5 billion.
The Cambodian government has proposed the construction of a light rail and subway system in the capital Phnom Penh at a cost of $3.5bn [Tang Chhin Sothy/AFP]

Hong Zhang, a China public policy postdoctoral fellow at the Harvard Kennedy School’s Ash Center, said the momentum of the project could see it through regardless of the concerns.

“If the project has a very strong political backing, I don’t think environmental and social impacts would be in the way or prevent it from happening,” Zhang told Al Jazeera.

Zhang added that Cambodia’s relative political and macroeconomic stability – plus its government’s pro-China stance – has likely afforded it options that other countries would not necessarily get.

“Cambodia continues to be a relatively trouble-free market for Chinese engagement compared to many other countries such as Pakistan, Sri Lanka or even Laos,” she said.

“Even if [the canal] not going to be economically feasible but seems to have good value in terms of its public utility, a lot of externality, this kind of project will be quite legitimate for them to still go back to the old model of borrowing from China with concessional loans, building it and then the government pays back the loan.”

Even if not all the projects in the master plan come to pass, those in the national logistics and transportation industry see a lot to like.

Matthew Owen, the project development executive for the Phnom Penh office of the Singapore-based shipping agency Ben Line Integrated Logistics, said the plan has major potential, but its success will depend on Cambodia’s ability to simultaneously improve the value of its exports.

“I don’t think it’s ‘build it and they will come’, but I think [the government] is ahead of their time,” Owen told Al Jazeera. “Having everything there means they’re going to be able to draw more people in to invest and do business.”

The scramble for large-scale public works is matched with a drive for more private-sector engagement as well, according to Owen.

Owen said the new Cambodian government has been urging international investors from across Asia to get moving on projects initiated before last year’s political handover.

“Everybody’s got an influence, everybody’s got something to gain, and it balances the influence from China,” he said.

“It’s not even a competition, it’s like a pool of countries trying to be Cambodia’s best friend. Cambodia is open to whatever country that’s open to making Cambodia better – if they want to have their own competition of who can build the biggest bridge, go for it.”



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