CONTENT PREVIEW
Country Risk

China’s growing importance as aid donor and development partner to enable Cambodia to pursue new authoritarian politics

22 January 2018

Key Points

  • China is growing its role as Cambodia’s development partner and foreign aid donor while Western donors are cutting aid and threatening sanctions in response to the country’s ongoing political crackdown.
  • Increasing Chinese investment and support will diminish Western donors’ influence to highlight corruption and the abuse of authority around Cambodian Prime Minister Hun Sen.
  • Authoritarianism increases risk of lower transparency, in turn worsening bribery, corruption, and reputational risks faced by companies in agriculture, construction, and other sectors, especially in which land acquisition is required.

Event

According to official data released on 16 January 2018, the value of construction projects in Cambodia increased more than 22% year on year in 2017 to USD6.4 billion, reflecting expanded Chinese investment in the infrastructure and construction sectors.Cambodian Prime Minister Hun Sen (left) talking with Chinese Premier Li Keqiang (right) on 16 May 2017. (Nicolas Asfouri-Pool/Getty Images)Cambodian Prime Minister Hun Sen (left) talking with Chinese Premier Li Keqiang (right) on 16 May 2017. (Nicolas Asfouri-Pool/Getty Images)

China is the largest foreign investor in Cambodia. According to official figures, China accounted for about 30% of all recorded investment and provided nearly 36% of bilateral aid in 2016 – almost four times the amount of US aid to Cambodia. China has been Cambodia’s top foreign aid donor since 2010.

Recently, Chinese investment and aid have expanded to an entirely different scale. In October 2016, China offered USD150 million for the ongoing construction of the Morodok Techo National Sports Complex in Phnom Penh – more than 10 times the previously largest grant. On 11 January 2018, Cambodian Prime Minister Hun Sen and Chinese Premier Li Keqiang signed 19 agreements to develop Cambodia’s infrastructure, agriculture, and health system. Although the total worth of the agreements has not been disclosed, local sources estimate that they are worth billions of dollars. One of the largest agreements includes USD2-billion funding to build a 190-kilometre expressway linking Phnom Penh with the coastal city of Sihanoukville, according to Cambodian Minister for Public Works Sun Chanthol. The agreements also include funding for a new international airport in Phnom Penh and the construction of a national transmission line connecting Cambodia to neighbouring Laos’s power grid.

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