Interview: 'Who Wants Cambodia To Be a Province of China?'

(RFA - March 7, 2018) Sophal Ear is an associate professor of diplomacy & world affairs at Occidental College in California who has written "Aid Dependence in Cambodia: How Foreign Assistance Undermines Democracy" and co-authored “The Hungry Dragon: How China's Resource Quest Is Reshaping the World." The policy analyst gave an interview by e-mail with Sovannarith Keo of RFA's Khmer Service about Cambodia's deepening economic relationship with China and concerns about the Southeast Asian country's growing debt to its giant northern neighbor as Beijing ramps up its signature Belt-Road Initiative infrastructure plan.

Occidental University professor and author Sophal Ear, in undated photo.

RFA: What are your general observations and assessment of Cambodia's debts to China, especially since China introduced its Belt Road Initiative (BRI) projects for Cambodia? Has such an initiative induced Cambodia to take on more debt to China than ever before? If so, is the trend a good or bad sign for Cambodia's future?

Sophal Ear: $4.3 billion in debt to China is about 20 percent of Cambodia’s GDP. This is a lot to owe one single creditor: China. Belt Road Initiative projects are just a way of categorizing a bunch of lending--much of which would have taken place anyway. It's putting a nice label on something--like the same old wine in a new bottle. Of course, it sounds so impressive, globally the spending could approach $1 trillion, but if it’s loans, it’s great for China. The money lent becomes income for Chinese companies which use Chinese workers (who receive paychecks). A win-win-win for China. As for Cambodia, if it builds infrastructure that can transform Cambodia and add value to its economy, that’s good. But if it’s just white elephant projects, ghost cities, and Potemkin villages, then (it's) terrible for Cambodia. Chinese President Xi Jinping said this for China and it applies to Cambodia: 'Houses are built to be inhabited, not for speculation.' Yet that is what is happening on Diamond Island and in other parts of Phnom Penh and Cambodia.

RFA: A new report published by the Center for Global Development (CGDEV) identified Cambodia among 23 countries at 'risk of debt distress' today as a result of Chinese BRI. But the report did not classify Cambodia among eight countries 'vulnerable to debt distress' due to future BRI-related financing. Do you agree with this finding? Which such trends, can you predict when Cambodia may face debt default as a result of such Chinese BRI financing?

Sophal Ear: It’s a reasonable finding. Cambodia’s overall debt sustainability is not bad. Look, this analysis is based on debt as a percentage of GDP, export revenue, etc. Exports bring in foreign exchange, which is used to service debt. You cannot pay foreign debt in Riels. Cambodia is in the 32 percent of debt-to-GDP range, but could be inching up to 40 percent of GDP before you know it, especially if Cambodia's economy hits a bump and a recession happens or if debt grows more rapidly than GDP growth. Right now, based on existing numbers, it’s not yet unsustainable. The acceleration of indebtedness is probably what puts it “at risk”. It’s going up, but if it goes up too quickly, that’s worrisome. The U.S. has about 106 percent debt-to-GDP. Japan’s is 245%, but most of Japan’s debt is held by Japanese citizens. China and Japan own about 5% each of U.S. debt. No-one believes the U.S. or Japan could default. The risk is very small. Cambodia, on the other hand, has a painful history of banning money. This is why the dollar is used in Cambodia and the country is still only talking about issuing bonds.

RFA: What are your general recommendations so that Cambodia can escape from a Chinese debt trap?

Sophal Ear: Diversify who you borrow from. Borrow too much from one source, especially if that source is not your own people, and you become a wholly owned subsidiary of that source: China. Who wants Cambodia to be a province of China? I don't think Cambodians want that.


RFA: Prime Minister Hun Sen recently defended his government's foreign debt status, saying that it is still healthy since the entire debt-to-GDP ratio remains lower than 40 percent or so. What is your reaction to that?

Sophal Ear: Mathematically, it is correct. However, if Cambodia’s Chinese debt-to-GDP ratio is 20 percent, and we’re still below 40 percent debt-to-GDP ratio overall (as I mentioned earlier 32%), then about 62.5% of Cambodia’s current debt is owed to China. That is an incredible level of dependency on one country. If one wishes to avoid being a wholly owned subsidiary or a province of China, one had better diversify with no foreign country lending Cambodia in excess of 50 percent of its debt, and preferably a lot less than 50 percent. The African proverb applies: "If your hand is in another man’s pocket, you must walk where he walks."

China to train Cambodian army

Jan 25, 2013- China has signed a contract to train the Cambodian army and to supply Phnom Penh with new and updated weapons, starting with 12 helicopters.

Chinese Gen Jianguo, deputy chief of staff of the People's Liberation Army (left), shakes hands with Deputy Defence Minister Moeung Samphan after signing the agreement on Wednesday. (Photo by Phnom Penh Post)

The ground-breaking deal, certain to shake up regional relations, was signed Wednesday in Phnom Penh at a low-profile ceremony held Wednesday in Phnom Penh.

It was signed by Moeung Samphan, Cambodian deputy defence minister and secretary of state of the defence ministry, and Gen Qi Jianguo, deputy chief of general staff of the Chinese People's Liberation Army, with Cambodian Defence Minister Tea Banh looking on.

The military training and the 12 helicopters "will help to boost the (Cambodian) military's capabilities," said Mr Tea Banh at the ceremony, according to an account from Phnom Penh carried by the People's Daily, the official mouthpiece of the Chinese Communist Party.

"This will contribute to assisting the RCAF to increase capacity in national defense sector."

There was no immediate reaction to the low-key report from either Thailand or Vietnam. Hanoi, in particular, is likely to view the military training of the Cambodian army with major scepticism, if not outright opposition.

The move comes at a delicate time, with China under close examination for its huge territorial claims in and near the Asean region. Vietnam and the Philippines have been particularly suspicious of what they view as Chinese overreach in the region.

China has been increasingly active in military and economic affairs in Cambodia during the past several years. In 2012, Chinese companies have pledged to invest $8 billion in Cambodia, a figure equivalent to almost two-thirds of its entire economy.

On Thursday, Prime Minister Hun Sen inaugurated an extension of the Combined Arms Officer School, funded entirely by China.

As for Thailand, any upgrade to the Cambodian army will almost certainly result in both increasing hostility from the ultra-nationalist "patriots" involved in the dispute surrounding the Preah Vihear temple. There are likely to be calls from the military to upgrade Thai forces facing Cambodia, the only country with which Thailand has had armed conflicts in recent years.

On Thursday, top officials of the Chinese government's railways ministry signed a deal in Phnom Penh to design, fund and build a new seaport and 404km railway from Preah Vihear to Koh Kong, the island province just off the Thai coast. The railway will virtually shadow the the entire eastern border of Thailand with Cambodia.

China agreed to train, equip and upgrade the Royal Cambodian Armed Force (RCAF) after the United States considered, then rejected a request by Phnom Penh, a separate report by the Washington-based Radio Free Asia service.

"China has played a key role in improving Cambodia's dilapidated military inventory since 2010, when Beijing donated 250 jeeps (sic) and trucks to Cambodia's army after the US scrapped a similar plan," the RFA reported.

The US opposition to Cambodian military aid was a direct result of the decision by Cambodia to send 20 ethnic minority Uighur asylum seekers back to China for virtually certain imprisonment or worse.

Bangkok Post

Cambodia agrees deal to buy army choppers from China

Jan 24, 2013- PHNOM PENH: Cambodia will use part of a $195 million loan from China to buy 12 of its military helicopters and boost its tiny fleet, its defense minister said on Jan. 23, the latest deal underlining Beijing's tight alliance with the Southeast Asian country.

China's Zhi-9 (Z-9) attack helicopter.

Tea Banh said the 12 Chinese-built Zhi-9 army utility helicopters would be for use mainly in humanitarian missions. He did not disclose the cost of the helicopters.

"Clearly, these will help our efficiency and capability," Tea Banh said during a ceremony in which the Deputy Chief of Staff of China's military, General Qi Jianguo, signed an agreement to help train Cambodia's armed forces.

China has played a key role in improving Cambodia's dilapidated military inventory over the past two years, as well as providing big loans and a slew of large-scale investments in construction, energy, transport and agriculture.

That influx of cash has earned China a small but significant ally in Southeast Asia as the United States seeks to boost its footprint in the region to capitalize on its growth and counter Beijing's growing influence.

Critics accuse China of using its economic muscle to ensure Cambodia works in its strategic interests within the 10-member Association of Southeast Asian Nations (ASEAN), which requires consensus on all decisions.

In the past year, Chinese companies have pledged to invest $8 billion in Cambodia, a figure equivalent to almost two-thirds of its entire economy. The $195 million loan was made in late 2012.

The alliance between the two countries expanded to defense support in 2010 when Beijing donated 250 jeeps, trucks and ambulances to Cambodia's army after the U.S. scrapped its plan to provide the military with 200 vehicles.

That was in response to Cambodia sending 20 ethnic minority Uighur asylum seekers back to China in 2009 at Bejing's request.

Much of Cambodia's military equipment is outdated and in need of repair, with only a few helicopters currently in use.

REUTERS