Executive Summary

• As the multipolar world system is evolving unpredictably and regional order is under mounting pressure stemming from great powers’ struggle, the Asia-Pacific region has remained a contested ground for geopolitical leverage.
• The rise of major powers’ grand strategies and the increasing strategic competition between the Free and Open Indo-Pacific and the Belt and Road Initiative in the region have placed Cambodia in a volatile situation in navigating its foreign policy in the right direction.
• Cambodia’s foreign policy strategy should be designed at best to hedge against major powers’ grand strategies, which will not only enable the country to minimise risks associating with direct bandwagon but also to protect its national interest and maximise gains from great powers’ competition.
• The Kingdom should also strongly advocate rules-based ASEAN and ASEAN’s centrality, as they can offer Cambodia a hedging space to manoeuvre its smart foreign policy strategies. All great powers can be accommodated into ASEAN-led regional architecture and their deleterious actions can be constrained by the regional organisation’s institutional norms and practices.

Introduction

As the multipolar world is evolving unpredictably and regional order is under mounting pressure stemming from complex interactions between great powers, it puts small states like Cambodia in a volatile situation. The kingdom finds itself increasingly difficult to navigate its foreign policy through the complex global order. In the same vein, ASEAN’s regional architecture has remained vulnerable to contestation by various regional initiatives of major powers. Small and medium-sized states in ASEAN can escape from the ramification of power alignment with larger states if they adopt common hedging approaches that promote ASEAN’s centrality. Particularly, Cambodia, as an ASEAN member, also needs a smart hedging strategy to capitalise on opportunities and minimise risks from geopolitical rivalry.

The effects from great powers’ geopolitical competition have brought about both challenges and opportunities, which require foreign policy makers to be proactive and responsive in mapping out a clear strategic foreign policy direction. In addition to giving a general overview of small states’ diplomacy, this article examines Cambodia’s foreign policy strategy at the crossroad of major powers’ grand strategies in the region including the Belt and Road Initiative (BRI) and the Free and Open Indo-Pacific (FOIP). It also discusses the emerging hedging space within ASEAN regional grouping.

Major Powers’ Grand Strategies and Small States’ Diplomacy

In the rapidly changing contexts of the New World Order, the wave of unilateralism continues to threaten global multilateral system. Multilateralism is under increasing strain and stress. The United States of America’s withdrawal from major international agreements, particularly the Trans-Pacific Partnership (TPP), Paris Climate Agreement, Intermediate-Range Nuclear Forces Treaty (INF), and Joint Comprehensive Plan of Action on Iran Nuclear issues (JCPOA) has caused others to question its roles as an architect of rules-based multilateral order after World War II. The Sino-US trade war and the rising protectionism have been impeding regional and global supply chains, discouraging the viability of international multilateral trading system. The emergence of new actors and the rise of major powers’ grand strategies have resulted in stronger power competition and rivalry for sphere of influence in the Asia Pacific region.

The Asia-Pacific region remains a ground for geopolitical, geo-strategic and geo-economic competition among extra-regional and emerging intra-regional powers, which has shifted the distribution of the power system from a short-lived regional unipolarity in the post-Cold War era to a new regional architecture whereby multiple actors engage in the contestation. The region has now found itself at the frontline of deep structural changes in the form of great powers transition. Since the inception of China’s BRI, major powers’ grand strategies have been on the rise such as South Korea’s New Southern Policy, India’s Act East Policy, and FOIP of Japan, the US, India and Australia. The grand strategies have pivoted to Southeast Asia simultaneously. Competition is becoming fervent and visible when China’s BRI can respond to ASEAN’s needs by pledging at least USD 1.024 trillion for infrastructure financing. In response, Washington also announced USD 113 million down payment for its FOIP engagements with the region.

Hence, small and medium-sized states in ASEAN could be compelled to opt for alignment, which would contradict with their foreign policy principles which have been generally practised since the Bandung Conference of Neutrality and Non-Alignment Movement in 1955. Amidst the growing competition in the region, small states are vulnerable to geopolitical pressure to varying scales. They are striving to escape from the dangerous alignment scenario and are weighing different foreign policy choices based on the calculation of three options: bandwagon, balancing, and hedging. A full-scale bandwagon can be found in the foreign policy strategy of states that choose to align themselves with a particular rising power, while a balancing strategy is the refusal to the alignment but rather seeks to tighten relations with other powers to counter pressure from a particular major power.

For hedging, it is the most-used strategy by small states as an alternative to alignment choice that enable them to get out of their foreign policy dilemmas. Hedging is perceived as a middle and two-pronged approach between a full-scale bandwagon and full-scale balancing. It offers small states a space to manoeuvre their foreign policy position and moderate great powers’ influence despite the uncertain status quo. Kuik contends that hedging is an insurance-seeking behaviour under high-stakes and high-uncertainty situation, where a sovereign actor pursues a bundle of opposite and deliberately ambiguous policies to prepare a fallback position should the circumstances change. 

Smaller states in Southeast Asia, a region where great powers’ interests are concentrating, have more reasons to hedge. 2 However, small and medium sized countries in the region practised different hedging approaches towards great powers depending on their foreign policy choices as well as their position of power in the regional hierarchy. As strategic interests define foreign policy direction, it is complicated to examine real motives and rationales behind the foreign policy behaviour of smaller states in ASEAN. However, we can still witness similar patterns of hedging approach being used by smaller states in the region to engage major powers and bind them to ASEAN’s institutional norms and practices. 

Cambodia and the BRI: An Economic Pragmatism Bandwagon

Since the launching of the BRI in 2013, China has been playing important roles in the global economic process, global multilateral system, trade and investment, regional economic integration, infrastructure connectivity, sustainable development, and regional supply chains. Various BRI-sponsored projects have provided small and medium-sized countries in Southeast Asia with huge financial capital for infrastructure development such as roads and railways, which can boost their economic development in term of an increase in cross-border trade, logistics and transport activities. Therefore, most Southeast Asian states have expressed their unwavering supports for the BRI. Cambodia has also sought to position itself to reap as much benefit as possible from the BRI’s projects.

Theoretically speaking, bandwagon in international relations is referred to an attempt of a state to align itself with a rising great power rather than to balance against it. There are two underlying rationales persuading small states to align with the rising powers. First, minor powers may seek to avoid the possible threats from emerging powers by joining alliance with them for defensive purposes. Second, for offensive purposes, small states may expect to reap economic gains from the alignment with the ascending powers. Cambodia, hence, fits in the second rationale as its foreign policy approach is aligning with the BRI to support its socio- economic development efforts in improving infrastructure connectivity, transport, investment, skill diversification, and hydropower supply efficiency. In this sense, it can be implied that Cambodia’s foreign policy strategy in regional integration is partly shaped by a pragmatic calculation to tap as much economic benefit and infrastructure connectivity as possible from the BRI. Thus, the Kingdom should continue to pursue its economic pragmatism strategy of bandwagon with the BRI in order to maximise economic gains to propel the country’s socio- economic growth to realise the national development goals of 2030 and 2050.

Historically, the term to describe cordial bilateral relations between Cambodia and China is “ironclad” as having been expressed by the leaders of both countries to refer to their strong cooperation and friendship. Both countries established their diplomatic relations in 1958, which has served as a foundation for stronger cooperation until the present day. The long- standing cordial relations paves the way for the signing of the Comprehensive Strategic Partnership agreement in 2010. Since the inception of the BRI in 2013, Cambodia has consistently shown strong support for the grand initiative, as the initiative can enhance Cambodia’s economic competitiveness and accelerate its national development vision of becoming an upper-middle income country by 2030 and a high-income country by 2050. As a small developing country, Cambodia can tap net benefits from various BRI-linked mega- projects to enhance its physical infrastructure development such as roads, bridges, railways, expressways, ports, hydropower dam construction, investment and Special Economic Zone development.

According to a press release issued by the Ministry of Public Works and Transport, the Transport and Logistic Master Plan will need USD 9 billion in 2020 to build 850-kilometre expressways, along with a long-term plan to establish 2230-kilometre national expressway network by 2040. 3 Therefore, the BRI grand initiative offers great opportunities to Cambodia to have access to huge infrastructure development funds under various BRI-linked financial institutions such as the Asian Infrastructure Investment Bank (AIIB), Silk Road Fund (SRF), and China’s Development Bank (CDB). 4 As part of BRI’s megaprojects, the construction of the 190-km-long Phnom Penh-Sihanouk Ville Expressway is underway, which will be an important logistic route linking the capital city with the coastal city. Other examples of major infrastructure projects are the new Siem Reap International Airport, railways renovation connecting more than 5 Cambodian provinces together, and the construction of dry ports for SEZ development along coastal areas.

Moreover, under the BRI and Mekong-Lancang Cooperation (MLC) framework, Cambodia can also improve the country’s electricity generation capacity, which is crucial for supporting its industrialisation efforts. China has been responding to Cambodia’s needs for expanding its power grid networks to support industrial development through hydropower dam construction and power transmission line installation. The Lower Sesan II, the largest hydropower plant in Cambodia, is a good example. Its construction started in 2016, and it has an electricity capacity production of 400 megawatts. According to a senior official of the Ministry of Mines and Energy, the electricity from the hydropower plant is expected to add another 20 per cent to Cambodia’s total electricity generation capacity. 5 In addition, the second largest dam is Steung Russey Chrum Krom which was also constructed under Chinese aid in 2013. It can produce electricity of 338 megawatts supplying electricity to Takeo and Kampot provinces. 6 The development of Special Economic Zones (SEZ), which are also one of BRI’s landmark projects, has contributed greatly to Cambodia’s socio-development. It has generated jobs and incomes and also eased the logistics flow of goods. For example, the Chinese-invested Sihanouk Ville Special Economic Zone (SSEZ) has more than 100 factories in operation, which together employ over 200,000 Cambodian workers in garment, textile, and light manufacturing, while easing the logistic routes.

In terms of trade and investment volumes, China is Cambodia’s biggest trading partner with their two-way trade amounting to USD 3.8 billion in 2019. China’s FDI flow to Cambodia has played a vital role in enhancing Cambodia’s economic growth. Chinese investment was accounted for more than USD 1.1 billion in the first half of 2019. Apart from the BRI multilateral frameworks, Cambodia should also focus on the bilateral arrangements with China to boost its economic potential, expand export markets, and to realise the bilateral trade goal of USD 10 billion with China by 2023. Cambodia’s first preliminary negotiation with China on the feasibility of a Cambodia-China Free Trade Agreement (CCFTA) is a significant milestone in its efforts to diversify market access beyond what currently exist in various regional and multilateral free-trade arrangements such as the ASEAN-China Free Trade Agreement (ACFTA) and the Regional Comprehensive Economic Partnership (RCEP). Hence, Cambodia should also strengthen the bilateral basis with China in order to speed up negotiations for an early conclusion of FTA by the end of this year.

In addition, the BRI cooperation frameworks also complement the Royal Government of Cambodia’s national development policies such as the Rectangular Strategy Phase 4 (RS4), the Industrial Development Policy (IDP 2015–2025), and the National Strategic Development Plan (NSDP 2019–2023). The BRI cooperation frameworks have facilitated the improvement of Cambodia’s private sector development, economic diversification, job opportunities, and physical infrastructure development, all of which are deemed as the core developments goals of the national policy. In addition, Cambodia should expand areas of cooperation with China to human resource and skills development, digital economy, e-commerce, ICT, health, and sustainable development. Taking all these into consideration, building synergies between BRI cooperation frameworks and the national development policies can enable Cambodia to explore other areas of value-added cooperation to support the country’s sustainable and inclusive growth.

Despite the many opportunities for Cambodia, the BRI as well as MLC could also bring huge risks associating with their unintended impacts on the livelihoods of local people and on the ecological sustainability. The dam constructions have negative impacts on the eco-system and fisheries resource as their reservoirs block fish migration routes. Cambodia’s mining sector is largely dominated by Chinese investment, which has caused soil erosion and water contamination. Issues with land management are also huge challenges for the government in dealing with issues of land concession to Chinese contractors. To solve the above issues, Cambodia should improve private sector facilitation mechanisms to have an effective public policy implementation and monitoring framework such as the Environmental Impact Assessment (EIA) to encourage more private sector’s participation in addressing social issues and enhancing Corporate Social and Environmental Responsibility.

Cambodia and the Free and Open Indo-Pacific: An Ambiguous Limited Bandwagon

For many regional observers, the term ‘Indo-Pacific’ has come to replace the term ‘Asia- Pacific’ in ASEAN’s vocabulary of geopolitics. It is difficult to have a single accurate definition of the term ‘Indo-Pacific’, as its concepts involve multi-polarity, dynamic balance of power systems, and complex webs of relations between multiple actors. 7 The term itself is geo-strategically constructed rather than coined by geographical traits. According to the Australian Foreign Policy White Paper, Indo-Pacific is defined as a geographical boundary ranging from the Eastern Indian Ocean to the Pacific Ocean connected by Southeast Asia. The Free and Open Indo-Pacific, known as FOIP, is a collective strategy of the US, Japan, Australia, and India. It was first initiated by Japanese Prime Minister Shinzo Abe at the 6th Tokyo International Conference on African Development in 2016. The Trump administration has implicitly intended to use this geostrategic framework to push for a renewal of the Quad cooperation, which is a regional security architecture established by four large democracies— the US, Japan, Australia, and India. America’s intention to renew the Quadrilateral Security through the inception of Indo-Pacific strategy is viewed by Chinese and other regional observers as anti-China coalition. It is seen as a strategic tool to challenge Beijing’s grand strategy—the BRI.

Whether or not FOIP will receive supports from ASEAN Member States depends on its respect of ASEAN centrality and its complementarities with ASEAN-led regional architecture. However, FOIP itself lacks a clear and unified vision even amongst its allies. America’s version of FOIP is intended to reshape the rules-based regional order and to ensure an arc of freedom and prosperity by mainly focusing on maritime security, including but not limited to the freedom of navigation and overflight. However, Australia concerns that America’s FOIP might jeopardise Australian economic relations with China. As Australia has growing economic and trade interdependence with China, consolidating FOIP and the Quad with an exclusively strategic focus on defence and maritime security is not a smart foreign policy option for Canberra.

For Japan, while it simultaneously seeks to ensure its security by supporting the US FOIP and to reconstruct the rules-based regional order, the country has also opted for a flexible approach of its own FOIP version as a way to gain supports from ASEAN Member States. Even Japan was an initiator of the Quad Security Cooperation in 2007, it has avoided linking its FOIP concept with the US FOIP or the Quad. It has rather introduced a more inclusive approach which emphasises economic cooperation and quality infrastructure connectivity in the Indo- Pacific region with ASEAN serving as a bridge. Japan’s FOIP version is created based on three major pillars: (1) Promotion and establishment of the rule of law, freedom of navigation, and free trade; (2) Pursuit of economic prosperity through improving connectivity with quality infrastructure; and (3) Commitment for peace and stability, particularly capacity building assistance in Humanitarian and Disaster Relief.

In their responses to FOIP, small states in Southeast Asia have adapted their foreign policies by blending limited bandwagon with hedging to exploit the opportunities arising from the great powers’ competition in the region. These constitute smart diplomacy of small states, which is flexibly swinging within a linear spectrum between limited bandwagon and hedging. A limited bandwagon refers to a situation whereby small states register support for a rising power, while simultaneously maintaining relations with other big powers to diversify the sources of benefits. 8 Notably, the concepts of limited bandwagon and hedging are somehow converging because of their ambiguity and compatibility. Small states in ASEAN can rely on limited bandwagon strategy to draw benefits from FOIP and the BRI, while they, at the same time, adopt a common hedging strategy by using ASEAN as a shield to protect them from risks. Nevertheless, most Southeast Asian states are still sceptical about the openness and inclusiveness of the US FOIP strategy. They are afraid that it could marginalise them and divide the region. Whereas conceivably supporting Japan’s FOIP version, these nations will either refuse to take part in any anti-Chinese coalition (Cambodia and Laos) or strategically hedge against such an initiative to preserve beneficial relations with China (Indonesia, Malaysia, and Vietnam). 

Due to the ambiguity surrounding the vision of FOIP, See Seng Tan contended that Southeast Asian countries also responded to the strategy with uncertainty with most of them adopting a ‘wait and see’ approach or even an agnostic behaviour. 10 Their approaches have differed from one another in terms of readiness to share their views publicly. Thus far, only few countries have openly disclosed their views towards the US FOIP, while others have remained silent and have chosen to position themselves with the ASEAN-owned Indo-Pacific concept. Also following this approach, Cambodia has adopted a ‘beauty of ambiguity’, a strategy of limited bandwagon, since Cambodia has demonstrated its support of only the Japanese FOIP, but it has opted for silence towards the American version. Cambodia’s tilting away from the American FOIP would not necessarily lead Cambodia to fall into the strategic orbit of China’s BRI, rather the country is searching for other versions of FOIP that are more inclusive and that strongly support ASEAN’s central roles.

Cambodia is the first country in ASEAN to announce its support of the Japan FOIP. There are three main reasons. First, Cambodia considers Japan as a sincere partner who has helped Cambodia greatly since the early 1990s from peacekeeping and peacebuilding to national rehabilitation. Moreover, Japan has been the top provider of Official Development Assistance (ODA) to the Kingdom, which amounted to more than USD 2.9 billion in 2019. For peace building, Cambodia is grateful for Japan’s contributions to the peacekeeping forces of the United Nations Transitional Authority in Cambodia (UNTAC) from 1992 to 1993. Japan dispatched ceasefire observers, election observers, civilian police, and self-defence force engineering units to Cambodia. 11

Second, Japan’s FOIP entails a strong economic element which is evidenced in the second pillar of its specification. Regional initiatives that have strong economic focus get a higher chance of gaining regional support than initiatives that strongly focus on security aspects aiming to achieve a geostrategic vision. 12 One of the main objectives of Japan’s FOIP is the pursuit of economic prosperity through expanding trade and investment activities in the Indo- Pacific region including the improvement of “Quality Infrastructure Connectivity”. The promotion of free trade and investment facilitation can be done through the improvement of quality infrastructure links. Under its FOIP and Mekong Connectivity Initiative, Tokyo has funded Cambodia with a USD 120 million grant for the construction of the 2.2-kilometer-cable- stayed bridge (Tsubasa or Neak Loeung Bridge) and the renovations of National Road 1 and 5. They are crucial for improving transport infrastructure connectivity to enhance trade and investment activities in the East-West and Southern Economic Corridors. 13 Moreover, Japan has also provided a USD 203 million loan for a new container terminal project at Sihanouk Ville Port to improve Cambodia’s logistic environment and cargo handling capacity. 

Third, Cambodia views Japan’s FOIP version as an open and inclusive concept that supports the ASEAN centrality and complement ASEAN Community Vision 2025, including the Master Plan on ASEAN Connectivity (MPAC 2025) and the ASEAN Outlook on Indo-Pacific. As an ASEAN Member State, Cambodia refuses to support any initiative that would divide the region and break ASEAN centrality and unity. Japan’s FOIP, in principle, is viewed as an inclusive concept, which neither aims to exclude any country nor to construct a new architecture to override the existing regional institutions. 15 Furthermore, the ASEAN-Japan Strategic Partnership and the Mekong-Japan Cooperation together can be a key mechanism for Japan to translate its FOIP into a concrete vision. What have been discussed so far provide concrete evidence to counter the misleading narrative and poor assumption that Cambodia is a mini-China and that it has allowed a Chinese military base on its soil. In contrast to the allegations, Cambodia has strictly maintained its foreign policy autonomy by hedging against great powers’ competition via ASEAN.

Cambodia and ASEAN: A Hedging Space

Southeast Asian region is at the crossroad of great powers’ contestation for regional dominance. The rivalry has affected ASEAN’s community building process and its regionalism. As a member of ASEAN, Cambodia is also geographically vulnerable to multiple great powers’ struggles. However, the Kingdom still has a room to manoeuvre its foreign policy strategy by strengthening ASEAN’s key mechanisms and employing them as viable hedging tools to mitigate risks. As a member of ASEAN, Cambodia should adopt an effective hedging strategy to deal with the shifting power dynamics and to minimise potential risks from the pressure of full-scale bandwagon. 16 Through hedging approach, the Kingdom can eschew taking sides with major powers’ grand strategies through adopting binding engagement and soft balancing.

Binding engagement is a strategy to maximise diplomatic gains by engaging great powers in multilateral institutions and binding them through institutional norms. By means of binding engagement, Cambodia has been proactive in participating with other ASEAN members to build synergies between the BRI, FOIP, Japan Indo-Pacific version, and all the Mekong sub- regional mechanisms with the existing ASEAN’s initiatives such as the Master Plan on ASEAN Connectivity (MPAC 2025), ASEAN Community Blueprint, and ASEAN Outlook on Indo-Pacific (AOIP). To maintain ASEAN fulcrum in the changing landscape of regional architecture, Cambodia has already taken part in conceptualising the AOIP with other ASEAN members in order to manage great powers’ politics, optimise ASEAN community vision, and promote ASEAN centrality. This Outlook incorporates a key principle of “complementarity” to emphasise AOIP’s vision of transforming zero-sum mentality into a win-win cooperation for the maintenance of peace, stability, security and harmony in the region.

Soft balancing refers to a strategy that gives multiple great powers roles in the regional agenda to channel their engagements and at the same time restrain their powers and competition by institutional norms. As Goh also pointed out, creating open and inclusive multi-layers of relationships and overlapping regional initiatives allows small states in ASEAN to integrate new powers in the regional order to prevent any great power from dominating the scene. 17 Despite Cambodia’s support of Japan FOIP, the Kingdom has never disregarded ASEAN’s central roles from its foreign policy cornerstone. Cambodia has been actively engaging with ASEAN in the promotion of normative constraints and ASEAN style of multilateral diplomacy, which are important for maintaining the rules-based regional architecture. The examples are Cambodia’s active engagements and twice chairmanships of the ASEAN Summits and other related meetings such as ASEAN Regional Forum (ARF), East Asia Summit (EAS), and ASEAN-Plus Three (APT). Through these ASEAN-led mechanisms, Cambodia can hedge by enmeshing and mediating great powers’ rivalry through ASEAN informal dialogues, non- confrontational approach, and consensus-based decision making.

Manoeuvring a smart hedging approach through ASEAN, Cambodia can neither take sides nor express support to any strategy that may polarise the region. Cambodia and the rest of ASEAN members welcome any regional architecture initiative that is open, inclusive, transparent, and value-added. The initiative should rather promote connectivity and a win-win environment in the region than cause direct or indirect confrontations. Cambodia stands firm with other members in supporting ASEAN’s core mechanisms, centrality, and cohesiveness to respond to the evolving regional and global order.

Conclusion

Navigating through the current complex global security architecture, Cambodia’s foreign policy needs to be strategically formulated with an inward and outward-looking focus. The motto “reforming at home, making friends abroad, and adhering to the spirit of independence” should remain the guiding principle of the Kingdom’s smart foreign policy in the protection of national interest, sovereignty, and neutrality so that the country will achieve an equal footing in the international fora. As a sovereign state, Cambodia wants to coexist peacefully in the New World Order and to promote rules-based multilateral system. The official announcement of Cambodia’s Chairmanship of the 13th Asia-Europe Meeting (ASEM) in tandem with the 8 ASEM side events in November this year under the theme “Strengthening Multilateralism for Shared Growth” affirms Cambodia’s foreign policy direction to make full use of effective multilateral institutions to jointly restructure rules-based international order in achieving people-centred prosperity. Going forward, the country should decisively adopt modern approaches of economic diplomacy to stimulate economic growth, diversify export markets, enable a favourable condition for FDI, and lastly improve the capacity and professionalism of young diplomats and negotiators.

The opinions expressed are the author’s own and do not reflect the views of the Asian Vision Institute.