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Why Should Cambodia Embrace Chinese Investment

ISSUE 2019
No 04
Release 25 th March 2020
By Mr. SUY Bunlay

Over the last few years, opposition politicians and some intellectuals and ordinary people have framed public discourses of Chinese investment in Cambodia as controversial. Although the Cambodian government sees Chinese investment as a significant source of capital for development and is striving to attract more investment from China, some Cambodian people view it as a source of problems for Cambodia, affecting the society and their livelihoods. Some online media outlets and public opinions on social media have expressed concern about the increasing number of casinos and crimes committed by some Chinese nationals. Such problems have caused anti-Chinese sentiment among some segments of Cambodian society. Nevertheless, this article argues that Chinese investment has great significance for Cambodia and that we should embrace it for the following reasons.

Some Cambodian people having negative views of Chinese investment in their country should have a more sensible judgment and avoid prejudice. Before blaming or recklessly rejecting Chinese investment, they should ask themselves whether those sources of news are reliable, whether such problems are representative of all Chinese investment or just a tiny fraction of it, and whether Cambodia can still achieve strong economic growth without substantial investment from China. They should be open-minded and avoid making prejudiced judgment based on the little information they have or a few isolated problems they have seen or heard. Open-mindedness allows ones to accept different ideas and views and make sound judgment based on solid evidence and logical analysis. Taking a prejudiced stance, on the contrary, would likely lead to bias and false presumption. Any expression of fear and discrimination against Chinese investors or foreign investors in general would result in fear and hesitation among the investors, discouraging them from investing in Cambodia. The situation would be counterproductive to the Cambodian government’s efforts to attract foreign investment to the country to enhance further economic development and employment opportunities.

According to the Ministry of Economy and Finance, Cambodia’s nominal GDP were USD 24.6 billion and USD 27.2 billion in 2018 and 2019 respectively. The country’s trade volume was USD 26.7 billion and USD 30.4 billion in 2017 and 2018 respectively, and it was predicted to rise to USD 33.45 billion in 2019. Cambodia had strong annual economic growth between 1995 and 2018, yet her economy has remained one of the smallest among ASEAN Member States. The country’s economic growth has been driven mainly by foreign investment, and investment from China has played a crucial role. An increasing volume of Chinese investment has enabled Cambodia to expand her exports to international markets. According to the data from the Ministry of Commerce, Cambodia’s exports have remarkably increased from USD 5.8 billion to 11.3 billion between 2012 and 2017. Many Chinese companies in Cambodia focus their businesses mainly on garment and footwear products, and these sectors remain the backbone of Cambodia’s exports, accounting for 78% of the country’s total merchandise exports based on ILO 2017 report.

Chinese investment in major sectors such as hydropower plants, roads and highways, telecommunication, agriculture, tourism, banking and finance have all played crucial roles in sustaining Cambodia’s economic growth. Cambodian people have directly or indirectly benefitted from the investment, since electricity has become more affordable and reliable; transportation cost has become lower; and more competitive price and diversification of products and services have provided better choices for Cambodian consumers. Taking Chinese investment in hydropower plants as an example, the electric supply has been expanded beyond urban areas to rural villages, and electric cut has been greatly minimised. Electricity prices, which used to be at a range of 600-4,000 riel per kWh, has now dropped to a range of 380-720 riel per kWh for residential consumption in 2020.

In addition to its contributions to macro-economy, Chinese investment especially in construction and manufacturing sectors have so far created many employment opportunities for Cambodian people. According to the data from the Ministry of Land Management, Urban Planning and Construction, Chinese investment in construction in the first quarter of 2019 was USD 315 million out of USD 367 million of foreign investment in the sector. A recent study suggests that Chinese investment has created a high level of employment effect for Cambodian people, employing more than 600,000 people in the sectors. The investment has created jobs for unskilled and low-skilled workers and jobless people from rural areas. Therefore, Chinese investment has contributed to the improvement of those workers’ livelihoods and the reduction of unemployment rate. Cambodia’s unemployment rate has dropped from 2.45% in 2000 to 1.05% in 2018. 

Amid the increasing inflow of Chinese investment into Cambodia over the last few years, there has been criticism that Cambodia has been over-reliant on China and that the country’s economy has been dominated by China. In fact, Cambodia has welcomed to the country not only Chinese investment. The Cambodian government has been making great efforts to promote trade and investment with many countries. However, what if there is little investment from other countries, while Cambodia dearly needs foreign investment to develop the country. Should the country limit her development potential to balance foreign investment from different countries? The answer is No. Cambodia’s decision to seize Chinese investment is a smart and flexible move due to the fact that the country’s national interests and economic development must come first, as stated in the government foreign policy. Besides, Cambodia must seize the opportunity because good opportunity rarely happens frequently.

It is undeniable that a small pocket of Chinese people coming to Cambodia have caused problems such as inappropriate behaviour, crimes and violence, which have irritated and angered the local Cambodian people. Nevertheless, they do not represent all Chinese investors and people coming to the Kingdom. Besides, a small number of other foreign nationals have also caused such troubles in Cambodia. Such problems should not be the cause of rejecting Chinese investment because they can be addressed by the stricter enforcement of the rule of law.

To sum up, Chinese investment provides huge benefits to Cambodia. The investment provides the necessary capital to Cambodia’s economy. It helps enhance Cambodia’s exports and create employment opportunities for Cambodian people. Therefore, Cambodia should try to attract more investment from China. Even our neighbouring Thailand and Vietnam, whose economies reached roughly USD 505 billion and USD 241 billion respectively in 2018, have been making great efforts to attract more Chinese investment to their countries. Why should Cambodia not? Cambodia’s economy needs to be further developed and expanded. We have many reasons to maintain and promote more Chinese investment to our country, especially in the era of China being the world’s second largest economy and the most powerful player in Asia. China has great potentials which can help Cambodia achieve her economic development goals. Therefore, Cambodia should seize the golden opportunity by fully embracing the investment from this Asia’s most powerful country. The few inevitable problems caused by the inflow of people and investment can be addressed by the law enforcement.

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