What next for Cambodia’s US ties, China trade deals after Hun Sen’s certain electoral win?

Washington’s distrust of Hun Sen and concerns about a possible Chinese military presence in Cambodia have affected attempts to improve ties
While Cambodia has been trying to diversify its China-centric economic ties, its friendship with Beijing remains ‘unrivalled’, one analyst notes

Cambodia

Maria Siow

Published: 9:30am, 15 Jul 2023

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The uncontested re-election of Cambodia’s leader this month is unlikely to boost its profile with Western nations, analysts say, but it might be an opportunity for Phnom Penh to diversify its China-centric economic ties and reduce its debt burden to Beijing.

On July 23, Prime Minister Hun Sen and his Cambodian People’s Party (CPP) are tipped to win 92 per cent of the 125 seats contested in the election, a walkover that will extend his long-time rule.

Phnom Penh has in recent years become increasingly reliant on Beijing, which has emerged as the kingdom’s largest source of aid and investments. China became the largest donor in Cambodia in 1999, and the largest foreign investor in 2011. A year later, it surpassed Japan as Cambodia’s largest official development aid and soft-loan provider.

China was by far Cambodia’s largest trading partner last year, with a trade volume of US$11.6 billion of which Chinese exports accounted for a staggering 89.38 per cent, according to figures from Cambodia’s customs and excise department – a 4.39 per cent increase from 2021.

Cambodian and Chinese officials at the groundbreaking ceremony for a shipyard repairing and restoration workshop at the Ream naval base in June last year. Photo: Cambodia’s Fresh News via AP

Some 34.89 per cent – or US$10.446 billion – of everything Cambodia imports comes from China and the Southeast Asian nation’s trade deficit with its giant neighbour grew by 12.61 per cent last year, reaching US$9.205 billion from US$8.174 billion in 2021.

Cambodia’s foreign debt now stands at almost US$10 billion, 41 per cent of which is owed to China, according to figures from Cambodia’s Ministry of Economy and Finance in December last year.

Charles Dunst, an adjunct Southeast Asia fellow with the Washington-based Centre for Strategic and International Studies, said Cambodia had sought with little success to improve ties with the United States in recent years due to Washington’s distrust of Hun Sen and concerns about a possible Chinese military presence in Cambodia.

“Phnom Penh will likely continue trying to court Washington, but this distrust and Hun Sen’s crackdowns on civil society will probably stand in the way,” Dunst said, eferring to Cambodia’s efforts in recent years to dissolve the main opposition party, force opposition politicians into jail or exile and crack down on the media.

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For years, the US has warned that Cambodia’s Ream naval base is secretly being developed to become an overseas outpost for China’s military, a charge that Phnom Penh and Beijing have both denied.

Dunst said Cambodia had been seeking to diversify its economic ties in recent years, sealing free-trade deals with South Korea and the United Arab Emirates, and working to pursue new ones with Canada, India and Latin American countries.

In the medium term, Dunst said there was a chance that Hun Sen’s son, Hun Manet, could come to power and shift Cambodia’s foreign policy in a direction more towards that of Malaysia or Thailand – countries that welcome Western interest and investment while remaining partners with China.

“But the fact that Hun Manet will take power in a non-democratic nature will make it difficult for Washington to draw him so close, given long-running US efforts to promote democracy in Cambodia,” Dunst said.

Hun Manet (second from right), the eldest son of Prime Minister Hun Sen, and his wife Pich Chanmony (left) during a general election campaign rally in Phnom Penh on July 1. Photo: EPA-EFE

Chhengpor Aun, a visiting fellow at the International Institute for Strategic Studies (IISS), said Cambodia’s ties with the US now hinge on how Washington responds to the “unfair renewal of the CPP mandate” and the country’s succession plan.

US President Joe Biden’s administration is likely to “register criticism without taking any concrete action to punish CPP defiance in democratising”, Aun said, adding that it was in Washington’s long-term interests “to play nice” with the incoming cabinet of young elites who were likely to be in charge of Cambodia for the next two or three decades.

Days after endorsing his son as successor in December 2021, Hun Sen said a “reserve cabinet” had been formed around a younger generation of leaders who would replace the current team when the older officials retired.

Analyst Astrid Norén-Nilsson noted that Cambodia, while still close to Beijing, was trying to diversify its foreign policy, with Phnom Penh’s “gradual rapprochement” with Western powers visible last year.

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Norén-Nilsson, a Southeast Asia specialist at Sweden’s Lund University, said Western powers had increasingly accepted they could not leverage the economy to influence Cambodian politics and had expressed a willingness to work with Phnom Penh.

“Cambodia’s friendship with China remains, however, unconditional, and therefore unrivalled and unsurpassable,” she said.

Cambodia’s friendship with China remains … unrivalled and unsurpassable

Astrid Norén-Nilsson, academic and Southeast Asia specialist

Sam Seun, a policy analyst at the Royal Academy of Cambodia, said infrastructure help from China was of utmost importance for Cambodia’s growth.

“China thinks Cambodia is very important for them, so it is very easy for Cambodia and China to strengthen good relations with each other,” he said.

The US “does not think that Cambodia is important for them” due to the latter country’s small size and economy as compared to Vietnam and Thailand, he added, despite Phnom Penh’s efforts to boost ties with Washington.

The China-built Phnom Penh-Sihanoukville expressway in Preah Sihanouk province, Cambodia. Photo: PPSHV Expressway Handout via Xinhua

Chinese debt burden

IISS’ Aun noted that to ease concerns “in both optics and substance” about a “debt trap” by China, Cambodia had re-categorised Chinese assistance from loans to the build-operate-transfer or BOT model of project delivery, especially for large-scale infrastructure projects.

These include the international airports in Phnom Penh (US$1.5 billion), Koh Kong (US$350 million), Siem Reap (US$880 million), and expressways connecting Phnom Penh to Sihanoukville (US$2 billion) and Bavet (US$1.4 billion).

They also encompass proposed high-speed railways from Phnom Penh to Poipet (US$4 billion) and to Sihanoukville, and a US$1.7 billion canal between Phnom Penh and the Gulf of Thailand.

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“These investments are not recorded in Cambodia’s government debt bulletin since it is not categorised as debt,” Aun said, noting that re-categorisations had brought down China’s share of Cambodia’s debt from 48.11 per cent of US$6.67 billion in 2017 to 38.72 per cent of US$10.23 billion by the first quarter of this year.

“Statistics don’t lie, but you must look at it from the right angle,” he said, adding that the investments “boost the ruling CPP’s image, legitimacy, and performance at home”.

Aun predicted that Cambodia would continue accepting more Chinese investment and loans for “as long as it possibly can”, while keeping its doors open to other foreign sources in case of a Sino-US conflict or economic fallout from China.