JAKARTA -- China and Cambodia reaffirmed their solid relationship during a two-day visit by Chinese President Xi Jinping to Phnom Penh, which ended on Oct. 14. Xi's meetings with Cambodian government leaders yielded 31 agreements, including one that doubles Cambodia's quota for rice exports to China to 200,000 tons a year.
Cambodia's rice sector has been hit by falling prices, affecting farmers and millers, and the government has been scrambling to offset the damage, which could undermine ruling party support among the country's rural majority ahead of local elections in 2017. Cambodia's long-serving Prime Minister Hun Sen recently visited China, where he pushed for an increase in the rice quota.
"About 80% of our people are farmers," Phay Siphan, spokesman for the Council of Ministers told the Nikkei Asian Review. "This agreement is very important to the rural economy."
Cambodia's $20 billion economy exports much more to Europe and the U.S. than it does to China. Of an estimated $8 billion in total exports in 2015, only 5% went to China, while Western fashion brands sourced almost $4.5 billion worth of garments from Cambodia during the same year. Garments make up around 70% of Cambodia's exports.
However, China accounted for 22% of Cambodia's estimated $10.6 billion imports in 2015, second only to Thailand.
Earlier this year China pledged $600 million in bilateral aid, to be delivered over the coming three years. Beijing is a prominent investor in its small neighbor, with almost $10 billion pledged since the mid-1990s. That money has yielded immense political influence, with Cambodia frequently acting as a proxy for Chinese policy inside the Association of Southeast Asian Nations.
Cambodia has repeatedly refused to sign ASEAN statements on the South China Sea that contradicted China's extensive claims to sovereignty. The 10-country bloc operates by consensus, which means that Cambodia's position prevents the group from speaking out, in spite of the strong views of countries such as Vietnam and the Philippines. By extension, Cambodia has also put itself at odds with the U.S., since Washington has backed freedom of navigation in the sea.
However, Hun Sen has railed against accusations that he is toeing the Chinese line, saying in June that the allegations were unfair. He added that, "I am not supporting any one country."
Philippine President Rodrigo Duterte has also downplayed the disagreement -- to the extent of ignoring an international arbitration ruling that undermined China's claims in the disputed waters. After Xi returns to China from visits to Cambodia, Bangladesh and India he will receive his Philippine counterpart in Beijing on Oct. 19 in a sign of a thawing relationship that could offset regional concerns about Cambodia's closeness to China.
That relationship is likely to be embellished by Xi's visit to Cambodia -- his first since becaming China's president in early 2013. The agreements signed by the two governments included $237 million in soft loans and the cancellation by Beijing of $89 million worth of Cambodian debt.
Chinese interest in Cambodia will likely result in other economic benefits. Cambodia's tourism numbers have almost doubled since 2010, hitting a total of 4.8 million visitors in 2015. Announcing another sweetener, Xi said he would encourage more Chinese tourists to visit, which could lead to 2 million Chinese visitors a year by 2020.
Cambodia has of late been adding casinos to its range of attractions as Chinese investors move in on Phnom Penh's booming real estate sector -- an increasingly important driver of growth.
Long haul flights
But for regular tourists, the country's main attraction continues to be the colossal Angkor Wat temple grounds -- sometimes described as the world's biggest religious building -- outside the northern town of Siem Reap. The temple was mentioned by Xi in an article in his name published in Cambodian media this week. "Angkor Wat, with its magnificent architecture and stunning bas-reliefs, stands as a true tribute to the talent of the Cambodian people and shines in the annals of human civilization," Xi enthused.
Xi also said he would ask Chinese investors to support a planned new airport outside Siem Reap, which would facilitate direct long haul flights to Angkor Wat's hinterland, as well as planned railway links.
Cambodia's beaches and temples are matched as attractions by grisly "dark tourism" draws such as the Tuol Sleng museum in Phnom Penh. The building, a former school, was used as a detention and torture center by the Khmer Rouge, the brutal regime backed by China that was deemed responsible for the deaths of up to 1.7 million Cambodians before its ouster by a 1979 Vietnamese invasion.
The U.S. war in Indochina in the 1960s and 1970s also paved the way for the Khmer Rouge, as American forces conducted bombing raids in Laos and Cambodia in efforts to destroy supply lines to Viet Cong communist fighters in the main theater, Vietnam.
Xi made no mention of the Khmer Rouge era in his newspaper article, merely saying that "the traditional China-Cambodia friendship, tested by the times and a changing international landscape, has grown strong like a luxuriant tree thanks to efforts made by past leaders of both countries."
China's backing is likely to bolster the Hun Sen government's determination to face down the opposition Cambodian National Rescue Party, which came close to winning the last elections in 2013. CNRP president Sam Rainsy is in exile and acting party leader Kem Sokha is holed up in the CNRP offices. Rainsy is accused of defaming a former Cambodian foreign minister while Kem Sokha is accused of procuring a prostitute. Opposition spokesman Yim Sovann told the NAR that both cases are "politically motivated" and both the accused have sought pardons.
In spite of the charges against opposition leaders, Cambodia operates "by the rule of law," according to Phay Siphan, spokesman for the Council of Ministers. "It isn't necessary for Kem Sokha to keep himself in the headquarters," said Phay Siphan. "My government does not interfere with what the court decided."
Cambodia has clashed with Western countries and international institutions over human rights issues, including disputed elections and periodic clampdowns on the opposition. The World Bank suspended assistance to Cambodia from 2011 to 2016 because of a series of land grabs in which an estimated 400,000 Cambodians were driven off their farms to make way for construction projects or commercial agriculture.
However, EuroCham, which promotes European investment in Cambodia, said the outlook for the country was positive, noting that many Europeans viewed Cambodia as a poor country recovering from the ravages of dictatorship, despite economic growth of 6% to 7% a year for more than a decade.
"We have an outreach program seeking to address these perceptions," said Blaise Killian, EuroCham's advocacy manager. 'This is a young and dynamic country, and it has potential to move up the value chain."
Japanese investors are also showing greater interest in Cambodia, although Tokyo has a long way to go to match the close China-Cambodia relationship.
"Aeon [a major Japanese mall operator] was opened, and this year the Sunrise Japan Hospital was just opened. You can find many Japanese restaurants in Phnom Penh. Some urban infrastructure -- such as water supply, flood control, urban transportation -- has been developed with Japanese [overseas development assistance]," said Hiroshi Suzuki, CEO and chief economist at the Business Research Institute for Cambodia.