The Phnom Penh-Bavet Highway which will ultimately link the Cambodian and Vietnamese capital cities
The 2022 ASEAN summit took place at the Cambodian capital Phnom Penh, this past weekend, with China as an official guest. At the event, Chinese Premier Li Keqiang announced Beijing’s approval of Chinese investment in significant infrastructure projects in the ASEAN region.
Among these is a US$1.6 billion expressway to be built from Phnom Penh to Bavet, at the Cambodian-Vietnamese border, and financial support for a rail link between Phnom Penh, Bangkok, and Vientiane, Laos, from which a high-speed rail link has already been constructed into China.
Sun Chanthol, the Cambodian Public Works and Transport Minister, said during the signing ceremony that the Phnom Penh expressway would link up with Vietnam’s expressway between Ho Chi Minh City and the Moc Bai border gate with Bavet, providing direct access via highway between the Cambodian and Vietnamese capitals.
Both this and the rail link are expected to be completed by the end of 2026 or early 2027, Sun said, and form a vital link with Asian Highway 1, connecting China through Myanmar to Thailand, Cambodia, and Vietnam.
“The expressway will be 138 kilometers long, with one long bridge,” Sun said. “The estimated cost is just a little less than that of the Phnom Penh-Sihanoukville Expressway, though its length is shorter.”
A US$2 billion, Chinese-built, 187-kilometer expressway from the capital to the southern port city of Sihanoukville, cutting the five-hour road trip in half, was officially opened by Cambodian Prime Minister Hun Sen on Wednesday.
The expressways are also expected to link with a new Phnom Penh international airport, which is being constructed under the Belt and Road Initiative by the China Construction Third Engineering Bureau Group Co,, and is expected to be operational by 2025.
Li told reporters that this week’s meetings would focus on development, multilateralism, and free trade, and a need for regional countries to preserve secure and smooth global industrial and supply chains.
This included China’s assistance “in the construction of bridges across the Mekong River and construction of the railway connecting Cambodia-Thailand-Laos and China,” according to the Cambodian Fresh News.
Li also signed off on 18 protocols with Cambodia, including health care, support for Phnom Penh hosting next year’s Southeast Asian Games, and assistance to improve the livelihoods of “Cambodian citizens.”
Five of those protocols also backed further road and bridge construction which will form a web of transportation – rail, road, and waterway – inside Cambodia, which is strategically located between Thailand, Vietnam, Laos, and the Gulf of Thailand.
Cambodia has long been a Chinese partner, with this accelerating over the past few years as BRI projects began to take hold as China reached out into Southeast Asia to develop both infrastructure, trade relations and upgrade local wealth. The development of Cambodia has been an interesting example of how, in conjunction with the China-ASEAN Free Trade Agreement and the recent RCEP agreement – Cambodia is a member of both – China has been combining development with free trade.
Some of these developments have taken ingenious paths – the development of casinos to generate capital from mainland Chinese gamblers (often involved in money laundering or other illicit money) which was subsequently re-invested in infrastructure is a quirky case in point – but it worked.
China-Cambodia BRI Background
During 2012-2017, China invested over US$15 billion, including US$11 billion alone in the energy sector, in building the infrastructure of Cambodia. The infrastructure also included roads/expressways, ports, and airports. The US$1.9 billion expressway which links Phnom Penh with Sihanoukville, a port town and vacation destination, is located 12 km from the Sihanoukville Autonomous Port (PAS) the sole international and commercial deep seaport of Cambodia (where some 90% of Cambodia’s imports and exports transported by sea pass through). In 2021, China-Cambodia bilateral trade reached US$11.2 billion.
Casinos & Real Estate
Throughout the period of 2015-2018, manufacturing (many relocating from China), and tourism – led by casinos – real estate boomed around the expressway/corridor into the Sihanoukville SEZ (SSEZ). This is partially a recreation of the China Macao model.
The SSEZ has become recognized as a high-profile example of cooperation between China and Cambodia under the BRI. Launched in 2008 as a future home of manufacturing, led by garments and textiles, SSEZ is now home to 170 enterprises as well as university buildings, legal service centers, libraries, and shopping. By the end of 2021, SSEZ provided nearly 30,000 job opportunities to locals. It is of note that it was the original casino developments that prompted this development, with careful government planning then overseeing the financial benefits of that then being reinvested into manufacturing, production, retail and educational facilities.
In November 2020, Cambodia Airport Investment (a domestic Cambodian JV/OCIC) chose the Metallurgical Corporation of China (MCC) to design and build the airfield for its US$1.5 billion, the international airport in Kandal province to the south of Phnom Penh. The US$400 million (£330 million) deal, MCC’s largest foreign contract in 2021, will be executed by its Shanghai Baoye Group subsidiary. The airport is due to be completed by the end of 2022, allowing flights to begin in 2023.
Chinese investment is also planned in the US$3.8 billion Dara Sakor airport and resort. About US$1.1 billion of the total cost of the Takhmao airport will come from China Development Bank and US$280 million from the OCIC.
Other Chinese Investments
In June 2021, Celllcard (Cambodia) chose ZTE for its 5G partner
In 2018, Xiaomi partnered with SEATEL, a fast-growing domestic telecommunications network
In March 2019, Alibaba announced plans to make Cambodia its logistics hub for the Greater Mekong region, which has a population of about 300 million.
In 2019, Alibaba announced a partnership with DaraPay to allow Chinese customers to use their Alipay wallets in Cambodia
In 2022, Cellcard and Tencent announced plans to expand an e-sports platform, both domestically and regionally.
After the COVID-related downturn of 2020, the two countries have a goal of reaching 5 million tourists by 2025 and 8 million by 2030.
Inbound FDI from China (2021)
Chinese investment in Cambodia increased significantly in 2021 despite the negative effect of the COVID-19 pandemic. Cambodia attracted fixed-asset investment of US$2.32 billion from China in 2021, up 67% from US$1.39 billion in 2020, according to a report from the Council for the Development of Cambodia. China remained as the top foreign investor in Cambodia, accounting for 53.4% of the total investment of US$4.35 billion the kingdom approved in 2020.
Cambodia’s growth rebounded to an estimated 3.0% in 2021 after a contraction of -3.1% in 2020. The government has implemented policies to mitigate the negative impact of COVID-19 on businesses and people’s incomes and to support economic recovery. Growth is expected to be 5% over 2022, although there are inflationary concerns. According to the World Bank, over the past two decades, Cambodia has undergone a significant transition, reaching lower middle-income status in 2015 and aspires to attain upper middle-income status by 2030.