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THE CHINA EFFECT

Cambodia Greets a Cash Invasion

The fledging democracy has opened its arms to a Chinese spending spree, but U.S. officials are watching warily

September 17, 2006|Don Lee | Times Staff Writer

Phnom Penh, Cambodia — American diplomats made a big splash early this year when they opened an embassy near Wat Phnom, the sacred hill of temples where Phnom Penh was founded.

U.S. Ambassador Joseph A. Mussomeli trumpeted the three-story marble-and-granite outpost as a "powerful symbol" of American interests in the impoverished country.

On the other side of the capital, the Chinese also are giving their embassy a makeover. But they're doing a lot more in Cambodia.

The Chinese are digging up minerals and exploring for oil. They are cutting down forests and in some places planting saplings. And across Cambodia, they are building garment factories, power plants, bridges and roads, some into neighboring Laos.

For centuries, the Kingdom of Cambodia has tried to fend off greater powers such as Thailand, Vietnam and France. But today Phnom Penh is welcoming the Chinese with open arms, praising Beijing as a government that offers its largess unconditionally.

By Phnom Penh's tally, Chinese state-owned and private companies plowed more than $450 million into Cambodia last year -- a 460% increase over 2004 -- making China by far the nation's top foreign investor. Beijing says it is also giving hundreds of millions of dollars in loans and aid to Cambodia, easily surpassing the $62 million in loans and aid from the U.S.

Some Western diplomats see China's growing influence here as a threat to American political interests in the region. Cambodia, a nation of 14 million, is a fledgling democracy. It conducted open elections in the wake of civil war a decade ago and the brutal Khmer Rouge regime in the 1970s. Its constitutional monarchy provides for a multiparty system, unlike neighbors Vietnam, Laos and China, each ruled by an unopposed Communist Party.

Cambodian politics are dominated by Prime Minister Hun Sen -- who came to power in a bloody 1997 coup but has overseen the country's democratic reforms -- and analysts say the rule of law and press freedoms have not taken root. Washington has tried to exert influence on Cambodia through its aid, which is earmarked mostly for health and education. But as Chinese support increases, some U.S. officials worry that it will ease the pressure on Phnom Penh to fight pervasive corruption and build democratic institutions.

Cambodia has embraced the Middle Kingdom because "China has proven different from other donors. They don't impose conditions," Cham Prasidh, the minister of commerce, said in an interview here. "Others say, 'You have to do this with human rights, you have to do that with democratic reforms.' China doesn't do that."

China's interest in this country -- where income per person was $350 in 2004 -- is largely driven by the same need that is sending Chinese to remote regions in Africa, Central Asia and South America: to secure natural resources to fuel its expanding economy and enhance its global political muscle.

China's trek is often secretive, as banker John Brinsden has learned.

The Briton is vice chairman of locally owned Acleda Bank. A field representative in Rovieng, a tiny farming village, recently called by shortwave radio to tell him that a potential client had moved to the remote area.

Brinsden drove eight hours north along mostly dirt roads to the village, which is surrounded by jungle -- and land mines.

Next to the bank's outpost, Brinsden could see that a mining company was setting up offices behind a corrugated fence. But in his research later, he could find no permits or other records of the company. To the veteran banker, this was the Chinese way of doing business in Cambodia.

"They're very low-key," he said.

China's spending spree has helped Cambodia's economy come out of the doldrums. Tourism and garment production are growing briskly. Luxury sport utility vehicles are a common sight in the streets of Phnom Penh. The country's banks hold 30% more in deposits than a year ago.

The cash is certainly flowing at Naga's casino next to Buddhist temples on the eastern end of town. A construction firm from China is building a 500-room hotel by the gambling hall for its Chinese Malaysian owner.

"The big rollers are from mainland China," said Michael Nen, a former Long Beach policeman who runs security for Naga Resorts & Casinos here.

Yet many Cambodians are wary of China's growing presence in their homeland. Some talk bitterly about Beijing's support for Pol Pot, the man who engineered the Khmer Rouge's reign of terror, which left more than 1 million Cambodians dead on killing fields or from hunger.

Other Cambodians complain that the Chinese, along with other foreign companies, are plundering the nation and buying up vast swaths of land in secret deals with corrupt local officials. Such trade has uprooted families and made life harder for many people, they say.

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