What kind of Chinese investment may win over Cambodians’ hearts? The benefits and costs, and public reception of two landmark projects are revealing. People appear enthused to use a new expressway but are uneasy about economic change in the road’s terminal point, the city of Sihanoukville.
Phnom Penh-Sihanoukville Expressway
Cambodia has heartily embraced the first expressway linking the capital of Phnom Penh to the coastal province of Preah Sihanouk since it was opened to the public for a one-month free trial in early October. The 187km, US$2 billion Phnom Penh-Sihanoukville Expressway is a signature Belt and Road Initiative (BRI) project undertaken by the China Road and Bridge Corporation (CRBC), which borrowed from various Chinese development banks.
By mid-October, about 200,000 vehicles had travelled on the thoroughfare. Local media have reported welcoming, positive responses from motorists who were content with the convenience, efficiency and safety of the road. This author drove from Sihanoukville to Phnom Penh and has to admit that he shares the same sentiments. The expressway reduces the travelling time to two hours from five hours on the congested National Road 4. In the first two weeks of operation, only six accidents were recorded on the expressway (an accident rate of 0.004 per cent), with no injury or death.
This positive response will spur more BRI infrastructure projects.
This assuring start is warmly welcomed, given the generally dismal state of road safety. Traffic accidents result in 5.4 deaths per day in Cambodia, making it the sixth leading cause of mortality. The satisfaction goes beyond the material to the aesthetic. Police have had to educate and stop motorists from pulling over to the emergency lane to take selfies with the expressway’s picturesque backdrop.
Commuters asked by local media have expressed their willingness to pay after the free launch ends in November. A one-way, end-to-end trip costs US$12 for a family car and US$60 for a truck. This positive response will spur more BRI infrastructure projects. CRBC has already been contracted by the Cambodian government to build the Phnom Penh-Bavet Expressway connecting the Cambodian capital with Vietnam.
While the business community has not reacted to the expressway, it promises immense economic impact by reducing logistic costs and enhancing trade competitiveness. Besides halving the trucking time, the road connects four provinces with major economic activities. Most significantly, the expressway links to the Sihanoukville Autonomous Port, the country’s only deep sea port with comprehensive facilities. The latest figures indicate that the port handles imports and exports worth over US$2 billion per year, about 70% of Cambodia’s total.
Prime Minister Hun Sen sees the expressway generating positive spillovers for tourism in Preah Sihanouk, saying, “It’s good for Preah Sihanouk provincial residents because a lot of people have visited there.” Indeed, the Ministry of Tourism reported that Preah Sihanouk province received some 140,000 people, mostly domestic tourists, during a week in mid-October. This figure is a promising sign since visitors from China, Cambodia’s largest tourism source, have been unable to travel due to continuing pandemic-related travel restrictions at home.
Formerly booming with real estate development, Sihanoukville went bust after the exodus of Chinese investors and tourists in the wake of the government ban on online gambling in 2019 and the effects of Covid-19 since early 2020.
City of Sihanoukville
However, while tourism seems to be recovering in Sihanoukville, the outlook for local businesses and Cambodian-owned operators remains cloudy. The city, a BRI-related private sector initiative which has attracted heavy Chinese investment and promotion by both governments as a "multi-purpose" city like Shenzhen in China, has become a white elephant. Formerly booming with real estate development, Sihanoukville went bust after the exodus of Chinese investors and tourists in the wake of the government ban on online gambling in 2019 and the effects of Covid-19 since early 2020.
By August 2022, there were over 1,000 unfinished buildings scattered across Sihanoukville. Yet, the city is populated with Chinese firms operating not only tourism mainstays — casinos, hotels, restaurants and condos — but also associated businesses such as shops, supermarkets, beauty salons and taxi services. With Chinese managers and workers running both the tourism facilities and smaller enterprises, locals get minimal employment opportunities apart from low-paying jobs in tourism and construction. Local vendors have complained that they can hardly compete with Chinese entrepreneurs.
In 2020, Chinese investment in Sihanoukville generated estimated annual revenue of between US$3.5 billion and US$5 billion, 90% of which came from gambling patronised mainly by Chinese tourists. The ban on online gambling in 2019 and Covid-19 cross-border restrictions brought Sihanoukville’s tourism nearly to a standstill for much of the past three years. This has rendered a big blow to both local and Chinese businesses that are still struggling.
Sihanoukville has also recently become a centre of transnational human trafficking, online scams and related crimes committed by Chinese organised gangs. These crimes have victimised thousands of Cambodians and Southeast Asians, prompting an international outcry and an order by Hun Sen to crack down on the syndicates. While hundreds of criminals have been arrested and deported and hundreds of victims have been rescued, these illicit activities have tarnished the images of Cambodia and China — and by extension, the BRI — throughout Southeast Asia and beyond.
For local residents, the Chinese in Sihanoukville are not only tough business competitors, but some of them are also potentially related to criminal activities. Thus, seriously tackling Chinese-related crimes is imperative to improve both the image of China and the perception of its investment.
...it shows transport infrastructure projects may win over the hearts of Cambodians given their immediate and well-received benefits enjoyed by users, and positive spillovers for the economy.
Two China-driven projects show striking contrasts. The Phnom Penh-Sihanoukville Expressway seems to deliver tangible benefits to Cambodians and potential returns for the Chinese operator; Sihanoukville’s transformation has seen Chinese businesses crowding out locals, amid a tumult of boom-and-bust construction and illicit trades. The city’s troubles expose flaws in project conception and governance that have also limited the access and participation of Cambodians.
While the full costs and benefits of the expressway remain to be seen, it shows transport infrastructure projects may win over the hearts of Cambodians given their immediate and well-received benefits enjoyed by users, and positive spillovers for the economy.
This article was first published by ISEAS – Yusof Ishak Institute as a Fulcrum commentary.
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