Cambodia: Rice, River, and Realpolitik
Cambodia and Vietnam clash over the Funan Techo Canal, Cambodia strengthens trade ties with Pakistan, Bangladesh, Cambodia’s deputy PM says Japanese investment to help curb China dependence.
Cambodia and Vietnam clash over the Funan Techo Canal
By Juki Trinh (The Interpreter)
In August 2023, Cambodia sent an official notice to the Mekong River Commission flagging the construction of a new major canal project on the Mekong River. The Mekong, long a source of regional bounty, has become a modern point of contention for the countries along the waterway, with disputes over the environmental and economic cost to the river flow from the growing number of upstream dam and canal projects.
Cambodia’s planned 180-kilometre Funan Techo Canal, worth US$1.7 billion, is funded by China as a part of the Belt and Road Initiative. This canal provides a waterway linking the capital Phnom Penh and the deep seaport in the coastal province Kep, ultimately opening onto the South China Sea.
The Cambodian government hopes that this ambitious project may foster economic development by facilitating the transportation of goods and eco-tourism, along with an estimated 5 million jobs to be created. Moreover, the Funan Techo waterway would reduce Cambodia’s dependence on Vietnam’s seaport, notably Cai Mep.
The canal project may bring economic benefits to Cambodia, however, it has lead to mounting concerns within neighbouring Vietnam. Water security is a particular concern, with the canal is thought to act like a dam, altering the flow of the river and preventing water from reaching areas in the Mekong Delta in the south of Vietnam. This would not only exacerbate the present long-term drought and growing problems with salination affecting Vietnamese agriculture, but also impact the habitat of endangered species.
Hanoi’s influence in Phnom Penh has evidently decreased – a relationship that has a tumultuous history.
The project also brings geopolitical anxiety for Vietnam. The canal thought to have “dual-use” potential – that is, promoting economic growth and domestic connectivity for Cambodia, but it could also facilitate China’s military presence in the country. The canal is said to connect the Ream naval base in Sihanoukville, recently refurbished with Chinese funding. A CNN report in December last year showed that two Chinese navy frigates docked at the base. Security concerns have been raised about the ability of vessels to transit the Funan Techo canal from the Gulf of Thailand.
Cambodian officials have defended the aims of the project. Cambodia’s Prime Minister Hun Manet claimed the canal would have minimal effects on Vietnam and that there would be no foreign military base on Cambodia’s territory in line with Article 53 of its constitution. His father, and former Cambodian leader Hun Sen, declared the canal would not strain the Vietnam-Cambodia relationship. Meanwhile, the United States and Vietnam have called for more information and transparency about the canal.
The Funan Techo canal is a further example of Cambodia’s economic reliance on China and Beijing’s considerable economic influence in Southeast Asia. This concern is not only for Vietnam but extends to the unity and consensus of the Association of Southeast Asian Nations. In 2012 and 2016, Cambodia blocked a ASEAN statement on the South China Sea dispute, which stymied Vietnam’s effort to internationalise the issue and call for regional support.
Hanoi’s influence in Phnom Penh has evidently decreased – a relationship that has a tumultuous history, with Vietnam having militarily intervened in Cambodia in 1978, maintained its influence in the country for a decade, and then significantly supported the Hun Sen’s government. Anti-Vietnam sentiment in Cambodia runs deep, as the stage for the clash of ancient empires seeking dominance in Indochina, with the Nguyen dynasty’s territory expansion southward over land regarded by Cambodians as “Kampuchea Krom”, and illegal Vietnamese migrants in Cambodia.
China describes Cambodia as its “ironclad” friend in Southeast Asia. The Mekong is watery thread that these regional rivalries are seeking to bend in their favour.
Cambodia strengthens trade ties with Pakistan, Bangladesh
By Nhean Chamrong (Khmer Times)
The Ministry of Commerce (MoC) yesterday inked an agreement with Pakistan to establish a joint committee aimed at elevating trade cooperation. It is also preparing another Memorandum of Understanding (MoU) to be signed with Bangladesh to promote the trade of rice.
Cham Nimul, Minister of Commerce, and Zaheeruddin Babar Thaheem, Ambassador of the Islamic Republic of Pakistan to Cambodia, signed an MoU in Phnom Penh to create the joint trade committee for mutual benefits.
Speaking at the signing ceremony, Nimul underlined the importance of the MoU that will significantly contribute to the elevation of the two countries’ relations, particularly on trade and economic cooperation.
“The joint trade committee established under this agreement will serve as a mechanism that allows both sides to explore ways to create favourable conditions for businesses and investors and to diversify economies, expand production bases, and foster bilateral trade,” she noted.
The minister continued that Cambodia and Pakistan are committed to work together closely and actively engage the private sectors including the chambers of commerce and business associations in both nations.
The initiative aimed at promoting trade and economic activities, exchanging trade insight, boosting small and medium enterprises, and enabling standardization, technical regulation as well as conformity assessment procedures for the Sanitary and Phytosanitary Measures (SPS) and Technical Barriers to Trade (TBT) regulations to streamline exports, she said.
While speaking to Khmer Times, Dr Tan Monivann, Vice President of Mong Rethhy Group Co Ltd noted that SPS is a measure to ensure the quality of the products based on each country’s standards which generally demands the certificate of origin (CO) while the TBT is a regulation that involves taxes required from both parties.
He emphasised that once the agreement is made, both parties will discuss ways to reduce complicated requirements of SPS and TBT which will pave the way for business to carry out their trade activities with ease.
Besides the two requirements, there are also non-technical barriers such as the complicity of paperwork demand, the obstacle to document processing and approval requests which could delay the trade cooperation, Monivann said.
A day earlier, Nimul also received a farewell call from Mohammed Abdul Hye, Ambassador of the People’s Republic of Bangladesh to Cambodia to discuss and exchange views on mechanisms that could strengthen the two nation’s bilateral trade cooperation.
During the meeting, she also informed the Bangladesh Ambassador of the Kingdom’s positive growth in the first four months of this year.
The minister went on to request the ambassador to consider arranging the schedule for the first meeting of the Cambodia-Bangladesh Joint Trade Council as well as signing an MoU to continue rice trade between the two countries.
Based on the report from the General Department of Customers and Excise (GDCE), Cambodia’s exports were worth $8 billion in the first four months of 2024, rising by 15.2 percent compared to $6.9 billion during the same period last year while the imports reached $8.6 billion, an increase of 9.3 percent during the same period.
Penn Sovicheat, Secretary of State and Spokesperson of MoC said that the implementation of the Cambodia-China Free Trade Agreement and the Regional Comprehensive Economic Partnership (RCEP) agreement have added momentum to Cambodia’s exports.
“Despite the war crisis and weakening of the purchasing power, the Kingdom’s export orders remained high, with the volume remaining unchanged. Although there was a decline in some items, this was compensated by an increase in other items,” he added.
Cambodia’s deputy PM says Japanese investment to help curb China dependence
By Tamayo Muto (Nikkei Asia)
Cambodia expects growing Japanese investment to help curb its economic dependence on China, the Southeast Asian nation's deputy prime minister told Nikkei Asia. Sun Chanthol made the comment in an interview last Thursday on the sidelines of the Nikkei Future of Asia forum, at a time when his country is looking to broaden its sources of foreign direct investment as it pushes to become a regional manufacturing hub.
Cambodia must diversify investment into the nation beyond its "reliance on China alone," Chanthol said. About two-thirds of all investment capital in Cambodia currently comes from China.
Attracting investment from Japan is key to that push, the deputy prime minister continued, noting that the government has set up a task force to accelerate value-added tax refunds to Japanese companies after some of them said the process was not fast enough.
"We'd like to see a Japanese company that has a factory for the electronics, electrical or automotive [industries]," said Chanthol, who has also been traveling to other Asian countries and Europe to drum up investment. "It will help Cambodia achieve its vision of becoming a high-income country by 2050."
Any new Japanese investment would follow the likes of parts supplier MinebeaMitsumi, which entered the country in 2011 to churn out products such as motors and smartphone components.
The Japanese company now plans to invest 32 billion yen ($214 million) to build a new Cambodian plant.
Chanthol, a former minister of public works and transport, said that foreign companies can bring in "know-how, technology transfer and good corporate governance." That will contribute significantly to the development of local companies, fostering a more robust and competitive business environment, he added.
Chinese investment into Cambodia includes backing for the flagship Siem Reap-Angkor International Airport, which cost about $1 billion to build, as well as the Ream Naval Base, strategically located near the entrance to the Gulf of Thailand.
Indeed, Chanthol noted how Beijing has supported Cambodia over the years. Looking back to the COVID-19 pandemic, he said, "No one offered us any vaccine at all ... but China came forward with millions of doses to give."
He continued that Cambodia has been hungry for resources to build roads, bridges, schools, hospitals, and other infrastructure. "We never reject any support from any Western country or Japan ...You cannot blame us [for reliance on China alone]."