Developments
BRI brings profound impact to Cambodia, Taiwan catalyses great power rivalry, US hype China-Russia joint naval patrol, KPMG Australia made billions overcharging Defence Department
UPDATE: The Belt and Road Initiative, the most ambitious and expansive infrastructure connectivity and development project ever conceived, was proposed a decade ago. The initiative connects about 150 countries in Asia, Europe, Africa and Latin America through a network of infrastructure investments, trade agreements and cultural exchanges. Cambodia is among the countries that have seen the greatest impact of the Belt and Road Initiative on its infrastructure, economy and cultural landscape.
Rising tensions across the Taiwan Strait preceding and following the visit of the former US House Speaker Nancy Pelosi in August of 2022 ensured the semi-autonomous island, centrally located between East and Southeast Asia, concentrated both regional and great power attention. Geographically, Taiwan’s importance, as an entryway to the South China Sea and one of the world’s most crucial trade routes is further amplified by the island’s key role as a regional manufacturing hub and home to the world’s most advanced semiconductor production.
China and Russia's third joint naval patrol that allegedly reached international waters near Alaska last week has touched the nerves of US media, which hyped the voyage as "highly provocative," ignoring the fact that the US constantly sends warships and warplanes to China's doorsteps for close-in reconnaissance and military exercises under the so-called freedom of navigation.
While PwC has attracted headlines over its use of confidential government information to help its clients avoid tax, there has been less scrutiny of one of Canberra's biggest players: KPMG. The consulting giant has apparently submitted inflated invoices and billing to the federal government Department of Defence allowing it to charge a staggering $1.8 billion over the past decade.
BRI brings profound impact to Cambodia
By Digby James Wren and Seun Sam
The Belt and Road Initiative, the most ambitious and expansive infrastructure connectivity and development project ever conceived, was proposed a decade ago. The initiative connects about 150 countries in Asia, Europe, Africa and Latin America through a network of infrastructure investments, trade agreements and cultural exchanges. Cambodia is among the countries that have seen the greatest impact of the Belt and Road Initiative on its infrastructure, economy and cultural landscape.
Cambodia's strategic location on the Mekong River south of Laos and between Thailand and Vietnam on the Gulf of Thailand has made it an important hub for trade and connectivity in the Southeast Asian region. And China's investments in Cambodia have catalyzed a remarkable transformation of its infrastructure.
New highways, railways, seaports and airports have been built or old ones upgraded, facilitating efficient transportation of goods and movement of people within and beyond Cambodia's borders. These infrastructure are connected to free trade zones (FTZs) and special economic zones (SEZs) that have further improved regional connectivity, facilitating trade and attracting foreign investment while boosting Cambodia's economic growth and creating employment opportunities for its people.
The Belt and Road Initiative has also played a significant role in strengthening trade relations between China and Cambodia. With improved infrastructure and logistical capabilities and a new free trade agreement between the two countries, Cambodia has become an attractive destination for international investors and businesses looking to expand their presence in the region. The increased trade volume has resulted in a more diversified economy and helped Cambodia develop its energy, telecommunications, financial, logistics, tourism and agricultural sectors.
Besides, Chinese investments in Cambodia's agricultural sector have helped modernize farming and improve productivity, and have had a positive impact on Cambodia's agricultural exports, benefiting local farmers and boosting the country's processing and packaging sectors. In fact, Cambodia has become a key source of rice, fruits and vegetables for the Asian market.
Cambodia is rich in minerals, and the Belt and Road Initiative's infrastructure projects have helped increase mining and mineral processing activities. Large-scale projects such as mining and forestry require strict environmental controls and monitoring. And since its focus on sustainability and green development is guided by the United Nations 2030 Sustainable Development Goals, the initiative prioritizes stringent environmental regulations and monitoring mechanisms to ensure compliance to the SDGs when it comes to investments in mining, agriculture and forestry. The Belt and Road Initiative accords priority to renewable energy sources, too, and promotes biodiversity conservation efforts.
Keeping all these factors in mind, China's investment in energy infrastructure has helped alleviate Cambodia's power shortages and fostered sustainable development. The construction of hydropower plants, solar panel farms and power transmission networks has increased the country's energy production capacity, reducing dependence on costly imported energy sources, which in turn has improved power supply, spurring industrial growth and attracting foreign direct investment in energy-intensive sectors. Also, Chinese companies' investments in the electrification of the transport sector have widened the electricity charging network. As a result, Chinese-made electric vehicles have become a common sight on Cambodia's Belt and Road Initiative-funded highway networks.
One of the most significant outcomes of Belt and Road projects in Cambodia is the construction of the Sihanoukville Special Economic Zone, which has attracted foreign investments and boosted Cambodia's manufacturing sector, leading to job creation and increased exports. In partnership with investors in the Sihanoukville and Phnom Penh SEZs, Cambodia is now processing its rubber into car tires, and has become a leading exporter of other value-added products such as car parts and bicycles.
Investments in Cambodia under the Belt and Road framework have also stimulated the construction and real estate sectors, leading to the development of modern residential and commercial properties across the country. Despite slowing down during the COVID-19 pandemic, the construction sector remains a key employment generator, boosting incomes, improving living standards, reducing poverty and underpinning socioeconomic development.
The socio-cultural impact of the Belt and Road Initiative projects on Cambodia has also been profound, with significant changes evident in local communities. One notable change is the rapid urbanization and modernization of previously rural areas as the construction of roads has connected remote regions to major cities, facilitating the movement of goods and people. This has resulted in the emergence of new urban centers and the expansion of existing ones.
In the post-pandemic period, international and Chinese tourists in Cambodia are benefiting from improved transportation, hospitality infrastructure and globally integrated electronic payment systems. Thanks to the improvement in infrastructure connectivity, the country's rich cultural heritage and historical sites have become more accessible to both domestic and international tourists, with the influx of tourists generating significant revenue and providing new economic opportunities for local communities, which are working for, operating or have built hotels, restaurants and retail shops.
Moreover, cultural exchanges between China and Cambodia have increased as a result of the Belt and Road Initiative. With Chinese tourists, workers and investors bringing their traditions, language and customs to Cambodia, the integration of Chinese elements into Cambodian society has intensified. And many Cambodian students enjoy scholarships and increased access to universities and vocational training institutions in China through Belt and Road cultural and education networks. Such intercultural exchanges enrich cultural diversity.
In conclusion, the Belt and Road projects in Cambodia highlight the benefits of comprehensive planning, good and transparent governance, environmental protection, partnership building and robust monitoring mechanisms. To realize the full potential of the initiative, Cambodia and China should deepen win-win cooperation to jointly build a high-quality, high-level Cambodia-China community with a shared future.
Read more here.
Taiwan Catalyses Great Power Rivalry
By PHORN Vicheka
Rising tensions across the Taiwan Strait preceding and following the visit of the former US House Speaker Nancy Pelosi in August of 2022 ensured the semi-autonomous island, centrally located between East and Southeast Asia, concentrated both regional and great power attention. Geographically, Taiwan’s importance, as an entryway to the South China Sea and one of the world’s most crucial trade routes is further amplified by the island’s key role as a regional manufacturing hub and home to the world’s most advanced semiconductor production.
Taiwan’s geo-political and geo-economic importance make it strategically vulnerable to great power competition, and the fulcrum of US decoupling from the People’s Republic of China (PRC). Beijing has been very clear about its position over Taiwan as a province of China since the adoption of the One China Policy in 1979, when the United States switched diplomatic recognition from the Republic of China (ROC) to the PRC and acknowledged it as the sole legal Government of China and Taiwan, in return for peaceful reunification and political and economic autonomy.
Taiwan’s economic importance and pragmatic policies toward the mainland benefited the PRC in during the 1980s and 1990s and provided the island with political stability and economic prosperity. In the 2000s, rapid economic growth and development powered PRC national rejuvenation and emergence as a regional power and later alternate superpower. The PRC’s transformation meant that Taiwan’s strategic advantages were also critical to the mainland. Strategically, Taiwan is positioned on the world’s busiest trade route with half of the global container fleet and 88% of the world’s largest ships traversing the waterway every year.
Strategic geo-economic control over Taiwan secures the PRC’s economic interests including the trade flows through the South China Sea. Additionally, Taiwan is a leading semiconductor producer providing a strategic technological advantage to the PRC. Taiwan produces over 60 percent of the world’s semiconductors and over 90 percent of advanced chips. Most high-end chips are manufactured by Taiwan Semiconductor Manufacturing Corporation (TSMC). The rising global demand for semiconductor technology grants Taiwan significant leverage over both the PRC and global digital infrastructure. In 2020, 40 percent of Taiwan’s total exports of semiconductor chips were to the mainland and Hong Kong.
In terms of strategic security, Taiwan's geographical position is crucial to the PRC for access to the Pacific Ocean. The PRC maritime position is disadvantaged by the potential of neighbouring states to limit its merchant and naval fleet access into the western Pacific Ocean. Two US allies, South Korea and Japan, control the Sea of Japan and the Miyoko Strait to the east. The Philippines maintain dominance over the Philippine Strait to the south. The PRC’s relations with Japan, Korea and the Philippines has been further complicated and degraded by US-China rivalry and the South China Sea issue. Domination over Taiwan, long sought by the mainland, would secure access for its naval and merchant activities and defend against any threat of a naval blockade.
The US also sees Taiwan as a strategic partner and main supplier of semiconductors for domestic technology industries. US tech firms including Apple, Amazon, Google, Qualcomm, NVIDIA and AMD rely heavily on Taiwanese contract manufacturers to produce up to 90 percent of their chips. Beside technological dependence on Taiwan, the US also relies on Taiwan as a major exporter of consumer goods. In 2020, 2.6 percent of all U.S. imports were sourced from Taiwan. Top import categories included electrical machinery, machinery, vehicles, iron and steel products, and plastics. The significant US technological and import dependency on Taiwan adds impetus to US designs of denying Taiwan sovereignty to the PRC for long-term US geo-strategic advantages.
Taiwan's geo-strategic location provides both maritime chokepoints and weakens the mainland’s territorial security. Further complications in US-PRC relations only increases Taiwan’s importance to both parties. By maintaining the status quo with Taiwan, the US maintains strategic advantages in dealing with the PRC and extends its wider geo-political interests in the region.
Ultimately, US-China rivalry amplifies Taiwan’s economic, technological, and logistical importance. Taiwan’s strategic significance has continuing relevance for contemporary geopolitics and remains a significant catalyst for great power rivalry for the foreseeable future.
PHORN Vicheka is a Konrad Adenauer Stiftung and Cambodian Institute for Cooperation and Peace (KAS-CICP) Horizon Fellow and fourth-year undergraduate at Institute for International Studies and Public Policy (IISPP), Phnom Penh, Cambodia.
US hype China-Russia joint naval patrol
By Liu Xuanzun and Guo Yuandan (amended)
China and Russia's third joint naval patrol that allegedly reached international waters near Alaska last week has touched the nerves of US media, which hyped the voyage as "highly provocative," ignoring the fact that the US constantly sends warships and warplanes to China's doorsteps for close-in reconnaissance and military exercises under the so-called freedom of navigation.
11 Chinese and Russian vessels approached the Aleutian Islands and have since left without entering US territorial waters, the Wall Street Journal (WSJ) reported on Sunday, citing US officials. Four US destroyers and a P-8 maritime patrol aircraft shadowed the combined Chinese and Russian naval force, the report said.
While the WSJ report quoted a US Northern Command spokesperson who said the patrol remained in international waters and was not considered a threat, it also quoted US experts as saying the voyage "is a historical first" and "highly provocative."
The US media reports came after China's Ministry of National Defense announced on July 26 that China and Russia would soon launch their third joint naval patrol, which would see both sides' warships sail into West and North Pacific waters following the Northern/Interaction-2023 joint exercises in the Sea of Japan.
The operation is not targeted against any third party and is not related to any international or regional situation, the Chinese Defense Ministry said in a press release at the time.Two Type 052D guided missile destroyers, two Type 054A guided missile frigates and a Type 903 comprehensive replenishment ship of the Chinese Navy are included in the flotilla, while the Russian Navy is represented by vessels including large anti-submarine ships and corvettes, according to media reports.
The Northern/Interaction-2023 joint exercises and the subsequent joint naval patrol fully reflect the level of the strategic mutual trust between the two countries and further enhanced the traditional friendship between the Chinese and Russian militaries, said Senior Colonel Tan Kefei, a spokesperson at China's Defense Ministry, at a regular press conference on July 27.
The China-Russia joint patrol in international waters in the North and West Pacific marks a positive force that helps safeguard regional stability and security of strategic routes in the Asia-Pacific region at a time when the US is enhancing combat readiness, rallying allies and partners in the region to change defense policies and expand militaries, which escalated regional tensions, Zhuo said.
The US media linked such an escalation in US reaction to the Ukraine crisis and the Taiwan question, but such speculation is purely groundless and is aimed at throwing mud at the normal military cooperation between China and Russia, analysts said, noting US' hegemonic mindset and its double standard are the true reasons behind its anxiety.
While the China-Russia joint flotilla did not enter US territorial waters, US warships have in many occasions trespassed into Chinese territorial waters in the South China Sea. It is ironic that all US forces involved in shadowing the China-Russia joint flotilla have provoked China on Chinese doorsteps, observers said. The USS John S. McCain, the USS Benfold, the USS John Finn and the USS Chung-Hoon destroyers and a P-8 maritime patrol aircraft have all made transits in the Taiwan Straits in the past, while the USS John S. McCain, the USS Benfold and the USS Chung-Hoon have records of being expelled after trespassing into Chinese territorial waters in the South China Sea.
It exposes the US' double standard that only allows its military presence near other countries and not accepts other countries' military presence near it, observers said, urging the US to reflect on itself.
"In the future, the Chinese Navy could conduct more far sea patrols like this, either alone or together with other countries. The Americans should get use to it," Fu said.
Chinese experts said this kind of far sea exercise serves as a countermeasure and a signal against the US hegemonic actions of frequently making provocations near China in the name of freedom of navigation.
Read more here.
KPMG Australia made billions overcharging Defence
By Four Corners (amended)
Consulting giant KPMG has been accused by two whistleblowers of repeatedly ripping off taxpayers while contracted by the Department of Defence — submitting inflated invoices and billing the federal government for hours never worked.
The whistleblowers – one from KPMG, the other from Defence – told Four Corners the ongoing cosy relationship meant new work was awarded with little scrutiny, allowing KPMG to charge the department a staggering $1.8 billion over the past decade.
One whistleblower said KPMG had "significant influence" over senior Defence staff.
"What I don't hear is anybody calling it for what it is … an abuse of privilege and power," said Labor senator Deborah O'Neill, who has played a key role in the parliamentary inquiry that is examining the "big four" consulting firms: PwC, KPMG, EY and Deloitte.
While PwC has attracted headlines over its use of confidential government information to help its clients avoid tax, there has been less scrutiny of one of Canberra's biggest players: KPMG.
Defence is its number one government client. The whistleblower who previously worked for the department said KPMG proposed $1 million worth of new work that was already covered by existing contracts. And that was just on one project over a seven-month period.
About the same time, the whistleblower claimed personal connections helped KPMG land a $14 million contract for a defence logistics project — despite it being the most expensive tender option.
Within 12 months, KPMG had reaped $4 million from contract extensions.
In the consulting world, it is known as "land and expand".
"It's about getting very, very close to government, finding out what's going on using the contacts, and then growing the business," Senator O'Neill said.
"The whole business model of these companies is 'billable hours'; the longer they stay there, the less efficiently they do the job."
Since 2013, work KPMG won was initially valued at $1.7 billion but ended up costing the federal government more than $2.6 billion.
The whistleblower said while they worked for Defence, repeated financial errors favouring KPMG were discovered and the firm agreed to cut its fees. That prompted the whistleblower to audit KPMG's earlier invoices.
"We discovered that every KPMG invoice reviewed was incorrect … Defence had been consistently overcharged," they said in a statutory declaration.
KPMG charged for work never completed and even billed for a consultant who had not worked on a project, they added.
"KPMG … wasted a significant amount of public funds, enabled by Defence personnel who had been complicit in blindly awarding multiple contact extensions to KPMG … with little or no scrutiny."
The whistleblower said part of the problem was the influence that the KPMG consultants — most of them former Defence Force members — had over their former colleagues.
According to figures compiled by Four Corners, over the past five years, KPMG hired almost 100 people who previously worked at Defence.
Australia's spending on consultants is among the highest in the world. Australian governments have paid the big four firms a staggering $10 billion over the past decade.
They are meant to fill gaps in specialist knowledge and work on urgent projects but they are increasingly doing jobs traditionally carried out by public servants.
The explosion in consultant numbers followed a cull of 15,000 public servants after the Abbott government came to office in 2013.
"It's absolutely pervasive," said Chris Wallace, a government historian at the University of Canberra.
"Consultants are everywhere and it's happened at such a rapid clip in recent years.
"The consultants are pretty much feasting on the public service."
Read more here.