Sihanoukville pays the price for heavy reliance on Chinese

Sihanoukville pays the price for heavy reliance on Chinese

For several years now, Cambodia has been receiving billions of dollars in Chinese investment as part of China's Belt & Road initiative (BRI). Between 2013 and 2017, Beijing invested US$5.3 billion in the Southeast Asian country. Between 2016 and 2019, the two countries signed 65 cooperation agreements to finance infrastructure projects such as seaports, highways, airports, power stations and even an oil refinery.

Many of the projects are focussed on the Special Economic Zone (SEZ) of the province of Preah Sihanouk, as part of a strategy to transform Cambodia into a regional economic hub. While these investments have contributed to the development of the country and Sihanoukville in particular, negative impacts on the local population and communities have resulted from corruption and other factors.

Home to the only deep seaport in the country, Sihanoukville is viewed as a strategic location. Until recently it was a sleepy beach town catering mainly to western backpackers, but in the last few years, has been the focus of Chinese foreign direct and private investment, led by real estate development and casino resort construction.

The massive influx of Chinese capital was accompanied by a wave of Chinese tourists, businessmen and workers. In 2017, Sihanoukville added 120,000 tourists and 78,000 permanent residents from China – unsettling numbers, given that the province's total population is only 150,000. This massive migration of Chinese nationals upended the economic and social fabric of the local communities, leading to negative impacts that will be long-lasting.

Massive demand for land has caused prices to skyrocket, and as a result most poor and lower-middle-income Cambodians have been priced out of their homes and neighbourhoods. By the time the Chinese began to move in, Sihanoukville's most desirable real estate was already in the hands of the ruling elite, its family and local oligarchs.

The 2000s in Cambodia were marred by country-wide land grabs by the elites, in the form of private holdings, concessions, military and economic development zones, over which they maintain full control.

For a decade, United Nations special rapporteurs on human rights in Cambodia flagged these massive land grabs as large-scale systematic human rights violations but little was done to address those concerns.

China's recent investments in Cambodia have worsened these conditions, with rents and land prices tripling or quadrupling, and in some cases even multiplied by 10 since the large influx of Chinese nationals.

Although the influx of Chinese tourists and investment has contributed to the development of the province, the wealth generated is generally kept within their own communities. Where the Sihanoukville tourism sector once catered mainly to westerners, who were mostly eager to immerse themselves in the local culture, the priority before the pandemic had shifted to Chinese visitors who spent their days in a Chinese bubble. All services and goods consumed were from China or Chinese-owned businesses -- including Chinese brothels staffed with Chinese sex workers trafficked to Cambodia.

Most Cambodian-owned small businesses have gone bankrupt and their owners have left the province to seek opportunities elsewhere. In 2020, it was estimated that 80-90% of Sihanoukville businesses were owned by Chinese nationals.

Gambling has been illegal in China since 1949, but Chinese nationals are able to engage through gambling tourism, online and proxy gambling enabled by virtual private networks and anonymising software. Today Sihanoukville caters to everyone from modest online gamblers to VIP high rollers, and has even been dubbed Southeast Asia's "new Macau".

Organised crime and its Chinese bosses followed the investment wave and turned Sihanoukville into Cambodia's crime capital. Reports of guns, drugs, money laundering, human trafficking, child labour, prostitution, widespread violence and general insecurity have alienated the local Sihanoukville population, fuelling anti-Chinese sentiment across the country.

In order to address this increasingly alarming situation, the government ordered a crackdown and announced measures to phase out online gambling. High-profile arrests and extraditions of Cambodia-based Chinese nationals linked to gambling followed.

But then came Covid-19, and with it lockdowns and closures of non-essential businesses, including casinos. It is estimated that 80-90% of Chinese nationals living and working in Sihanoukville have since left, turning it into a ghost town. Many of the remaining Cambodians who managed to keep their businesses afloat, by adapting to Chinese demand, are now unemployed, in debt or bankrupt.

However, given the systemic corruption that prevails in Cambodia and the absence of the rule of law, the gradual return of Chinese businessmen, tourists and gamblers seems likely. The gambling sector will inevitably make a comeback, albeit with a lower profile. Moreover, forcing casino owners to operate in a legal grey zone is all the more advantageous to Prime Minister Hun Sen, his family and close circle, given that they themselves have been linked to numerous casinos throughout the country; this also enables them to keep competition in check.

Furthermore, Chinese plans in Sihanoukville include a refinery and an oil terminal, as well as a naval military base. Should these plans go forward, Chinese investment and a large continued presence are a foregone conclusion.

Given the unchecked and uncontrolled greed of the ruling elite, the country and its assets will continue to be sold off at the expense of the Cambodian population who are becoming increasingly landless and powerless.

Matthias Alffram is a Master's student in political science at the University of Montreal.

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