For many years now, the People's Republic of China has been one of the major investors in Cambodia. In fact, the recent announcements of large-scale investments by Chinese companies in Cambodia to undertake development projects have resulted in a sharp surge in the value of the country's currency. As Chinese President Hu Jintao embarks on a two-day state visit to Cambodia from November 8 to November 11, this article will offer insight into the reasons why both China and Cambodia should invest in each other.
China is one of the biggest invest in Cambodia as it seeks to deepen its ties with the Southeast Asian country, especially through trade and infrastructure projects. In recent years, China has sought to improve its image after U.S. President George Bush said that China was a "strategic competitor" in the eyes of the US. To bolster its claim, China has made extensive construction of airports, roads and bridges across the border in Cambodia which, in turn, will enable it to transport more goods and services to and from the country. In addition, China has also invested significantly in Cambodia's tourism sector, especially in terms of establishing an international airport in Phnom Phen city.
As regards the Cambodia tourism sector, it is evident that Chinese investments have had a significant impact on the level of development here. Most of the infrastructure investments were carried out during the tenure of former President Yahya Khan who permitted greater foreign direct investment (FDI) in the country. The main drivers behind these investments are what are known as project supply chains which are essential for the smooth functioning of any business. Project supply chains therefore dictate that certain activities must be done in order to make a certain product or service available to consumers.
A major portion of the investments tourism and construction is directed towards the construction of hotels, resorts, theme parks and other tourism facilities. This trend is expected to continue as projects get underway in Cambodia's Mekong Delta region. In fact, projects like the Cambodia National Museum and the Central Library have been established with the help of Chinese funds. In addition, the recently approved USD 10 billion China-funded projects in the southeast of the country, namely the $2.4 billion extension to the Cambodia Motorway Company's existing terminal at Tonle Sap Lake and the new Broad Railway station in the town of Sihanoukville, have seen the lion's share of their funding coming from Chinese sources. Another important project in the southeast, the huge Tompse River bridge, was likewise completed by Chinese loans and finance.
While most foreign investors are now turning their attention to the growing tourism and commerce in Cambodia, there is a great deal of potential in the burgeoning duty-free and other trade deals between China and Cambodia. Some of these deals, particularly the one concluded last year with the European Union, are focused on the processing of export goods. These include garments, textiles and other items which are normally subjected to heavy duty rates when imported into the EU. China, in conjunction with its main exporting partner Vietnam, is Cambodia's largest trading partner. Despite rumors to the contrary, there is no evidence that China is currently trying to encourage Cambodia's entry into the Chinese economic system, as it would mean losing much of its own industry.
Foreign investors can therefore invest in Cambodia without worrying about their impending losses in the form of duty-free and exit fees in the future. Given the current situation on the ground, it is unlikely that Cambodia will become a major destination for exporting of textiles anytime soon, but the CPEC can only help boost the economy and improve its competitiveness in the global market. As such, more investors are turning to this Southeast Asian country for their upcoming business ventures.