A new China-Cambodia trade pact will not provide Phnom Penh the economic lifeline it needs amid the Covid-19 pandemic. Image: Twitter/Bilaterals.org

Cambodia’s government by now recognizes that it is in the middle of a geopolitical tug-of-war between the US and China, a contest for influence some see as an emerging new Cold War in Southeast Asia.

Phnom Penh likely also understands that America is shifting its policy towards direct competition with China by offering more financial offerings, seen in Washington’s US$150 million pledge in new funding for Cambodia last month.

Prime Minister Hun Sen is navigating that intensifying contest in his own inimitable way, receiving US funds on one side and stoking tensions with Washington on the other.   

On October 2, the America-based think-tank Center for Strategic and International Studies reported that a US-built facility at Cambodia’s largest naval base had been destroyed the previous month. Phnom Penh had turned down an American offer last year to help rebuild older parts of the Ream Naval Base, which opens onto the Gulf of Thailand.  

Phnom Penh would have known that this would revive speculation that it had agreed to a secret deal to give China 30-years of exclusive access to the base, an allegation first made by the Wall Street Journal in 2018 quoting unnamed US sources who said they had seen an early draft of a reputed agreement.  

“We have concerns that razing the [US-built] facility may be tied to Cambodia government plans for hosting People’s Republic of China (PRC) military assets and personnel at Ream Naval Base,” the Pentagon said in a statement on October 2.  

The alternative alleged site of a possible future Chinese military base in Cambodia is a $3.8 billion “tourism resort” in Koh Kong province, close to the Ream Naval Base.

Union Development Group, the Chinese state-run developer of the project, was last month sanctioned by the US Treasury under the Magnitsky Act, ostensibly for corruption and environmental destruction.

A Cambodian naval officer salutes at the Ream Naval Base in a file photo. Image: Twiiter

US Secretary of State Mike Pompeo said at the time that there were “credible reports” that the Dara Sakor development “could be used to host [Chinese] military assets.”

The Cambodian government has consistently denied rumors since they first started arising in 2017 that it will offer China’s military access to the country’s bases, which is barred under the national constitution.

But there are reasons for skepticism. For instance, why did the Cambodian authorities destroy the US-funded facility around the same time as the US imposed sanctions on Union Development Group? Some observers saw the move as a tit-for-tat response by Phnom Penh.

The government claims the facility was razed because it was too small and lacked docking facilities, and space was needed for an improved facility. However, no prior warning about the facility’s destruction was reportedly given to the US, raising suspicions Phnom Penh wanted to hide the demolition.

And the decision not to destroy the surrounding facilities, which may have been expected if the Cambodian Navy aimed to redevelop the site, aroused further uncertainties.

As tensions swelled over the base issue, Hun Sen announced on October 8 that a controversial Chinese-Cambodian businessman was appointed as one of his new advisors, a position with a rank equivalent to a minister.

Chen Zhi, who became a naturalized Cambodian citizen in 2014, heads the Cambodia-based conglomerate Prince Group, which has fast become one of the country’s most dominant firms.

Chen Zhi with Prime Minister Hun Sen on July 20, 2020.

Chen has close connections with top brass of the ruling Cambodian People’s Party (CPP), having served as a personal advisor to Interior Minister Sar Kheng since 2017, the same year he established a business with Sar Kheng’s son Sar Sokha, a secretary of state for Ministry of Education, Youth and Sport.

Some sources who spoke to Asia Times suggest that Chen and his Prince Group could be associated with the United Front Work Department, one of the Chinese Communist Party’s main agencies tasked with carrying out overseas foreign influence operations.

The Prince Group did not respond to Asia Times’ request for comment on the speculation, which has not proven with any clear evidence.

Still, a Radio Free Asia report on Chen and Prince Group last month noted that a “shroud of mystery hangs over much of the [group’s] wealth”, as does why he’s listed as a director for so many Hong Kong-based companies.

Days after Chen was appointed as Hun Sen’s adviser, China landed another public relations coup when the Cambodian government signed its first-ever bilateral free-trade agreement, a deal with China that took less than eight months to negotiate.

The FTA will have marginal benefits for Cambodia’s exports to China but is plumb with geopolitical significance.

The signing ceremony was a relatively modest affair, as Cambodia’s Minister of Commerce Pan Sorasak signed the pact instead of Hun Sen, who watched in the wings alongside China’s Foreign Minister Wang Yi, who stopped in Phnom Penh during his five-nation tour of Southeast Asia this month.

Aside from the FTA, Wang also pledged an additional $140 million in aid to Cambodia this week, a figure coincidentally close to the $150 million Washington recently pledged to mainland Southeast Asia as part of its new Mekong-US Partnership, a initiative launched in September in the hope that the region’s governments prefer America’s largesse over China’s.

“Countries of the Mekong region have undergone an amazing journey in the last few decades. They deserve good partners,” said US Secretary of State Pompeo last month when launching the partnership.

The US earmarked an additional US$50 million for Cambodia last month as part of its new $60 billion International Development Finance Corporation (DFC), a global investment fund, on top of the $150 million that the DFC’s predecessor, the Overseas Private Investment Corporation, has already pumped into Cambodia.

US Ambassador to Phnom Penh W Patrick Murphy touted funding from the DFC as part of America’s “gold standard of foreign investment” and an example that the US is “committed to deepening our economic relationship” with Cambodia, according to remarks he made at a conference of the American Chamber of Commerce in Cambodia.

US Ambassador to Cambodia W Patrick Murphy at a press event in Phnom Penh in 2017. Photo: Twitter

Last month, Washington also launched the Mekong-US Partnership, a new initiative to pump more than $150 million worth of initial investments into mainland Southeast Asia, in the hope that the region’s governments prefer America’s largesse over China’s.

“Countries of the Mekong region have undergone an amazing journey in the last few decades. They deserve good partners,” said US Secretary of State Pompeo last month when launching the partnership.

From Cambodia’s perspective, America’s latest geo-economic overture to rival China may provide an ideal moment for Phnom Penh to play one superpower off against the other, a tried and tested way of extracting the greatest financial benefit from each side.

Significantly, Cambodian officials have intoned in recent months that they are open to improving relations with the US. A recent statement from the US Embassy stated that the Federal Bureau Investigation (FBI) will soon be allowed to open a headquarters in Phnom Penh, in addition to an existing “joint FBI-Cambodian National Police task force established to fight crimes against children, money laundering and financial crime.”

This summer, Hun Sen dangled the prospect that Cambodia might even restart its annual joint-military exercises with the US, which Phnom Penh postponed in early 2017 after claiming its troops were needed to prepare for an upcoming local election that year. They never resumed, however, and Cambodia started annual military drills with China instead.  

Phnom Penh’s snub of America’s military drills presaged a sharp deterioration in relations, which worsened after the ruling CPP forcibly dissolved the country’s only viable opposition party, the Cambodia National Rescue Party, in late 2017 on spurious accusations that it was plotting a US-backed coup.

Relations soured further after the CPP won all 125 seats in parliament at a general election in 2018, which the White House described as “neither free nor fair and failed to represent the will of the Cambodian people” and turned Cambodia into a de facto one-party state.

After Murphy was named the new US ambassador to Phnom Penh in August 2019, Washington encouraged rapprochement with the Cambodian government. US President Donald Trump and Hun Sen exchanged friendly letters in late 2019, with the US leader vowing that Washington had no intention of interfering in Cambodian affairs, a constant claim made by Phnom Penh.

Underlying this rapprochement is a belief among US policymakers that Washington can counter Chinese influence through competitive infrastructure investment, aid and loan offerings.

Chinese President Xi Jinping (L) and Cambodian Prime Minister Hun Sen (R) toast in Phnom Penh in a file photo. Photo: AFP/Tang Chhin Sothy

The theory holds that Southeast Asian states turned to China for financial reasons and to avoid US censure over human rights and democracy.

However, because many of the region’s governments are now highly reliant on Beijing’s largesse, representing in some cases a potential threat to their economic sovereignty, more US investment could be welcome. 

“A major reason why countries [have moved into China’s orbit] is because China is coercing them,” said US Defense Secretary Mark Esper during an International Institute for Strategic Studies webinar in July.

“They are threatening economic sanction or diplomatic isolation, or doing other things. We also see China enticing countries [with loans that] end up being debt traps, or with the promise of building out naval bases that might benefit them commercially.”

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