As Cambodia launches $36.6 billion construction campaign, China and Japan fight for the spoils | The infrastructure

Phnom Penh, Cambodia – Cambodia is pushing for an infrastructural renaissance, but it will need some help from its friends abroad to achieve an estimated $36.6 billion price tag.

That was the final amount calculated by the Cambodian government and published earlier this year in a master plan of 174 projects that would reform the national transport and logistics network within an ambitious period of just a decade.

The goal of criss-crossing the kingdom with expressways, high-speed rail lines and other works fits in with the state’s long-standing desire to become an upper-middle-income country by 2030 and a high-income nation by 2050.

Since the unopposed ascension last year of Prime Minister Hun Manet – son of former Prime Minister Hun Sen, the country’s leader for nearly 40 years – his new government of aspiring technocrats has continued the building campaign, imploring foreign allies for closer ties and increased investment while assuring the public that great things are coming.

“We will not withdraw from defining our objectives in the construction of road infrastructure and bridges,” said Hun Manet during the inauguration of a bridge in Phnom Penh in February, financed with a Chinese loan.

“Roads are like blood vessels that feed the organs they pass… soon we will have the ability to not only possess [material things] but also for Cambodians to build infrastructural wonders such as bridges, highways and subways themselves.”

Cambodia has recorded more than two decades of rapid economic growth, with some of the worst infrastructure in Southeast Asia, according to the World Bank’s logistics performance index.

With the bank predicting an acceleration in Gross Domestic Product (GDP) growth in the coming years, Cambodia’s already overburdened transport system could be pushed to the limit.

While the new prime minister seeks to consolidate his own status after his father’s long rule, making progress on physical infrastructure will pose a test of his governance as well as the traditional Cambodian balancing act in international relations.

Implementing the master plan with a task list of large and small projects could represent an opportunity to benefit from geopolitical rivalries as foreign partners fight for influence – especially as competition intensifies between two of its biggest benefactors, China and Japan.

“I think the Cambodian government feels it is time to maximize everything it can get from donors,” Chhengpor Aun, a researcher at Future Forum, a Cambodian public policy think tank, told Al Jazeera.

“It is logical that if an infrastructure project initiated by the Cambodian government is not accepted by one partner, the latter can still turn to the other partner to finance it. It is strategic and flexible in the way they play great powers against themselves to try to extract benefits.”

The Cambodian government and private companies finance infrastructure projects in the kingdom, but China and Japan together are responsible for much of that investment.

Both are also the only countries that hold Cambodia’s highest diplomatic designation of “comprehensive strategic partnership,” a status Japan achieved last year.

So far, China’s flagship Belt and Road Initiative (BRI) has led the infrastructure charge with major projects such as the kingdom’s first expressway, which runs from the inland capital Phnom Penh to the coastal city of Sihanoukville.

Meanwhile, Japan has maintained its own steady agenda, focusing on a series of projects such as new wastewater treatment facilities and improvements to existing roads.

Perhaps most notable is a Japanese-led expansion that could more than triple the capacity of the international deep-water port of Sihanoukville, the only facility of its kind in Cambodia.

The busy facility processes about 60% of the country’s import and export traffic and is increasingly congested after more than a decade of steady growth.

Under the supervision of the Japan International Cooperation Agency (JICA), port crews began the expansion late last year.

The planned three-part, decade-long project is included in the new master plan and has a total estimated cost of about $750 million.

“Compared to Chinese [infrastructure] investment, the amount of Japanese investment is very limited,” Ryuichi Shibasaki, an associate professor and global logistics researcher at the University of Tokyo who has studied Cambodia’s shipping industry, told Al Jazeera.

“We need to find market niches, as there is a lot of investment from China, to fill the gaps or adjust the investment to a broader point of view.”

In recent years, the BRI has strengthened its focus.

Accusations that China has trapped poorer countries in “debt traps” have prompted Beijing to move away from granting large loans to countries to finance megaprojects – typically defined as those worth more than a billion dollars – in favor of a more investment-oriented inclination, towards projects with good results. expected returns.

These are typically financed by “build-operate-transfer” agreements, in which the company overseeing the work assumes the costs of its development in exchange for revenue generated by the completed project over a pre-determined period.

At the end of the agreement, which can last decades, ownership is transferred to the host country’s government.

Key pieces of Cambodia’s overall vision will depend on this type of financing.

‘Trying to be Cambodia’s best friend’

The kingdom’s master plan for infrastructure includes proposals for nine megaprojects with a total estimated value of more than US$19.1 billion.

Although the viability of most of these is still being studied, almost all have been run at some point by JICA or the China Road and Bridge Corporation (CRBC), a subsidiary of the state-owned giant China Communications Construction Company.

CRBC previously led the construction of Cambodia’s first expressway, which came into operation in late 2022 and was generally considered a success.

Last year, the company inaugurated a second expressway, valued at US$1.35 billion, between Phnom Penh and Bavet, a city on the Vietnamese border, which is among the nine planned megaprojects.

This is joined by works such as another expressway system studied by the CRBC that would connect Phnom Penh to the main tourist center of Siem Reap and the city of Poipet, on the border with Thailand.

Divided into two parts, the construction of this road system is estimated at a total cost of US$4 billion. There is also an upgrade of an existing railway line to Poipet to accommodate high-speed trains for US$1.93 billion, plus another to Sihanoukville for US$1.33 billion.

Later, the plan envisages a light rail and metro system for the capital Phnom Penh and part of Siem Reap, all combined for an estimated value of US$3.5 billion.

Maritime transport projects also feature heavily in the plan.

The largest of these is a navigation channel 180 kilometers long and 100 meters wide that connects the Mekong River system in Phnom Penh directly to the Gulf of Thailand. The $1.7 billion canal would bypass the current, less convenient river route that runs the entire length of the Mekong through Vietnam.

The canal is currently being studied by the CRBC regarding its economic viability.

Although few details have emerged from this process and no company has signed an official agreement to actually build the project, the Cambodian government has announced that work will begin by the end of this year.

The magnitude of the proposal and the government’s urgency in making it a reality drew positive attention from the logistics industry, while also raising ecological concerns for its potential effects on the cross-border river system.

Poor communication with the public about the details has left residents along the proposed route confused and apprehensive about their ability to remain in their homes.

The Mekong-focused think tank Stimson Center expects the canal itself to have a negative impact on a key floodplain that spans important agricultural regions in Cambodia and Vietnam.

Hong Zhang, a postdoctoral fellow in China public policy at the Harvard Kennedy School’s Ash Center, said the project’s momentum could carry it forward regardless of the concerns.

“If the project has very strong political support, I don’t think the environmental and social impacts would hinder or prevent it from happening,” Zhang told Al Jazeera.

Zhang added that Cambodia’s relative political and macroeconomic stability — plus its government’s pro-China stance — likely provided it with options that other countries wouldn’t necessarily have.

“Cambodia continues to be a relatively hassle-free market for Chinese involvement compared to many other countries such as Pakistan, Sri Lanka or even Laos,” she said.

“Even if [the canal] it will not be economically viable, but it seems to have good value in terms of public utility, a lot of externalities, this type of project will be quite legitimate so that they still go back to China’s old debt model with concessional loans, build it and then the government pays the loan.”

Even if not all of the projects in the master plan come to fruition, those in the national logistics and transportation sector see a lot to like.

Matthew Owen, project development executive at the Phnom Penh office of Singapore-based shipping agency Ben Line Integrated Logistics, said the plan has great potential, but its success will depend on Cambodia’s ability to simultaneously improve the value of its exports. .

“I don’t think it’s ‘build it and they will come,’ but I think [the government] it’s ahead of its time,” Owen told Al Jazeera. “Having everything there means they will be able to attract more people to invest and do business.”

The rush for large-scale public works is also accompanied by a push for greater private sector involvement, according to Owen.

Owen said the new Cambodian government has been urging international investors from across Asia to move forward with projects started before last year’s political handover.

“Everyone has influence, everyone has something to gain and that balances China’s influence,” he said.

“It’s not even a competition, it’s like a group of countries trying to be Cambodia’s best friend. Cambodia is open to any country that is open to making Cambodia better – if you want to have your own competition to see who can build the biggest bridge, go ahead.”