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Thayer Consultancy Background Briefing:

ABN # 65 648 097 123
Cambodia and China’s Belt &
Road Initiative – A Debt-Trap
Dead End?
Carlyle A. Thayer
April 16, 2019

We request your assessment of the following. We learnt that Prime Minister Hun Sen
is scheduled to attend China’s second Belt and Road Initiative (BRI) summit in Beijing
among forty other world leaders late this month amid concerns among critics and the
West that BRI is being employed by China as its geopolitical tool and as a debt trap for
partner countries. We request your assessment of the following issues:
Q1. By attending the summit, what does it mean for Cambodia and what are the
implications of this trip?
ANSWER: Cambodia was an early supporter of China’s Belt and Road Initiative.
Cambodia’s attendance will reaffirm its support for President Xi Jinping’s signature
initiative and add political support for China’s hosting this summit. Beijing expects
nothing less and will continue to reward Cambodia by extending diplomatic and
political support, continued economic engagement (aid, trade and investment), and
defence cooperation.
Q2. What is your latest general assessment of Cambodia now with regard to China’s
ANSWER: Cooperation between China and Cambodia under the BRI is linked with
Cambodia’s Rectangular Strategy of national development. Bilateral cooperation is
quite extensive and includes seven key sectors: infrastructure, agriculture, finance,
special economic zone development, capacity building, culture and tourism, and
environmental protection. The lion’s share of funding goes to infrastructure such as
highways, bridges, ports, airports, and high-speed rail. In 2016, for example, President
Xi Jinping visited Phnom Penh and pledged US $2 billion in loans under the BRI to
upgrade Cambodia’s road system.
Q3. What lessons can Cambodia learn from cases of Sri Lanka and Pakistan under
China’s BRI?
ANSWER: It is estimated that Cambodia’s debt to China totals approximately US $3
billion. This is a significant proportion of Cambodia’s total public debt. According to a
recent report by the Centre for Global Development, Cambodia is among three BRI
countries (Mongolia and Laos) in East Asia that was rated significantly or highly in debt
distress to China.

China provides most of its overseas development assistance in the form of loans.
These must be repaid. In addition, although China finances major infrastructure
projects that do contribute to Cambodia’s economic development, recurrent
maintenance costs are left to the host country. Overdependence on China, coupled
with loan repayments and maintenance costs, could result in Cambodia’s falling into
the so-called debt trap. This means that Cambodia will not be able to meet regular
repayments and defaults. Chinese companies involved in providing infrastructure
could take possession of the infrastructure. This could hypothetically mean Chinese
ownership of Cambodian ports and even airports.
Q4. Is it too late for Cambodia to escape from China’s BRI ambition? If so, what
should Cambodia do?
ANSWER: There is no escape for Cambodia from China’s BRI as this would be viewed
by Beijing as a negative development. Besides, Cambodia has no realistic alternative
to dependence on China. China is Cambodia’s largest trade partner, the most
important foreign investor and the major supplier of development aid. The
relationship is symbiotic. China has a regional client that it can count on to support its
core interests and Cambodia needs Chinese political-diplomatic and economic
Cambodia and other developing countries in the region face the same problem – their
infrastructure needs outstrip the ability of the traditional international financial
institutions (World Bank, IMF, Asian Development Bank) to provide funding. China’s
BRI and Asia Infrastructure Investment Bank offer an alternative.
Cambodia has painted itself in a corner by decimating its political opposition and
bringing about a serious decline in democratic and human rights standards. Traditional
aid donors such as the United States and Europe have either suspended or cut off
funding. The U.S. Congress passed the Asia Reassurance Initiative Act in 2018 that
specifically bars any funding that directly benefits the Cambodian government. The
U.S. government also has placed travel and financial restrictions on Cambodian
officials who are judged responsible for the deterioration in democracy.

Suggested citation: Carlyle A. Thayer, “Cambodia and China’s Belt & Road Initiative –
A Debt-Trap Dead End?” Thayer Consultancy Background Brief, April 16, 2019. All
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Thayer Consultancy provides political analysis of current regional security issues and
other research support to selected clients. Thayer Consultancy was officially
registered as a small business in Australia in 2002.