The next Macau? China’s big gamble in Cambodia (News)

When several Chinese men dragged two Cambodian massage parlour workers out of a bar and forced them into a taxi, Som Neang says he couldn’t stand by and let them be kidnapped.

“Help me! The Chinese are taking me away! I don’t want to go!” one of the women was screaming.

Neang and other Cambodian motorcycle taxi drivers nearby demanded the women be released.

“The Chinese became angry and started attacking us,” Neang says. They were soon joined by others.

“There were more than 100 of them in the end, some with metal bars,” he says. “Many Cambodians joined in the fight, but some of us were beaten badly … when police arrived they fired shots into the air but the Chinese were not scared and kept fighting.”

Sihanoukville, once a sleepy coastal hamlet popular with backpackers, has been progressively populated by Chinese workers, developers, casinos and investors. It’s being touted by developers as the first port of call on Beijing’s $US1-trillion Belt and Road Initiative and some are saying that this little tourist town, carved out of jungle in the 1960s, will be the next Macau.

The city houses a deep-water port and a joint-country special economic zone which accommodates 121 mostly Chinese companies producing textiles, garments, machinery and electronics.

The 11-square-kilometre economic zone is being upgraded to accommodate 300 companies providing jobs for up to 100,000 workers, and a four-lane highway is proposed to link Sihanoukville to Phnom Penh, 220 kilometres to the north.

Connecting Sihanoukville to the BRI’s vast global network of rail, roads, ports, pipelines, fibre-optic cable and diplomacy is part of a radical change sweeping Cambodia.

Breakneck free-for-all

Money from Chinese businesses and individuals is flooding into Cambodia in the form of expressways, airports, skyscrapers, dams, bridges, hotels, casinos, restaurants and apartment blocks.

Land prices in both Sihanoukville and Phnom Penh have skyrocketed.

Chinese companies, some government controlled, are investing billions of dollars in the garment, footwear and energy industries as well as communications, banking, finance and agriculture.

Meanwhile, some of Cambodia’s islands and national parks, which jut into the turquoise waters of the Gulf of Thailand, are being carved up by Chinese property developers amid secret deals and swirling allegations of corruption.

Chinese money accounted for about 30 per cent of Cambodia’s total foreign investment in 2017.

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The investment has brought rapid social, financial, diplomatic, strategic and demographic changes, and China’s ruling Communist Party and the entrenched regime of Cambodia’s Prime Minister, Hun Sen, both back the breakneck property free-for-all.

In January, representatives of the Sichuan Huashi Group, one of China’s top 50 companies, signed an agreement at a gathering called the China-Cambodia Belt and Road Entrepreneur Cooperation Summit to build a huge commercial housing project in Phnom Penh.

Hun Sen and Chinese leaders announced $US7 billion in new investments in the past several months, including in forestry, a new airport for Phnom Penh, a hospital and a communications satellite.

The Chinese-built Phnom Penh to Sihanoukville expressway is expected to cost more than $US2 billion.

This south-east Asian nation of just 16 million people has effectively become pivotal to Beijing’s regional political and strategic ambitions at a time of heightened concern about the potential for conflict over Beijing’s claim to almost all the strategic waterways of the South China Sea.

Bentleys and $100 lobsters

But not everybody is happy about this influx of money and people.

In Sihanoukville, where backpackers came for years to party on some of Asia’s most pristine beaches, many Cambodians see the arrival of tens of thousands of mainland Chinese as a takeover.

English and Cambodian-language signs are being replaced by signs written in Mandarin. Some Cambodian coastal and island locations have been given new Chinese names. Supermarkets are packed with Chinese goods. Chinese people are gambling around the clock at more than 50 mostly Chinese-owned and run casinos and many more illegal online gambling dens.

Along once potholed roads, people from mainland China drive Bentleys, Porsches and Ferraris.

In the first nine months of 2017, flights connected to eight mainland Chinese provinces brought 87,900 arrivals, a staggering 170 per cent increase on the previous year. Chinese guides steer visitors to Chinese-run hotels, restaurants, casinos and karaoke bars.

The construction boom is fuelled by workers who are mostly Chinese, even though the minimum wage for local workers is a low $US140 ($184) per month.

Cambodia’s social media is awash with expressions of scorn for the fact that Chinese people are paying double or triple the going rate to buy or rent premises for businesses or accommodation, forcing Cambodians and non-Chinese expatriates out of the market.

The demand for land has pushed Sihanoukville beachfront prices higher than those in Australia’s Byron Bay. In one Chinese restaurant on the beachfront adjacent to four casinos, a plate of steamed lobster costs $US80 ($107), compared to less than $US5 ($6.70) for the same amount at nearby Cambodian eateries.

Non-Chinese expatriates say they are made to feel unwelcome in the casinos where some Chinese lose hundreds of thousands of dollars in a day, according to a Sihanoukville-based Cambodian businessman who worked in casinos for 20 years.

A Cambodian man recently won $US130,000 ($175,000) in a casino, but when he went to collect, the Chinese operator refused payment, pointing out it is illegal for Cambodians to gamble. The man returned with a group of friends and trashed gambling tables before police arrived.

Kidnap warnings

Above Sihanoukville’s beaches, off-the-plan apartment developments are shooting up, apparently in defiance of planning regulations, and towering over cheap hostels and burger vans. They are marketed virtually exclusively to mainland Chinese investors.

“The beach will be for tenants only,” insists Cheng Sourkea, a saleswoman for Blue Bay, a 1450-apartment tower and casino complex that is still under construction on the city’s famed Independence Beach.

Prices start at $US320,000 ($430,000) for a small two-bedroom unit.

Foreigners are not allowed to own land in Cambodia but Chinese business people pay up to $US100,000 ($135,000) to (legally) buy citizenship.

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Environmental groups say the unbridled construction will severely impact the environment and rights advocates worry it will stoke cultural clashes.

In a recent three-page report to the central government in Phnom Penh, Sihanoukville’s governor, Yun Min, complained that the boom had pushed up crime rates. Chinese people were spilling from the casinos and getting into fights, and soaring hotel prices were preventing Cambodian tourists from coming to the city, a traditional playground for people from the capital, he said.

The influx provided criminals – also imported from mainland China – with opportunities to kidnap investors, the report warned, creating an atmosphere of insecurity in the province. The construction sector had become over-supplied with foreign workers. Locally owned small businesses could not compete with foreign enterprises, the governor wrote.

Hun Sen’s regime has set up an inter-ministerial taskforce to examine the complaints.

A gambling-driven boom

Xiong Bo, China’s ambassador in Phnom Penh, acknowledges that some poorly educated Chinese nationals are breaking Cambodia’s laws.

Australian Brad King, managing director of CambodiaRealEstate.com, who lived and worked in Sihanoukville for two years, says that is an understatement.

“I’ll be blunt. They have stuffed the place. You ask any Cambodian there,” King says, sitting at a cafe table on a jetty on the nearby island of Koh Rong, where he now lives.

“If you go to the city’s roundabout around midnight you can usually see Chinese and Cambodians fighting … there are also the Chinese mafia gangs fighting each other.”

Sok Sotam faces eviction from a drink shop she runs on the city’s Serendipity Road as Cambodian landowners seek to cash in on soaring prices.

“I don’t like the Chinese … They are taking over all our space,” she says.

Chinese workers and tourists we approached declined to comment.

Much of the boom is being driven by gamblers, many of whom come to bet online, which is illegal in China.

A casino insider who spoke on condition of anonymity said profits generated by the city’s gambling sector could be as high as US$1 billion, and easy credit was given to gamblers, which has led to strife over debts.

The insider said Chinese police intermittently travel to Cambodia to assist local police in identifying cheating syndicates and members of kidnapping gangs.

Between 500 and 600 racketeers were deported from Cambodia last year, the insider said, and some gamblers unable to pay back money were held against their will while financial demands were made on relatives in China.

Such incidents are not usually reported to Cambodian police.

Beijing has sought to stop the outflow of black money into gambling and other speculation. But Carl Thayer, an Asian expert from the University of NSW, notes that many mainland Chinese businesspeople invest heavily in property overseas to evade controls.

“Cambodia lacks the capability to effectively monitor all the Chinese investment projects and financial arrangements,” he says.

Bulldozers and floating casinos

Critics of Chinese investment in Cambodia say the country’s leaders have given favourable treatment to the directors of well-connected companies in a country ranked among the world’s most corrupt.

A dozen cranes are working 24 hours a day building what is believed to be a huge casino and condominium complex adjacent to Sihanoukville’s Otres Beach. The builder is China’s giant state-owned Yunnan Construction and Investment Group, but it is not known who owns the project.

When unsubstantiated reports circulated last year that a subsidiary of Chinese billionaire Jack Ma’s Alibaba was behind it, land prices along the beach soared. Alibaba declined to comment, referring only to “market rumours”.

Environmental groups have protested over the granting of a 99-year lease for 33 square kilometres of the coastline that falls within the Ream National Park, near Sihanoukville, to the Chinese company Unite International, which plans a $US5.7-billion tourist development.

A casino ship named Rex Fortune is moored a kilometre off the beach but has not yet opened for gamblers.

The government gave the Europeans and Americans 15 years to develop here and all they brought was backpackers and marijuana.

Ministry of Land official, Cambodia

Sen Chantha, 60, has fished on the beach for decades but says park rangers paid by Unite International subsidiary Yeejia Tourism Development now discourage local villagers from going there.

“Even if we go as a family and lay down a mat, they want to charge us money,” he says.

Almost 500 local families, many of whom toiled under the murderous Khmer Rouge regime in the 1970s, protested for years against development within the park that includes a golf course, beachside villas and condominiums.

“The company has bulldozed much of the forest and many of the animals we hunted, like deer, are nearly gone,” Chantha says as he guides us around the company’s property.

We asked a Ministry of Land official we met in the park why approval had been given for so many Chinese-owned and built projects.

“The government gave the Europeans and Americans 15 years to develop here and all they brought was backpackers and marijuana,” he replied.

‘We don’t want to leave’

Several hours’ drive along the coast from Sihanoukville, the south-western Botum Sakor National Park was once an unspoiled home for elephants, bears and gibbons.

But the Tianjin Union Development Group from northern China plans a city-sized resort on 340 square kilometres. Plans for a casino have been abandoned. It sits on a 99-year lease that includes a 99-kilometre stretch of coastline. A highway has cut a swathe through virgin forest and a hotel and golf course have already been built.

A watermelon juice costs $US8 ($10.75).

The $US3.8-billion development includes a port deep enough to handle ships of up to 10,000 tonnes, prompting speculation it could also be used strategically by China’s navy.

Cars being driven by Chinese in the complex had Cambodian military passes displayed on their windows.

The site is just a few hundred kilometres from the flashpoint waters of the South China Sea. Human rights groups say up to 4000 Cambodian families have been resettled away from their homes in the park, some in forced evictions by men brandishing axes and automatic rifles.

But deep inside the park, on the site of a World War II military base, four families are refusing to leave their beachfront village, called Prek Smach Poy Japon. No one can visit the village without being cleared through a company security checkpoint.

A wire mesh fence has been erected to isolate the villagers, and cashew, jackfruit and banana trees have been cut down, forcing the families to survive by raising cattle and chickens.

Sengheang Seh, a woman who ran a motorcycle repair shop, says she fears the company will bulldoze the village, most of which now lies in ruins.

“I feel like I am in a prison. I have no freedom,” she says. “We don’t want to leave.”

The company has offered Sengheang a small house and plot of land far away from the park, but she does not want to accept it. “The resettlement site has no market and no opportunity for business for me,” she says.

Ngin Mon, a widower who lives alone in the village, says she has to ask the company’s permission to travel. “The Chinese company bullies me too much,” she says.

“Today I don’t know how to make a living because I can’t leave my village.”

Hun’s power play

Cambodian leader Hun Sen, a notorious autocrat, has become China’s most reliable regional partner as he shuns links with Western countries critical of his regime’s human rights abuses.

In a speech in February, the Cambodian leader lavished praise on China and castigated those worried about the extent of its stake and influence in his country.

This was not always the case.

In 1988 China was supporting the Khmer Rouge, but after Hun Sen defected from its ranks in the late 1970s he described China as the “root of everything evil”.

Now China has growing ties with the Royal Cambodian Armed Forces – including supplying most of their weaponry.

But Carl Thayer says Cambodia is more likely to become a Chinese dependency than a formal military ally.

“As Prime Minister Hun Sen burns his bridges to Europe and the United States, he has little option … [he] needs China’s political support and cash, in the forms of investment, aid and loans to keep his regime in power.”

Thayer adds there are many downsides to China’s investments, including concentration on physical infrastructure and leaving services such as public health underfunded.

Brad King, the Australian real estate agent, says forested 78-square-kilometre Koh Rong, 45 minutes by ferry from Sihanoukville, is one of the world’s most beautiful islands.

“I want to die here,” he says of his new home base.

But King, who used to run his own real estate business on the Gold Coast, fears Chinese developers are about to turn their sights on and a string of other unspoiled islands off Cambodia, one of Asia’s last frontiers.

After years of protesting against the seizure of their land by a Cambodian developer, about 500 Koh Rong families have won a long court battle to gain land titles.

King says he is advising the locals to seek Cambodian partners to develop projects jointly and not to sell to the cashed-up investors from China.

“The people here don’t want to see the Chinese take over the island,” King says.

“But if they are offered double or triple more than the going rate, what are they going to do as they have families to care for?

“Of course they will sell, and it will spell disaster.”