Laos and Cambodia: the China dance

Cambodia’s Prime Minister Hun Sen (centre, left) talks with Chinese Premier Li Keqiang during a signing ceremony at the Great Hall of the People in Beijing, China, in May. Photo - EPA

Laos and Cambodia: the China dance

Myanmar Times | 2 October 2017

Laos and Cambodia are often seen as little more than political twins who have chosen to reap economic benefits from China in exchange for their loyalty to the Middle Kingdom – and choosing this alliance over maintaining consensus with their ASEAN family.

But while their dance steps appear similar, they are not quite moving to the same tune, says analyst Edgar Pang, a visiting fellow at the ISEAS - Yushof Ishak Institute in Singapore.

China’s footprint will continue to grow in Laos and Cambodia, in many ways replacing what used to be, till perhaps the late nineties, Japan’s key role as a source of assistance and investment.

“While Laos and Cambodia share similar imperatives in embracing China, there are deep dynamics and undercurrents in Lao and Khmer politics that have a strong bearing on how they navigate their asymmetry vis-à-vis China,” Pang wrote in a set of two briefing papers published in September. “Labelling Laos and Cambodia as Chinese ‘satellites’ of similar mould is to simplify a complicated issue.”

Both countries and governments are keen to get investments and grant assistance they deem key to graduating from Least Developed Country status – by 2020 for Laos and by 2025 for Cambodia. But Laos, due to its size and long history of juggling ties with the bigger powers around it, appears to be showing more diplomatic savvy in navigating these tricky waters and faces less risk of “over-reliance” on China, according to Pang.

“Laos has come across as more ‘even-handed’ in handling their Chinese benefactor,” he wrote, citing as an example Laos’ and Cambodia’s different ways of handling Chinese pressure and ASEAN’s internal dynamics on the South China Sea, where Beijing’s construction of artificial islands, seizure of atolls and building of military facilities have become a major issue at ASEAN’s annual meetings.

As ASEAN chair in 2016, Laos successfully struck a compromise between China and fellow ASEAN member Vietnam, who have competing claims in the area, so that the joint communiqué issued by ASEAN foreign ministers could express “serious concern” over “land reclamation and escalation of activities’ in the disputed waters.

This reflected the “balancing act” that Laos has long experience practising to manage relationships with the countries around it, Pang said, quoting Lao government officials.

In comparison, Cambodia appears more comfortable with China’s embrace and has little qualms about jumping on the Beijing bandwagon, he added. Phnom Penh sees no need to couch this alliance as anything other than what it is – unabashedly being in China’s sphere of influence.

Thus, Pang refers to what in ASEAN circles is called a debacle: under Chinese pressure, Cambodia, as 2012 ASEAN chair, blocked proposals to include a call against the further rise of tensions in the South China Sea. As a result, for the first time since ASEAN was created in 1967, it failed to issue a joint communiqué.

Then in 2014, Cambodia had few qualms about keeping its side of the bargain with China after the Philippines’ victory in a lawsuit against China’s intrusions in the South China Sea before The Hague-based Permanent Court for Arbitration.
Cambodia supported China’s position by putting pressure on attempts by some ASEAN states to call on Beijing to respect the ruling. Laos did not go this far, Pang points out.

In October 2016, Cambodia got “due rewards” during President Xi Jinping’s visit to the country through China’s commitment of economic aid worth more than US$600 million (K818.16 billion) and some 31 cooperation agreements.

Cambodian Prime Minister Hun Sen has said his country is China’s “most trustworthy friend,” and Xi has called Cambodia an “ironclad” ally.

China is the largest source of development assistance and investment in both Cambodia and Laos.

As of 2016, China’s foreign investments totalled nearly $12 billion, or close to 35 percent of foreign direct investment in Cambodia. Cambodia sees China as its most important financial and developmental assistance partner.

In Laos, China’s investments exceeded $6 billion in 2016. The Lao ministry of planning and investments said China’s aid to Laos stood at $187 million in grants in 2014.

The scale of China’s economic presence is staggering, especially under China’s Belt Road Initiative which has identified ASEAN countries as being part of the Indochina peninsular corridor and the site of massive infrastructure projects by China.

The size of one flagship project alone, the high-speed railway project, is $6.8 billion or “about half the size of the country’s 2015 GDP of $12.3 billion,” Pang wrote.

As the two countries became trusted political allies of China, the exchange of visits by their leaders began occurring more regularly, starting with former Chinese President Jiang Zemin’s visit to both in 2000.

But political considerations – in particular relations with nearby countries like Vietnam and Thailand – shape the two countries’ positions within China’s tight embrace.

Laos enjoys smoother relations with Vietnam, a country also run by communists, and Thailand, a key economic partner with whom it shares a long border – although it has discomfort with what it sees as its richer neighbour’s superiority complex.

Analysts take note of signals like the fact that Lao President Bounnhang Vorachith visited Hanoi before Beijing. Pang cites how some saw the exit of pro-China senior cadres at the 2016 Lao People’s Revolutionary Party congress as a “sign that the Lao leadership preferred to engage with China in a move even-handed manner.”

Laos has wisely diversified its investors. Its airport was built by Japan, its international conference halls by China and its riverbank development by South Korea.

“While they (Laos and Cambodia) have similarly long and complex histories with both neighbours (Vietnam and Thailand), the arguably less contentious relations that Laos enjoys with Vietnam and Thailand afford it more diplomatic space and leverage compared to Cambodia,” Pang said.

Cambodia “views its immediate neighbours Vietnam and Thailand as historic predators of Khmer territory, and sees China as playing a pivotal role in ensuring its survival.” Vietnam’s 1978 invasion of Cambodia to kick out the Khmer Rouge is a sensitive point.

Because suspicions of Vietnam continue, Cambodia’s closeness to China gives the Hun Sen government political points given that he had come to power decades ago as part of a Vietnam-backed government.

Cambodians view Thais with suspicion but to a lesser degree than they view the Vietnamese. While the row over Preah Vihear temple remains unresolved, the countries share commonalities like Theravada Buddhism.

“The question is no longer whether Laos or Cambodia should continue to truck with the Chinese – in their view, there is simply no viable alternative given present developmental needs,” Pang wrote. “The question is how to live and deal with the socio-economic ‘consequences’ of heavy reliance on China for trade, investment and financial assistance.”

The risk of over-reliance on China appears “comparatively lower for Laos,” Pang asserted, because Laos is also part of other regional integration projects, such as the Greater Mekong Sub-region programme of the Asian Development Bank. But in Cambodia, Pang finds “little check or even debate on the risks of over-reliance.”

What also bears watching is the reaction within Lao and Cambodian societies to growing communities of Chinese migrants and workers for Chinese projects in their midst. As it is, Pang said, “Lao and Cambodian reception of the growing Chinese economic footprint at the government-to-government level has been overwhelmingly positive, but this is less evident at the people-to-people level.”

There are some 50,000 economic migrants from China in Laos and 120,000 in Cambodia. Pang said China plans to bring over 50,000 people for the high-speed rail project, and more than 10,000 are already working on tunnelling.

Lao officials are facing “undesirable” practices such as gambling and prostitution around two big Chinese commercial projects – the Golden Boten City and Golden Triangle special economic zone.

“Cambodia remains by and large receptive to the Chinese presence,” Pang said. At the same time, there are sentiments like those expressed in an open letter to Hun Sen published by the Phnom Penh Post on September 18. It said: “You are about to place Cambodia into such a tight corner that when China sneezes, all of Cambodia will feel it.

“And if war breaks out between China and our neighbours over the Spratly Islands, you can be sure China will be knocking on Cambodia’s door asking Cambodia to return the favour (perhaps to become its military base),” said the letter, signed “Ms Ratha Panh, staffer at an international development organisation.”

“While Laos and Cambodia risk becoming economic vassals of China, it is not a new situation for either country. They have been highly dependent on a series of major powers for developmental needs since the colonial era,” Pang said.

“Laos and Cambodia will try to manage their increasing reliance on China, but for the foreseeable future, neither is likely to break out of the dependency mindset.”

Johanna Son is editor, journalist and media trainer at Reporting ASEAN.