Cambodia is owned by a shadowy Chinese firm
A black ribbon of highway runs through the forest, down to the sea and what must be the largest tourism project in the world.
Dara Sakor Seashore Resort in southern Cambodia still has little to offer 15 years after it opened.
A Chinese company is planning to build a self-contained tourist city. According to the company, it is a Chinese colony that boasts an international airport, deep-sea port, power stations, hospitals, casinos, and luxury villas.
There is still work to be done on the airport. There is one casino with an attached five-star hotel and apartments, which sits alone near the sea, fronted by an unmade road and surrounded by construction sites.
It is just getting started as a tourist business. It has already damaged one of Asia’s richest natural environments, as well as thousands of people.
Compared to any other country, China now has a huge economic footprint in Cambodia. Most of its foreign aid and half of its direct investment come from it.
Xi Jinping’s Belt and Road Initiative (BRI), which aims to expand Chinese built-and-financed infrastructure around the world, is enthusiastically supported by Cambodia. There is clearly a lot of benefit to be gained from this. There is, however, a great deal of speculative, hurried, and poorly planned Chinese investment.
Sihanoukville, for instance, across the bay from Dara Sakor, was transformed into a huge casino construction site in just a few years.
During Covid, the gambling economy collapsed, leaving half-built, empty tower blocks all over the town. Dara Sakor may suffer similar problems, as there are good reasons to fear.
Sophal Ear, a Cambodian academic at Arizona State University, compares it to baking without flour. There is no way you can achieve sustainable development through unsustainable practices. What about the Chinese real estate bubble? When China sneezes, Cambodia catches a cold.”
Hun Sen-style development
It is the kind of development Hun Sen favored during his time as Cambodia’s prime minister.
Even though it is massive, it was conceived in almost total secrecy. The BBC found that human and environmental costs were not adequately assessed or consulted.
There is very little information available about the Chinese companies involved, and some have dubious track records. International suspicion has also been aroused about what other goals China might have in this part of Cambodia as a result of the project.
After ending three decades of devastating wars and revolutions in the 1990s, Hun Sen pushed for breakneck growth to help his country catch up with its neighbors, attracted by China’s “ask-no-questions” approach to aid and investment.
Foreign companies and favoured cronies have been given generous concessions to achieve this growth, including large parcels of land.
According to Sebastian Strangio, who has written the definitive book on Hun Sen’s Cambodia, there are no institutions. “The system relies on keeping powerful people happy.”
The Belt and Road Initiative was launched by Chinese President Xi Jinping ten years ago, and this is the first in a series of articles that examine Chinese investment abroad.
Dara Sakor dates back to early 2008, when UDG, a Chinese construction company based in Tianjin, secured a 99-year lease with a $1m deposit – the maximum term allowed under Cambodian law. Initial development rights were for 36,000 hectares, with 9,000 more added later.
For control of one-fifth of Cambodia’s coastline, UDG had to pay nothing more for ten years, and only $1m after that.
It would have been very controversial had anyone else known about the project, since it was located within Botum Sakor national park and exceeded the legal limit of 10,000 hectares per project.
At the time, Cambodian media did not discuss the deal since no information was published about it.
To see where he used to live, inside the UDG area, local fisherman Som Thy took the BBC on his motorbike along sandy tracks through the forest. The tree cover has largely disappeared. There are still a few lonely giants standing in some places, surrounded by a wasteland that has been stripped bare.
According to Global Forest Watch, the national park has lost almost 20% of its primary forests since 2008. A total of more than 1,000 families have been uprooted and forced to abandon their villages. Som Thy’s family was among them.
Looking out over what was once his home and rice fields, he said, “Seeing it like this brings tears to my eyes.” His family’s cashew nut orchard, which supplemented their farming and fishing income, was still intact.
Several kilometres from the coast, Som Thy was relocated to a small wooden house built by Dara Sakor in 2009, along with the inhabitants of the 12 villages displaced by the company.
There were many protests during those early years. As of today, Som Thy is part of a small group of employees who refuse to accept the compensation package offered by the company.
Despite their small plots of land, he claims they cannot make a living from them, and that the money they were offered is a fraction of what their original land was worth.
It is not uncommon for him to sneak back into Dara Sakor to take his boat fishing. In search of work, he has also traveled to Thailand. As a result of his continued opposition to the project, he cannot work on the casino’s construction sites as his brother has.
There are some dazzling brochures produced by UDG for prospective investors, with images of manicured golf courses, rows of villas, and happy families enjoying seaside leisure. Maps depict the different parts of this model holiday city – the Science and Education New Town Zone, the World Trade City Center, and the Forest and Elegance Zone.
In contrast, today’s bare forests, displaced people, and half-completed buildings and roads are far from what they used to be.
In 2016, the Chinese environmental organization GEI published a detailed study on Dara Sakor that found no evidence that the company had conducted any environmental impact assessments.
GEI was unable to find information on how forests that were supposed to be protected were reclassified as suitable for development. UDG was informed of GEI’s concerns.
According to BBC programme director Ling Ji, they did not respond to these points. Chinese companies just insisted that they followed all the relevant laws and regulations. They don’t see the problem. This has a very bad effect on China’s image. Many countries will believe Chinese companies are here just to plunder resources. It is difficult for Chinese companies to handle local grievances outside of China, since in China they are always dealt with by the local government. Overseas, the situation is very different. “It’s still a learning process for them.”
Chinese influence is being chased
In the United States, the size of the project has also raised concerns.
As a result of human rights abuses perpetrated against those evicted from their villages, but also due to the potential military use of the new airport by China, the US Treasury Department imposed sanctions on UDG in 2020. The runway is far too long for the smaller airliners expected to serve this remote tourist destination.
Washington is already concerned about a Chinese-funded naval base near Sihanoukville, which Washington believes the Chinese navy may use in the future.
Chinese infrastructure has become increasingly unpopular with the US due to Mr Xi’s emphasis on dual civil-military use – what China calls “military-civil fusion” – in its economic planning, and the requirement that Chinese overseas projects meet military standards.
“UDG’s projects in Cambodia have been used by the PRC to advance its global power ambitions,” said the statement accompanying the sanctions.
According to UDG, the sanctions are unjustified. According to the company, the US is acting based on “fabricated facts and rumours” and that those living inside its concession are illegal settlers.
Dara Sakor airport is being built on this scale to become a global transportation hub. A number of very ambitious targets have been backed up by this. In 2030, the company plans to have 1.3 million long-term residents, nearly seven million tourists, and one million jobs.
Considering that Cambodia’s tourist arrivals are still far below the peak of six million in 2019, these numbers are staggering. We are a privately-owned company, UDG said, disputing the US description of us as a state-owned entity.
It may be true, but Chinese state agencies have been supportive of the project from the beginning.
Even before the deal was signed, China’s top economic planning body, the National Development and Reform Commission, approved it. Zhang Gaoli, the Communist Party boss in Tianjin, took part in the contract signing ceremony in Cambodia at the end of 2008 as well.
In 2015, Mr Zhang became one of China’s most senior leaders and ran the Belt and Road Initiative (BRI). Dara Sakor predates the BRI by five years, but it is now officially considered a showcase BRI project.
Additionally, UDG has developed close relationships with senior figures in the Cambodian ruling party. There have been several large donations to the Cambodian Red Cross, which is run by Hun Sen’s wife Bun Rany, as well as a million dollars for the construction of a monument honoring Hun Sen.
Among the most powerful political factions in Cambodia is led by the former defence minister Tea Banh.
Due to the company’s lack of financial transparency, it is difficult to assess its capacity for a project of this scale.
Dara Sakor was the subject of a bond issue underwritten by the China Development Bank in 2017. The investment was only $15m, a fraction of UDG’s nearly $4bn commitment.
As a result, China City Construction Company or CCCC has taken over UDG’s leadership role. Almost unknown outside China, it entered the Dara Sakor project in 2014 for reasons that are still unclear.
According to CCCC, it is it, not UDG, that is responsible for “designing the overall programme for the planning and development of this special tourism zone”.
The CCCC is a state-owned corporation. However, it is also a troubled company.
After suddenly announcing that it was being privatised on orders of the Chinese government, it sent shockwaves through Hong Kong’s financial markets in 2016. Huinong, a little-known equity fund, was taking over the company.
CCCC’s so-called “dim sum bonds” – bonds issued in Hong Kong to get around Chinese capital controls – caused panic among investors. CCCC was unable to raise enough cash to redeem the bonds.
Financially, CCCC continues to struggle. As a result, its credit rating has been tarnished and some of its more promising businesses have been sold off.
Furthermore, Huinong, the mysterious fund that took over CCCC in 2016, is indirectly owned by the finance ministry, making it technically state-owned again. Because of this opacity, it is very difficult to assess CCCC’s actual financial health, which is likely to have been impacted by the recent collapse of the Chinese property market.
A binge of outward investment occurred during the initial Belt and Road initiative period, 2014 to 2016, according to Victor Shih, director of the 21st Century China Center at the University of California San Diego. As of 2016, though, the Chinese government had become a lot more cautious. They no longer threw money at projects like crazy.
In addition to She Zhijiang, another investor in Dara Sakor is a Chinese businessman known for operating casinos along the Thai-Myanmar border, where large-scale human trafficking and scam operations have been exposed. At present, he is being held in Thailand awaiting extradition to China.
People from Thailand, Taiwan, and the Philippines have been rescued from scam centers operating inside the Dara Sakor complex after claiming they were being held forcibly.
Chinese tourists are now deterred from visiting Cambodia because of the publicity surrounding scam centers operating in Chinese investment zones. Tourism, one of Cambodia’s most important sources of income, has taken longer than expected to recover.
According to Sebastian Strangio, a different approach is unlikely under the new Cambodian PM Hun Manet, Hun Sen’s Western-educated son.
The system will imprison him. Even if he wishes to rein in its excesses, he is powerless,” he says.
Following his father’s death, Hun Manet visited Beijing last week to assure Mr Xi that Sino-Cambodia relations are solid.
Local Cambodian businesses allied with the ruling party, including Dara Sakor, have received most of the land concessions in the area.
Due to the weight of vested interests, Cambodia’s rapacious development model is very difficult to change.
Eighty percent of the national park is now exploited commercially, despite repeated warnings from environmental activists that the country is on the verge of losing one of its most important natural habitats.
Dara Sakor was seen by one of those activists, a young woman in her 20s. In 2021, she was sentenced to 18 months in prison for trying to organize a protest against another land grab.
Coming with us to the UDG concession was a big risk for her. As we gazed out over yet another expanse of ripped-up forest, she said, “There is no choice.”.
The next generation must risk going to jail, or worse, to protect what’s left.”
The news reference is BBC