CHINESE PM VISITS CAMBODIA, CHINESE ASSISTANCE

UNCLAS SECTION 01 OF 02 PHNOM PENH 000696 SIPDIS SENSITIVE SIPDIS STATE FOR EAP/MLS, EAP/CM; GENEVA FOR RMA E.O. 12958: N/A TAGS: PREL EAID CB CH SUBJECT: CHINESE PM VISITS CAMBODIA, CHINESE ASSISTANCE SHOWCASED PHNOM PENH 00000696 001.2 OF 002 ¶1. (SBU) Summary. Chinese Prime Minister Wen Jiabao visited Cambodia April 7-8 as part of his tour of Australia, New Zealand, and Fiji. The PM announced an assistance package worth approximately USD 600 million, although some projects (the hydro-electric dam project in Kampot province financed by a USD 280 million GOC loan to a private Chinese firm) had been announced earlier by the Chinese government. In their joint communiqu, the two governments announced a comprehensive partnership to strengthen bilateral ties. Eleven accords were signed during the official visit, totaling USD 300 million dollars; most of the money (USD 200 million) was low-interest loans, rather than grants. As part of a diplomatic quid pro quo, Cambodia reinforced the One China Policy, slamming Taiwan, while China pushed for APEC membership for Cambodia. Cambodian PM Hun Sen hailed the visit, noting with satisfaction that the Chinese money does not come with conditions or benchmarks -- a slap at the Consultative Group process in which China does not participate. End Summary. China's PM Visit Cambodia -------------- ¶2. (U) During a two-day visit to Cambodia April 7-8, Chinese Prime Minister Wen Jiabao participated in two public events showcasing Chinese assistance to Cambodia: the groundbreaking ceremony for the new Council of Ministers building financed by China with an estimated cost of USD 35 million, and the launch of the hydro-electric dam project in Kampot province. The Kampot dam project is being financed by a GOC low-interest loan to a private Chinese firm that won the bid to build the dam. The Chinese announced low-interest loans to assist in the construction of two bridges -- one for the Tonle Sap river and other for the upper Mekong where Route 6 crosses at Prek Tamak. The two countries discussed the upcoming fiftieth anniversary of bilateral relations in 2008, according to press reports. Deliverables included 30 fire trucks and a scanner for checking shipping containers at the port of Sihanoukville. ¶3. (U) In a joint communiqu, the two sides outlined the establishment of a Comprehensive Partnership of Cooperation aimed at deepening the bilateral relationship and focused on six areas: (1) consolidating friendship and mutual ties through increased exchanges at all levels -- ministerial, local government, military, political parties and NGOs; (2) promoting economic cooperation and trade, especially in infrastructure, mineral, gas and oil exploration, manufacturing; (3) promoting other forms of cooperation in sports, culture, tourism, agriculture; (4) enhancing party-to-party and parliamentary exchanges; (5) expanding mil-to-mil cooperation and expanding cooperation on non-traditional security issues like transnational crime; (6) strengthening bilateral and multilateral diplomatic consultation, particularly within ASEAN and other multilateral organizations. ¶4. (U) FM Hor Namhong characterized the visit as historic, and a new page in Sino-Cambodian relations. From a business and investment standpoint, PM Hun Sen reported that PM Jiabao would press Chinese businessmen to increase foreign investment in Cambodia, and look for new avenues for opening businesses. (Note: Chinese investment in Cambodia reportedly topped USD 400 million in 2005, accounting for 43% of foreign investment projects approved by the Council for the Development of Cambodia (CDC) statistics. End Note.) The RGC thanked the GOC for lowering or eliminating import duties and taxes on more than 400 products exported by Cambodia to China. The two sides called for greater representation by developing countries on the UN Security Council, and Wen Jaibao invited Hun Sen to participate in an ASEAN plus China Summit to be held this year. The Cambodian government reaffirmed its "One China" policy, clearly at the behest of Beijing. In a separate public launch of a Korean factory on April 11, PM Hun Sen referred to Taiwan as "a province of China," and reiterated Cambodia's opposition to Taiwanese independence. In return for the RGC references to Taiwan, China publicly called for Cambodia to become a member of APEC. PHNOM PENH 00000696 002.2 OF 002 ¶5. (U) In reviewing Chinese assistance to Cambodia, Prime Minister Hun Sen publicly thanked China on April 11, praising the GOC for helping Cambodia without setting conditionality or performance benchmarks. Noting that promised Chinese assistance totaled nearly USD 600 million -- nearly the same amount as that promised by the Consultative Group (CG) of donors, RGC government spokesperson and Minister of Information Khieu Kanharith said that conditionality is a pretext by countries who do not want to provide aid. In deference to Tokyo's sensitivities and sizable assistance to Cambodia, Kanharith singled out Japan from the CG group as another country that does not place requirements on the Cambodian government as a precondition to assistance. ¶6. (U) Opposition Sam Rainsy Party (SRP) members were quoted in the local press as having reservations about the RGC's warm embrace of China, and downplayed the notion that Chinese assistance comes without strings. Yim Sovann, an SRP parliamentarian, noted that Chinese largesse could mean that the RGC would not monitor closely Chinese firms that exploit the Cambodian environment. Another SRP member of the National Assembly, Keo Remy, warned that Cambodia must remain independent and guard against being drawn into China's sphere of influence and larger geo-political designs in the region. Comment -------------- ¶7. (SBU) Despite the hoopla regarding the USD 600 million assistance numbers equaling the CG donor figure, much of the assistance is old news and announced more than a year ago by the Chinese. One Asian diplomat characterized it as recycled money and inflated figures. The new assistance is mostly loans, and reportedly the Cambodians feel a bit squeezed on the terms. According to diplomatic sources, the loans are not as good as those provided by the Japanese, and the RGC is reportedly not happy with the interest rates (the Cambodians wanted 1-3% but the Chinese did not agree). We have heard that out of all the announcements resulting from the visit, the Cambodians are most pleased with getting final Chinese agreement on the long-awaited construction of the new Council of Ministers building as well as the dam in Kampot -- although with reservations. We understand the RGC believes the Japanese do a better job on infrastructure projects, and that Chinese construction standards are not as good. We will check with other sources regarding the significance of the Comprehensive Partnership and if it will translate into a real broadening of Chinese interests in Cambodia or if it will remain largely words on paper. End Comment. Mussomeli