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