A GRATEFUL CHINA REWARDS CAMBODIA

C O N F I D E N T I A L PHNOM PENH 000956 SIPDIS NSC FOR BADEN E.O. 12958: DECL: 12/21/2019 TAGS: PGOV PREL EAID CB SUBJECT: A GRATEFUL CHINA REWARDS CAMBODIA REF: PHNOM PENH 954 AND PREVIOUS Classified By: Classified By: Charge d'Affaires Theodore Allegra for Re asons 1.4 (b,d) ¶1. (C) SUMMARY: Just forty-eight hours after the Royal Government of Cambodia's (RGC) December 19 forced deportation of 20 Uighur asylum seekers to China (reftel),Cambodia is already benefiting from Chinese gratitude and generosity. During the official visit of Chinese Vice President Xi Jinping, commemorated with hundreds of Chinese flags displayed along the capital's major thoroughfares, China pledged to provide USD 1.2 billion in economic assistance to Cambodia. Referring to the deportation of the Uighurs which took place less than a day before Xi's arrival, RGC Minister of Information Khieu Kanharith told reporters that "China thanked the government of Cambodia for assisting in sending back those people." China has long used foreign aid as a key tool in cultivating closer relations with Cambodia, wooing a series of leaders with foreign assistance since the establishment of diplomatic relations in 1958. END SUMMARY. ¶2. (SBU) The 14 bilateral agreements signed December 21 between China and Cambodia are valued at USD 1.2 billion, more than the cumulative total of Chinese assistance over the past 17 years. The assistance will be provided in the form of grants and soft loans to Cambodia and will reportedly support infrastructure projects such as roads, irrigation, and power transmission lines, among others, as well as provde undisclosed technical assistance. ¶4. (SBU) China is already Cambodia's largest donor, dwarfing other donors with USD 930 million in aid and loans since 1992, according to RGC spokesman Khieu Kanharith. Of the nearly USD 1 billion in assistance for 2009 pledged by international development partners, China pledged the most with USD 256 million. By contrast, the EU and European countries pledged USD 213 million, Japan pledged USD 112 million, and U.S. development assistance to Cambodia in 2009 totaled approximately USD 62 million. Of the USD 256 million from China, however, as much as USD 240 million was provided in loans, not grants. Chinese preferential loans are often used to support projects invested by Chinese companies. ¶5. (SBU) Chinese foreign direct investment in Cambodia is booming, with USD 339 million in Chinese investments approved in the first three quarters of 2009 (compared to the record USD 3.94 billion approved during the same period last year), according to Center for the Development of Cambodia statistics. (NOTE: Approved projects are not meant to reflect actual investments on the ground and may not even reflect firm plans to invest. END NOTE.) Chinese companies are estimated to have invested over USD 1.76 billion as of late 2008, primarily concentrated in garment factories and infrastructure projects, and the energy, agriculture, and tourism sectors. Bilateral trade between the two countries continues to grow, topping an estimated USD 1 billion in ¶2009. ¶6. (SBU) Prime Minister Hun Sen frequently praises China for its "blank check" policy on assistance, and criticizes other donors who to seek to condition aid on political and economic reforms in the country. During a September inauguration ceremony for a bridge built with USD 128 million in Chinese aid, Prime Minister Hun Sen lauded the Chinese for providing assistance with no strings attached, saying "they are quiet, but at the same time they build bridges and roads, there are no complicated conditions." ¶7. (C) COMMENT: Chinese financial assistance to Cambodia provides a strong incentive for Cambodia to support Beijing's policy objectives. The recent deportation of the Uighur asylum seekers coinciding with the visit of Vice President Xi and the conclusion of the new assistance agreements raise questions about the non-transparent quid pro quos often attached to China's "no strings attached" assistance. Nevertheless, China's conditions on assistance appear to be more palpable to the RGC than other international development partners' "strings," and could erode donor efforts to use assistance to promote improved governance and respect for human rights. ALLEGRA