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Cablegate: A Grateful China Rewards Cambodia

VZCZCXRO2698
PP RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHPF #0956 3561011
ZNY CCCCC ZZH
P 221011Z DEC 09
FM AMEMBASSY PHNOM PENH
TO RUEHC/SECSTATE WASHDC PRIORITY 1496
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 2592
RHHMUNA/HQ USPACOM HONOLULU HI
RHEHNSC/NSC WASHDC 0194

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

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