Microfinance in Times of COVID-19 and Loan Restructuring Policy in Brief

Phasy RES

The Center for Khmer Studies

Before the COVID-19 pandemic, researchers raised concerns about high levels of household over-indebtedness, questioning the relationship between debt and household vulnerability. In 2017, a sector-sponsored survey (N= 802) was conducted with household borrowers in 12 provinces and Phnom Penh, and it suggests that 28% of micro-finance household borrowers were insolvent, and another 22% were at risk (MFC and Good Return 2017). Concerning over-indebtedness, many researchers have pointed to several problems: land loss (Green 2018; Green & Bylander forthcoming), distressed migration (Bylander 2014; Ovesen and Trankell 2014; Green and Estes 2018; LICADHO 2020), and declining household nutrition through a reduction in food consumption (Seng 2018). COVID-19 pandemic, which induced economic slowdown and unemployment, has dramatically exacerbated vulnerable households’ livelihoods, especially micro-finance borrowers, in the country. Given these challenges, the World Bank (2020: 3) claims that “the global epidemiological and economic crisis unleashed by COVID-19 poses the greatest threat to Cambodia’s development in its 30 years of modern history.” The Bank continues, “poverty could increase between 3 to 11 percentage points from a 50 per cent income loss that lasts for six months for households engaged in tourism, wholesale and retail trade, garment, construction, or manufacturing.” In this essay, we attempt to briefly describe how the loan restructuring policy was enforced by financial institutions (FIs) and examine the extent to which this policy has benefited the debt-distressed or economically vulnerable households, and how they cope with the effects of the pandemic.

In response to COVID-19 induced economic crisis, loan restructuring policy or known in Khmer as Kareapcham Inatean Loeung Vinh or, in short, Inatean Saloueng Vinh policy, emerged. This directly follows a request by the government for leniency on debt-stressed borrowers impacted by the COVID-19. In March 2020, the Prime Minister of Cambodia called on financial institutions to be lenient towards borrowers and not to confiscate collateral assets from the debt-distressed households. Following the Prime Minister’s request, on 27 March 2020, the National Bank of Cambodia (NBC) issued a circular requesting banks and microfinance institutions to carry out a loan restructuring policy to relieve the debt burden of their clients whose incomes were adversely affected by the COVID-19.

To address the debt-distressed issues, NBC recommended nine options for the banks and financial institutions: 1) Reductions in the principal amount or the amount to be paid at maturity; 2) Reductions of the interest rate to a rate lower than in the original loan agreement; 3) Extension of time for the loan principal or interest repayment or interest capitalisation; 4) Extension of maturity; 5) Addition of and/or change of joint borrower or guarantor (if any); 6) Change in loan type from an instalment loan to a bullet loan; 7) Waiver of or reduction of collateral requirement; 8) Reduction of contract condition; and, 9) Provision of a grace period, which could last for six months counting from the effective date of the new contract.

To date, according to Cambodian Microfinance Association (CMA), there were USD 1.3 billion worth of total loans being restructured or around 16 per cent of total outstanding loans in 2020. As of December 2020, 271,117 borrowers (about 12 per cent of the total number of borrowing households) have benefited from some forms of loan restructuring. The CMA and Association of Banks in Cambodia then called on the NBC to extend the loan restructure policy into 2021, as the economic impact of the COVID-19 crisis remains in addition to the flood crisis (White 2020). The NBC granted the request so that the loan restructuring policy will continue until mid- 2021 (Sok 2020).    

While the nine options and loan restructuring have been officially implemented, it is not clearly defined by NBC what should be involved or who should receive which option. As such, the banks and FIs have opted for their discretion in responses to the COVID-19 crisis. As a result, the implementation of the loan restructure policy varies from an institution to another. However, the financial institutions with which we spoke offered three key aspects of restructuring available for COVID-19 affected borrowers:

1. Payment Holiday: Borrowers granted a payment holiday is not required to repay loans at all for a specified period. The interest payments associated with that period of time are added to the left-over principal amount, and a new repayment schedule will be issued at the end of the payment holiday.
2. Period Extension: With a period extension, loan periods are extended so that the monthly payment is reduced to a level within the borrowers’ capacity to repay.
3. Grace Period: Borrowers granted a grace period have the option to repay only interest payments for a specified period of time. This allows them to minimise monthly payments and not pay down the principal for the duration of the grace period.

Our data from interviewing borrowers (N=119) and FI representatives (N= 34) show that the popular option enforced was the “grace period.” We found that 16 were given a grace period, 6 were granted a payment holiday, and in one case, a FI allowed a borrower to repay flexibly. 11 borrowers approached the FIs but were verbally rejected because of ineligibility of the sector (6 borrowers) and the loan restructuring was generally unavailable in their areas (5 borrowers). Seven borrowers were offered a “grace period” but rejected the offer because they were concerned about the financial loss (khart) it would create. Meanwhile, thirty-one borrowers were not aware of the loan restructuring policy at all, and the rest either had the ability to repay or approached their FI for the fear of impacting their credit history and/or being ashamed. The unawareness of the existence of loan restructuring policy is consistent with a finding of a survey (N = 997) conducted in July 2020 with registered and non-registered medium, small, and micro-enterprises of tourism-related businesses in four zones in Cambodia. The survey found that 60 per cent of the respondents were not aware of the bank/MFI debt restructuring policy (The Asia Foundation 2020). 

Not only have FIs limited options for the COVID-19 impacted households, but they also decided not to publicise the loan restructuring policy. Since the loan restructuring policy is informed to clients on a case-by-case basis, many, predominantly, low-income household borrowers in the rural areas are not aware of the policy.

During our field visit, there is a growing sense of fear and confusion among debt-distressed households. These households do not know what kind of supports could be provided to them. A case study below illustrates this sense of fear.

Pu (uncle) Theurn and Ming (aunt) Mao started borrowing in 2014; their first loan was to buy a tractor to plough their 15 hectares of land. After a few years (he could not recall exactly when), his corn and cassava production failed due to drought, at which point the household began to struggle to repay their debts. After sustained losses, the couple decided to sell the tractor. However, they could not repay all the debt, and they decided to sell 10 hectares of their land to repay the loan. At the time of the interview, the middle-aged couple was chopping cassava roots, which were not fully ready to harvest but were harvested a few months early because the couple needed the money to repay the micro-finance debt. Our research team asked him (husband) about the key risks he perceived in agriculture, using the Khmer term phey, literally translated as “to be fearful of.” He responded jokingly, “The main phey (fear)is the due repayment date because I have to repay one after another.” After finishing the sentence, he laughed gently. This story reflects a reality for many borrowers who are struggling to repay—the feeling of phey (fear). To date, the couple is still struggling to make their monthly repayments.

(Chopping premature cassava root Phnom Preuk district, Battambang 2020.
Photo by Phasy RES

Overall, it is important to make all options of loan restructuring available to all COVID-19‑affected borrowers. As evidenced in this case study, debt-distressed households can resort to coping strategies, such as land sale, migration, food consumption reduction, repayment phobia, or fear of FI’s retaliation: collateral confiscation. All of which has (and will continue to have) exacerbated economic vulnerability. At last, the loan restructuring policy should remain even after COVID-19, and other forms of restructuring such as debt forgiveness or interest cancellation should be considered.

This is an excerpt from a study report to be released in June 2021. The full report can be found here on the website of The Center for Khmer Studies (CKS) or The Asia Foundation (TAF) in English and Khmer.

Bio

Phasy RES is a doctoral student in anthropology and sociology at Université Paris 1 Panthéon-Sorbonne and a research fellow at The Center for Khmer Studies (CKS) under The Asia Foundation’s Ponlok Chomnes Program, funded by Australia’s Department of Foreign Affairs and Trade (DFAT). Her PhD research looks at the relationship between microfinance expansion and land security by examining how access to microcredit shapes land access and control in Cambodia. At CKS, under Ponlok Chomes Program, she specifically examined the social and economic impact of the COVID-19 crisis on microfinance borrowers and loan restructuring processes. Apart from these, she has conducted research on a range of topics, including agricultural mechanisation and intensification, anti-malaria drug resistance, the subjectivities of financial literacy, and labour migration in the Sub-Mekong region. Her work has been published in Espace Politique, Malaria Journal, Development Policy Review, Development and Change, and Mekong Migration Network.

The views expressed in this article are solely mine

References

Bylander, Maryann. 2014. “Borrowing across Borders: Migration and Microcredit in Rural Cambodia.” Development and Change 45(2):284–307.

Green, W. Nathan. 2018. “From Rice Fields to Financial Assets: Valuing Land for Microfinance in Cambodia.” Transactions of the Institute of British Geographers (44): 749– 762

Green, W. Nathan and Jennifer Estes. 2018. “Precarious Debt: Microfinance Subjects and Intergenerational Dependency in Cambodia.” Antipode 51(1):129–47

Green W. Nathan & Bylander. Forthcoming. The Coercive Power of Debt: Microfinance and Land Dispossession in Cambodia.

LICADHO. 2020. Driven out: One village’s experience with MFIs and Cross-border migration. LICADHO. Available at from https://www.licadho-cambodia.org/reports.php?perm=229.

MFC and Good Return. 2017.  Over-indebtedness Study Cambodia II: Final Report. Phnom Penh: Microfinance Center and Good Return (unpublished).

Ovesen, Jan and Ing-Britt Trankell. 2014. “Symbiosis of Microcredit and Private Moneylending in Cambodia.” The Asia Pacific Journal of Anthropology 15(2):178–96.

Seng, Kimty. 2018. “Revisiting Microcredit’s Poverty-Reducing Promise: Evidence from Cambodia: Microcredit’s Poverty-Reducing Promise.” Journal of International Development 30(4):615–42.

Sok, Chan. November 2020. “Banks and FI loan restructuring extended to until mid-2021.” Khmer Times.  https://www.khmertimeskh.com/50785076/banks-and-fi-loan-restructuring-extended-until-mid-2021/

The Asia Foundation. 2020. Enduring the pandemic: rapid survey in the impact of COVID-19 on MSMES in the tourism sector and households in Cambodia. The Asia Foundation. Available at: https://asiafoundation.org/wp-content/uploads/2021/01/Cambodia_Enduring-the-Pandemic_RAPID-SURVEY-ON-THE-IMPACT-OF-COVID-19-ON-MSMES-IN-THE-TOURISM-SECTOR-AND-HOUSEHOLDS-IN-CAMBODIA_EN.pdf.

White, Harrison. 2020. MFIs call on NBC to extend loan restructuring into next year. Khmer Times.  Available at: https://www.khmertimeskh.com/50784701/mfis-call-on-nbc-to-extend-loan-restructuring-into-next-year/.

World Bank. 2020. Cambodia Economic Update: Cambodia in the Time of COVID-19- Special Focus: Teacher Accountability and Student Learning Outcomes. Available at: http://documents1.worldbank.org/curated/en/165091590723843418/pdf/Cambodia-Economic-Update-Cambodia-in-the-Time-of-COVID-19-Special-Focus-Teacher-Accountability-and-Student-Learning-Outcomes.pdf

Australia-Vietnam Enhanced Economic Engagement Grant (AVEG) Pilot Program

On 14 November 2020, as part of a broader package of economic, development and security measures to support Southeast Asia’s recovery from COVID-19, Prime Minister Morrison announced the Mekong-Australia Partnership (MAP), a four-year $232 million investment, led by DFAT, with whole-of-government input. Pillar Three of the six pillars of MAP is focused specifically on Vietnam.

The AVEG Program 2021 will advance Australia’s international economic interests through bilateral engagement on trade and investment policy priorities of the Australian Government. 
Intended outcomes: 

• Increase public awareness of Australia’s economic opportunities in Vietnam
• Develop enduring partnerships across sectors in Australia and Vietnam
• Increase Australia’s capacity to effectively engage with Vietnam in existing and emerging areas of mutual economic interest

Key eligibility criteria: 

• Individuals who intend the grant to be administered by a university should apply on behalf of the university, i.e. your university is the applicant.

For more information, click here

Application deadline: 
Applications are currently open until Friday 14 May, 14:00 AEST

For any questions regarding the program, please email the Vietnam Economic Strategy Team at vietnameconomicstrategy@dfat.gov.au no later than 10 May 2021. 

Property Development in Malaysia amid COVID-19 Pandemic: A Matter of Capital Growth or Housing Affordability?

Keng-Khoon Ng

UCSI University Kuala Lumpur Malaysia

Many governments and state agencies in Southeast Asia are shifting towards the operation of ‘property state’ (Haila, 2015) or ‘cities for profits’ (Shatkin, 2017) or ‘neoliberal policies’ (Chen & Shin, 2019). In Malaysia, retirement and second-home properties have been promoted by the government to lure foreigners to buy relatively cheap, free-hold properties in cities such as Kuala Lumpur, Penang, Melaka and Johor Bahru. However, such development tendency has been adding pressure to the provision of affordable housing because developers are keener to develop international property projects than those less-profitable products of local housing. Since 18 March 2020, Malaysia has imposed a series of entry and movement restrictions in response to the COVID-19 pandemic. These restrictions brought uncertainty and new challenges to the operation of international property market. This blog discusses the property-related policy responses taken by the Malaysian governments, while reflecting on a prevailing concern over housing affordability.

The proliferation of international property development

The proliferation of international residential property development is bound up with the Malaysia My Second Home program (MM2H), a special long-term visit pass (renewable every 10 years) for foreigners to reside in Malaysia. This investment migration program was introduced by the Ministry of Tourism, Arts, and Culture in 2002, with 42,000 participants having been approved to date. To encourage property-buying, for example, MM2H participants are allowed to withdraw partial of the required fixed deposit from the second year onwards (RM50,000 for aged 50 years and above or RM150,000 for aged 50 years and below) for expenses related to house purchase. It is important to note that, since 2020, the federal governments lowered the minimum price threshold from RM1 million to RM600,000 (under condominium/apartment segment) for the purchase of properties by MM2H participants with an attempt to solve property overhang. A total of 31,661 unsold residential units recorded by the end of the first half of 2020 for whole Malaysia, while Johor (6,166 units) and Selangor (4,865 units) faced the most severe situation of property oversupply (Napic, 2020). Here comes the questions. To what extent has MM2H accelerated capital growth in residential property? Would it have actually worsened the problem of property oversupply and housing affordability?

Despite the fact that there is no government or market data enabling us to answer the above questions, however, the whole idea of MM2H is capitalising on off-shore investment, privileged lifestyle and ability to hold long-term visit pass for small-scale investors. To resonate with Aihwa Ong’s concept of ‘flexible citizenship’ (1999), MM2H elucidated such intention by maximising capital accumulation from strategies of migration and border-crossing flexibility. In recent years, both local and foreign developers have taken a great advantage from this opportunistic policy to scale-up their international property development. For example, Iskandar Malaysia regularised the formation of international zone in Iskandar Puteri (formerly known as Nusajaya) to allow more than 25,000 residential units built for the speculative market of ‘seamless border-crossing living’ between Singapore and Southern Johor (see Ng & Lim, 2017; Ng, 2020). A series of exclusive facilities such as international boarding schools, a world-class theme-park, a private yacht marina, healthcare centres and hotels have been developed to create a lifestyle matching the international standard. Forest City by Country Garden Pacificview is another housing mega-project where a well-capitalized Chinese developer has ventured into the emerging market of international property in Johor. This project takes the cue from Beijing’s promulgation of the Belt and Road Initiative to lure homebuyers from China and the neighbouring regions. These high-priced housing projects, however, did not make any direct contribution to the provision of affordable housing for Malaysians. To this end, MM2H can be best understood as a result of contingent overlaps of capitalist interests by state and real estate developers.

COVID-19 and the ‘Malaysia My Second Home Program’

The COVID-19 outbreak in Malaysia has caused an unprecedented disruption to the international property market and the operation of the MM2H program. As a result, new applications for MM2H have been suspended with no clear direction of when the program is to resume. This sudden decision has disrupted international property sales. Furthermore, movement restrictions triggered by the pandemic have reshuffled the MM2H holders’ privileges of border-crossing and visiting their Malaysian homes. For example, the Johor-Singapore border closures have a far-reaching impact on everyday border-crossing practices, not to mention the existing business of international property. Although MM2H pass holders may apply for entry permission to return to Malaysia, the government enforced entry restrictions on foreigners who are travelling from countries that have recorded over 150,000 COVID-19 cases. In addition, all passengers travelling into Malaysia are required to serve a two-week-long mandatory quarantine at dedicated quarantine centres.

Several MM2H pass holders and consultants reported to local news media regarding their dissatisfaction over a lack of clear directions and considerations given by the Malaysian authorities (see Free Malaysia Today, 22 May 2020; The Star, 9 June 2020; Thomas, 2020; Davison, 2020). In brief, they wish for MM2H pass holders to be treated equally as citizens because they have been contributing a large amount of direct investment to the country’s economy. To a certain extent, these situations expose the instability and vulnerability of the MM2H program. For the government, perhaps the time is ripe to think more rigorously about this investment migration program in terms of risk management, investor relations and inclusiveness. For the real estate developers, the COVID-19 pandemic exposed underlying concerns over ‘sustainability’ of the current business model and growth strategies of international property. What still makes these high-priced residential projects attractive when the selling point of cross-border mobility can no longer be taken for granted? Given a realistic view that the coronavirus pandemic might take up to several years until it is under control globally, the market responses towards international property in the post-coronavirus era remain uncertain.

How helpful are the National Budget 2021 for Malaysians to buy home?

Housing affordability is a prevailing issue in Malaysia, especially for urban dwellers. Between 2002 and 2016, the country’s overall housing affordability worsened significantly where Kuala Lumpur, Selangor, and Johor were ranked under ‘seriously unaffordable’ category (Khazanah Research Institute, 2019). Although there are more than 31,000 unsold units available in the market, these units are simply unaffordable for the majority of Malaysians.

How does the government help Malaysians toward home ownership amid the coronavirus pandemic? Reintroduced under the Short-Term Economic Recovery Plan by the federal government in June 2020, the Home Ownership Campaign provides stamp duty exemption on instruments of transfer (for properties below RM1 million) and instruments on securing loans exemption (between RM300,000 to RM2.5 million), as well as a 10 percent price reduction but limited to those developers who have registered for the scheme. On 6 November 2020, the National Budget 2021 announced a series of initiatives targeted at increasing home ownership. An extension of full stamp duty exemption on instruments of transfer and loan agreements has been granted for first-time home buyers to buy new launch or sub-sale properties priced up to RM500,000.

How helpful are these stamp duty exemption schemes? Put simply, they will only benefit home buyers who managed to secure housing loans from banks. However, banks are likely to tighten lending standards because people’s debt-servicing capacity is deemed to have deteriorated due to potential retrenchment and recession, thus making it relatively difficult for people to own their first home.

Under the Budget 2021, the Ministry of Finance will allocate RM500 million to build 14,000 housing units for the B40 group, representing the bottom 40 percent of earners by income in Malaysia, and RM315 million for the construction of 3,000 units of Rumah Mesra Rakyat by Syarikat Perumahan Nasional Bhd. The government will also be offering a rent-to-own scheme for 5,000 PR1MA units limited to first-time home buyers. While Malaysians are recognising these positive attempts to build more affordable housing in the coming years, there is still a lack of immediate action taken by the government to solve pressing housing concerns. For example, there is a possibility to convert those underutilised public buildings and abandoned shopping malls as short-term solutions for the urban poor or homeless people. Moreover, there is a worrying tendency whereby private developers and government-linked developers are likely to focus on the luxury housing market (Lim & Ng, 2020). For the case of Medini Iskandar Malaysia, developers have been exempted from building low-cost housing as part of corporate social responsibility. In other cases, developers have preferred to pay penalties to local governments instead of meeting their responsibilities. In this regard, local governments should tighten the requirements for private developers to build affordable housing. While the country is actively promoting the MM2H program and international property market, the government must also put effort into answering this question – what is the right balance to juggle capital growth and housing affordability at the same time?

COVID-19 and housing affordability remaining as a huge challenge for Malaysia

Housing is increasingly being regularised towards a new geography of profits and politics in Asia (Chen & Shin, 2019). To turn property development into a rent-seeking mechanism, the government began to intervene housing policies and market-oriented practices. The two roles of ‘control’ and ‘exploit’ allow the government to expand their authority over public and private realms of property development. However, not only may these two roles lead to conflicts of interest between the state and non-state players involved, they also increasingly collide with social justice and governance integrity.

In Malaysia, both COVID-19 and housing affordability remain huge challenges. On the one hand, the coronavirus crisis has exposed new operational issues and policy concerns associated with the MM2H program. On the other hand, the vulnerability of international property market has been attributed to negative market sentiments due to movement restrictions. During these challenging times, the government should pay more attention to the local housing demand-supply mismatch and the reordering of state-business relationships in property development. International property development is a contested field of capital accumulation built upon market speculation. To avoid any irresponsible market speculations, the government should take stronger measures to guard against housing which is built for profit, not for living.

References

Chen, Y., & Shin, H. B. (eds.) (2019). Neoliberal urbanism, contested cities and housing in Asia. New York: Palgrave Macmillan US.

Davison, A. (29 September 2020). Writing on the wall: Is the MM2H programme doomed? Available at: https://www.expatgo.com/my/2020/09/29/writing-on-the-wall-is-the-mm2h-programme-doomed/ (Accessed 10 November 2020)

Free Malaysia Today, (22 May 2020). MM2H visa holder stranded abroad and confused. Available at: https://www.freemalaysiatoday.com/category/opinion/2020/05/22/mm2h-visa-holder-stranded-abroad-and-confused/ (Accessed 26 Oct 2020)

Haila, A. (2015). Urban land rent: Singapore as a property state. Chichester, West Sussex, UK: John Wiley & Sons Ltd.

Khazanah Research Institute (2019). Rethinking housing: Between state, market and society. Available at: http://www.krinstitute.org/assets/contentMS/img/template/editor/Rethinking%20Housing%20(Full%20Report)-%20EN%20Version.pdf (Accessed 14 November 2020).

Lim, G. & Ng, K.K (2020). Chapter 16: Johor’s housing policy and development trends. In: The SIJORI Series: Johor – the abode of development? Hutchinson, F. & Serina Rahman (eds.) p.424-446, Singapore: ISEAS Yusof Ishak Institute.

NAPIC, The National Property Information Centre. Residential Unsold Status H1 2020. Available at: https://napic.jpph.gov.my/portal (Accessed 10 November 2020).

Ng, K.K & Lim, G. (2017). Beneath the Veneer: The Political Economy of Housing in Iskandar Malaysia, Johor, Trends in Southeast Asia, 12/2017, Singapore: ISEAS Yusof Ishak Institute.

Ng, K.K (2020). Chapter 15: Johor Bahru’s urban transformation: authority and agency revisited. In: The SIJORI Series: Johor – the Abode of Development? Hutchinson, F. & Serina Rahman (eds.) p.407-423, Singapore: ISEAS Yusof Ishak Institute.

Ong, A. (1999). Flexible citizenship: The cultural logics of transnationality. Durham, NC: Duke University Press.

Shatkin, G. (2017). Cities for profit: The real estate turn in Asia’s urban politics. Ithaca: Cornell University Press.

The Star, (9 June 2020). MM2H visa holders hoping for clear directions. Available at: https://www.thestar.com.my/opinion/letters/2020/06/09/mm2h-visa-holders-hoping-for-clear-directions (Accessed 26 Oct 2020)

Thomas, J. (7 July 2020). Country’s economy, image at stake in MM2H freeze, say consultants. Available at: https://www.freemalaysiatoday.com/category/nation/2020/07/07/countrys-economy-image-at-stake-in-mm2h-freeze-say-consultants/ (Accessed 10 November 2020).

Dr Keng-Khoon Ng is Lecturer at the School of Architecture and Built Environment, UCSI University Kuala Lumpur Malaysia. He completed his PhD at the National University of Singapore in 2019. His research interest is in architecture, urban planning and the politics of urban transformation. He has written several publications about the urban changes in Johor’s Iskandar Malaysia.

This article was previously published by the Saw Swee Hock Southeast Asia Centre, the London School of Economics and Political Science. It is republished by Insights on Southeast Asia following the Creative Commons rule: https://creativecommons.org/licenses/by-nc-nd/2.0/uk/

Property Development in Malaysia amid COVID-19 Pandemic: A Matter of Capital Growth or Housing Affordability?

A long-haul fight during COVID-19: A risky journey from the UK to Southeast Asia (Cambodia, Singapore)

Dear Insights on Southeast Asia

I have enjoyed reading this new blog for a while. As a contribution to the blog, I am writing to share my flight experience from the UK (London) to Southeast Asia (Cambodia) via Singapore. I hope this experience is worth sharing to readers who wish to fly from the UK or Europe Cambodia. In this journey, I will also compare how the UK or probably even the whole EU, handle travellers to contain COVID-19 at London Heathrow Airport with Southeast Asian nations (Singapore, Cambodia). After experiencing about nine months lockdown and living in a square room and coping with stress, last month, I decided to travel to Cambodia, my home country, as I see COVID-19 in the country was not much worse compared to the UK, between 16,000-19,000 cases per day. However, the recent outbreak in Cambodia has disappointed my plan, but I have to fly because I already paid for the airfare.

Almost two months ago, before flying or choosing airlines, I did some researches and asked friends who had experience of a long-haul flight (up to 15 hours in total to exclude layover). I chose Singapore Airline. There are flights via South Korea, Thailand, and Japan, but I chose Singapore Air in term of airfare, service and safety measures.

A month before my departure, I prepared 4 3M/N95 masks (1: for inflight, 1: transit, 1: another flight, and 1 when you landed in Cambodia), a transparent face shield, hand sanitiser jells, cough sweets, and diarrhoea and flu tablets. I like cough sweet the most, even I am healthy, but it is very dehydrated on 13 hours flight from London to Singapore. I took immune pills two weeks before the flight to boost my immune system. I BELIEVE THIS IS ESSENTIAL EVEN YOU DO NOT TRAVEL BY AIRE. I STRONGLY RECOMMENDED N95 Mask as in the photo. Unlike other masks, this one is much convenient because when you speak your lips will not touch the mask layers. Imagine 13 hours flight, you will smell YOUR OWN MOUTH and get sick by that.

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  Immune tablets that I took

To the Airport. Compared to public transportation: buses and underground trains, I would spend some money on a private taxi, or Uber to be safe. Travel alone is better than with unknown herds using public transpiration services. You may know that the spike of COVID cases in the UK is linked to public transportations. London underground is a crowded since they do not have proper seat arrangement, social distancing and space between travellers to avoid close contact.

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At London Heathrow. I arrived at the airport about 2.5 hours before the flight. At Terminal 2, there was no standard social distancing arrangement besides queueing from the passenger drop off section to the check-in counters.  Not many cared about social distancing, 2 or 1.5 meters apart from each other, even FACE COVER (they called it that, not a mask; I FOUND FACE COVER unhelpful) is compulsory inside the terminal. At the check-in counter, I was asked to present a health certificate: COVID-19-free. I was exempted since I was travelling to my home country (I will explain that it is not helpful at all). After checking in, I went through a security check, and again there was no proper arrangement beside lining, not even 1.5 meters apart. THIS MIGHT BE THE CASE WHY THE TRANSMISSION RATE IN THE UK or EU increased sharply after first or second waves or lockdown.

Inside Heathrow’s departure terminal: Shops are opening, and as you know, BLACK FRIDAY remains, and you can still enjoy duty-free shopping. Discount everywhere. You can kill time and wander around shopping, and some of them do not respect social distancing.

Before boarding: I had temperature checked by Singapore Airline staff and was called by our row and seat number to board the flight, to avoid the crowd. Before entering the plane, each of us gets a health kit bag containing a hand sanitiser, a mask, a wipe, and a bottle of water.

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  A page of health and safety kit

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  Health and safety kit: hand sanitiser

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  Health and safety kit: a disinfection wipe

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  My personal medicine kit

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  Flight attendance

In the plane: we were arranged to sit with empty seat/ space in between seats we were assign (unless you know each other you can chose to seat together). IT IS AN EXCELLENT IDEA, and I FELT SAFE instead of sitting next to an unknown person (I MET a CAMBODIAN STUDENT FROM AUSTRALIA said her flight from Brisbane to Singapore arranged seat the same mine). ONE IMPORTANT NOTE is that if you could check online and select your preferred seats would be great. I DID SELECT SEAT in advance. I would recommend those at the EXIT AREA, LAST ROW, and ROW against the laboratory seats to avoid being SURROUNDED. If you cannot do that, you might be lucky to sit next to those EU/UK citizens who have COVID-19-free certificate. I WOULD FEEL SAFE TO SIT NEARBY THESE FOREIGNERS WHO HAD TEST NEGATIVE to board the flight. Test negative for COVID-19 is a must to travel to another country that is not your home.

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  The last and front rows are always the best

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  Seat arrangement between London-Singapore

Layover in Singapore. It was very unfortunate that I had 8 hours of layover in Singapore. All passengers were disembarked row by row, about 3-5 rows at a time. Those who transited at Changi Airport were well directed by a guide to the transit hall. TEMPERATURE WAS TAKEN as soon as you disembark, and BEFORE ENTERING THE transit HALL. Wrist bands were given to identify us as layover passengers. There, we were not allowed to move around like in London. If you want to eat and shop, you need to order online (there is a banner instructing how to do so). Duty-free shopping need to be placed at least 8 or 12 hours in advance. I THINK THIS IS WHY SINGAPORE COULD CONTAIN COVID-19 TRANSMISSION and or imported CASES. To avoid a close contact with other passengers, I located myself somewhere at the corner of the hall.

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  Checking temperature upon disembarking at Changi Airport

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  Airport staff giving wrist bands

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  Checking temperature before sending into the transit hall

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  Transit hall at Changi Airport

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  Instruction how to order food online

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  There is an app to place an order for duty-free shopping

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  Toilet inside the transit hall at Changi Airport equipped with disinfection spray and hand sanitiser

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  Wrist band given to transfer passengers

SINGAPORE-CAMBODIA: Before boarding, we were again asked to queue about 10-20 passengers each line with at least 1 m apart. They rechecked our temperature. A number of Cambodian flocks flown (mostly) from Malaysia joined us. The guide/staff navigated and led group by group to the security check. AGAIN, We were given health kit as we board. But, UPON BOARDING I WAS DISAPPOINTED THAT THE AIRLINE (Silk Air, a regional subsidiary of Singapore Airlines) did not follow the long-haul flight standard mentioned above. All seats were occupied except three rows left empty as the flight attendant told me that they reserved for quarantine or in case if anyone gets sick they would isolate him or her there. I AM DISAPPOINTED that we were asked to stay apart during the transit but HAD TO PACK US TOGETHER in a tinny Airplane. EVEN MASKS are still compulsory, but we sit close to each other. From HERE YOU DO NOY TRUST your CAMBODIAN FELLOWS since, like me, THEY DIDN’T COVID-19-Free certificate. IT seems Singapore does not care when they send travellers out of their country. THIS MIGHT BE THE CAUSE of COVID-19 transmission and importing CASES to CAMBODIA. The Government of Cambodia should instruct incoming flights to follow space inside the plane.

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  Queuing before proceeding to security check. Many Cambodian flocks from Malaysia joined us (Crowded)

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  Airport staff were directing us to walk line by line

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  A Changi staff guiding us to the security check, about 20 passengers were behind me

FOOD dining is the most CONTAGIOUS time in this small flight. When foods and drinks were served, everyone removed masks and dug in. THIS IS a risky time, but I DID NOT EAT UNTIL the nearby passengers ate. BUT, I WAS LUCKY ENOUGH TO SIT NEXT TO A FOREIGNER. AS I TOLD YOU BEFORE, THEY WERE ONCE TESTED NEGATIVE up to 72 hours before boarding the flight.

Food and drink served Singapore-Phnom Penh

LANDING in PHNOM PENH. Again, DISAPPOINTED since passengers compete to get out of the plane, and the cabin crews did not advise them to disembark row by row like the long-haul flight. NO SOCIAL DISTANCING at all.

Passengers were about to disembark

IMMIGRATION CHECK and COVID-19 TESTING. I think many have written on this aspect, I should not spend more time on this. We had to fill out health status and condition and presented to the Health Officer to inspect. AGAIN, WE NEED TO line up, and there was no social distancing practice (by passengers). YOU KNOW THAT THE AIRPORT IS SMALL; it cannot follow Singapore. From there you will be given a form to fill out your choice of QUARANTINE ACCOMMODATIONs: Free and private hotel. In the form, you must include your personal info, and contact information (phone and e-mail). As I once heard about the condition of free accommodation, I CHOSE HOTEL as I will need to work during this period. AS I SAID BEFORE, it is a must now that all passengers are required to quarantine 14 days at the hotel and the free accommodation, not two days to get the test result and check out to quarantine yourself at home.

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  Customs declaration card

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  Health status and declaration card

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  Arrival immigrant card

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  Toilet inside PP International Airport: No hand sanitiser or a disinfection spray

I proceeded to collect my baggage and presented the health information form to the doctors who interviewed where about I would stay after the quarantine period (part of the contact tracing).  From there, samples were taken from your mouth and noise. You will be asked to remove your face mask. Upon the samples were taken, you must wear you mask immediately as I believe it is where people were asked unmask; it can be a CONTAGIOUS area. DON’T be scared, ALL DOCTORS and OFFICERs were equipped with Personal Protection Equipment’s (PPE).

Waiting to be transferred to the hotel by a bus

Transferring to the hotel was complicated as well. AGAIN, NO SOCIAL DISTANCING AT ALL. It was confusing as not many officers could speak English well. Some foreigners joined different queues: hotel and free accommodation. It took about 2 hours to get ready on the bus to the hotel. Both foreigners and Khmer passengers were frustrated with the arrangement. I THINK IT IS TYPICAL BUSINESS AS USUAL IN THIS COUNTRY.

I will tell you more how I felt when I was transferred to the hotel. It is again a typical thing. Stay tuned!

If you have questions, please comment and I will respond.

Economic development and cultural genocide in Cambodia

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Frédéric Bourdier | Anthropologist | IRD France

Cambodia is home to 24 Indigenous peoples speaking Mon-Khmer and Austronesian languages. Numerically important groups are the Tampuan, the Kuy, the Bunong, the Jarai, the Brao and the Kreung. While the exact population of these ethnic groups is controversial, they constitute about 2-3% of the national population, between 350,000 and 400,000 individuals as of 2020. Some recuse their ethnic identity because of social discrimination, intermarriage, migration, urbanization and diverse processes of acculturation. Indigenous people’s territories are scattered in 15 provinces (out of 24), but a majority is located in the three north-eastern provinces (Preah Vihear, Ratanakiri and Mondolkiri). While they are not disaggregated in the national census, human right groups maintain that Indigenous Peoples face discrimination and coerced displacement from their lands that is extinguishing them as distinct groups. Scientific investigations confirm that these patterns are driven by ongoing state and transnational corporate ventures for resource extraction and land conversion (timber, minerals, hydro, and agro-industrial plantations), coupled with the growing in-migration from other parts of the country. National authorities regularly deny these assertions under the guise of an expected “national economic development for all”.

It is admitted that the principal adversaries of indigenous territorial and land claims in Cambodia, and by extension throughout the world, are the protagonists of a neo-liberal economic model that has impoverished and dispossessed major sectors of rural societies, blocked the improvement of locally based production (subsistence and commercial agriculture), and promoted capitalist expansion by excluding local populations. In the absence of any reliable mechanisms to secure land, many of the fertile and forested areas, traditionally occupied by autochthonous groups, started to be coveted by agribusiness companies, multinational consortia and wealthy politicians for monoculture exploitation: rubber, cassava, and cashew (north-east), sugarcane and corn (north).

Funeral ceremony, Andong Meas district, Rattanakiri. Photo by Frédéric Bourdier

After a decade of Vietnamese occupation, Cambodia has followed a free-market ideology. In the 1990s, Cambodia’s economy relied on external financial support, but socio-political elites constantly captured the bilateral/multilateral aid from the West. Insufficient allocation redistribution for the general population and feebleness of public services reinforced social and economic inequalities. Furthermore, the 2001 Land Law, a by-product of Western aid, with improved additional legislations for monitoring Economic Land Concessions sanctioned by the sub-decree in 2005, offered legal tools for granting Economic Land Concessions to national and international (joint-venture) companies, even though Article 29 of the same Land Law states that “no authority outside the community may acquire rights to immovable properties belonging to indigenous communities”. Indigenous Peoples expected that the 2002 Forest Law would lead to a substantive remedy for protecting their lands, but it led to the contrary (extensive logging by officials and local Khmer/Indigenous elites). In 2004, Vietnam, Laos, and Cambodia ratified a Master Plan, of which Ratanakiri Province was the epicentre. Once a remote area, nearly exclusively inhabited by non-Khmer populations, the province became a destination not only for landless migrants but also for politically connected opportunists, absentee landlords, and foreign corporations, due to its geostrategic position, Cambodia-Vietnam borderland region with fertile basaltic soils.

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Illegal logging with the complicity of military forces, Ratanakiri. Photo by Frédéric Bourdier

Leading developers/policy-decision makers keep on arguing that Indigenous peoples have to adapt to the contemporary economic world. Cambodia has to be competitive and must attract Foreign Direct Investment to advance the country’s economy as well as to modernize rural areas like the north-eastern provinces. Megaprojects constitute the ongoing skeleton of modernity. Subsistence agriculture and worse again slash and burn cultivation are mere testimonies of the past that can be confined to local places (for ecotourism purposes, under the label of cultural heritage) but which cannot contribute to the economic growth of the Kingdom. Land concentration restricts small scale ownership but, according to national authorities, will contribute to maintaining labour forces, providing Indigenous peasants “reasonable” daily wagers.

Dispossessed indigenous families work for a rubber plantation in Bokeo, Ratanakiri. Photo by Frédéric Bourdier

Working for others has always existed in a context of exchange of services among indigenous groups. Reciprocity conditions its acceptability. But the idea to be permanently or even seasonally employed is less conceivable, even for the Indigenous farmers having small plantations who prefer to recruit lowland workers. Disinterest for agrarian paid work in the plantation prevails. A job with restricting hours appears incongruous and unthinkable to the vast majority, except for the Indigenous landless families who have no other option. As a result, investors and companies recruit experienced Khmer and Cham from the lowland valley to work in their plantations located in indigenous territories. These skilful in-migrants and workforces decide to settle permanently (more jobs, better weather, less pollution, the myth of “abundance of nature”), and these, therefore, contributed not only to land speculation and socio-ecological conflicts but also exacerbated tensions between autochthonous people and new business-minded settlers. This new population have in turn convinced relatives and friends to flock into the indigenous people’s territories for lucrative business opportunities, opening small businesses, being seasonal workers, suppliers and contractors, or elaborating a partnership for a development project (transport/delivery services, construction, training, collective land acquisition).

Frédéric Bourdier is a senior anthropologist from the national scientific research centre from France (Research Institute for Development: IRD) and the University of Paris Panthéon-Sorbonne. He started conducting ethnographic work in Cambodia (1994-1995), with the aim to compare the social ecology of various autochthonous communities in Ratanakiri Province – Tampuan, Kachok’ and Jarai. Since 2004, he came back to the Kingdom (after ten years spent in Brazil Amazon, South India, Columbia, China and Cuba). He has been in charge of two programmes focussing on health policies and the socio-political mobilisation of the civil society in the fight against HIV/AIDS. He has been also involved in an ethnogenetic program in the Highlands, in a critical research insisting on the impacts of development on the livelihoods of the forest peoples. After being in charge of an interdisciplinary malaria research, an ethno-historical investigation of the rise of the Khmer Rouge in Ratanakiri in the sixties, he is actually organising anthropological surveys of the green economy in Cambodia. He periodically returns to Ratanakiri in the villages where he previously lived.

Citation: Bourdier, F (2020). Economic development and cultural genocide in Cambodia. Insights on Southeast Asia. Retrieved from https://sea-insights.com/2020/11/30/economic-development-and-cultural-genocide-in-cambodia/

How Chinese investors build patron and client networks to secure their investment in Cambodia

Sokphea Young |University College London|UK

This piece explains: i) how the new generation of Chinese investors and companies acquire licenses in a host country of a predominant Sino-diaspora community, and ii) how these Chinese investors and companies instill patron-client networks to influence regulations and secure business in the host country. It will address these topics by drawing on existing literature, field interviews and observation. It will begin with a brief overview of the relations between China and Cambodia, and other Western count parts. It will then illustrate how Chinese aid and trade have been playing a significant role in Cambodian business and regulatory frameworks by drawing on political culture and patronage-clientelism concepts.

Chinese diaspora and China’s relation within Cambodia

Contemporary Cambodia-China relations can be traced back to just before the collapse of the French protectorate in Indochina. In September 1947, China established its Phnom Penh consulate^[1] although the first generation of Chinese migrants probably began settling in Cambodia as early as the late 12^th century when Zhou Daguan visited the Khmer Angkorian Empire. In the early 1950s, there were approximately 3,000 Chinese living in Phnom Penh alone^[2]. As a business strategy, the Chinese migrants established good connections with Cambodians who were wealthy or were officials working for the French administration. Since then, the ties between Chinese migrants and Cambodian elites has become entrenched and been maintained, up to and including the current younger generation^[3]. This has shaped how the younger Chinese generations in Cambodia, commonly known as Sino-Khmer or Sino-Cambodia, operate their small and large-businesses in the country.

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Politically, following the collapse of the French protectorate in 1953, the leaders of the two countries (Zhou Enlai and Norodom Sihanouk) met in 1955 at the Bandung conference, where their relationship became closer^[4]. Due to geopolitical turbulence and intervention, especially by the US War with Vietnam—which trampled the neighbouring countries of Cambodia and Laos—the region became engulfed by civil war. Beginning in the early 1970s, when Nororom Sihanouk was deposed by a coup orchestrated by the pro-US General Lon Nol of Cambodia, the relationship between China and Cambodia become volatile, even though Shihanouk’s tie with China remained the same. After defeating the pro-US government, the Khmer Rouge’s communists re-established the bilateral relationship with China, from 1975 until 1979, and maintained contact until their surrender in the last battle in 1998. China then re-established a relationship with the new government that emerged from the United Nations organised-election in 1993.

After the election, there was an influx of European and US trade and aid into Cambodia (similar to what occurred in Myanmar after their 2015 election). The inflow of Chinese aid and trade did not draw much attention from the US and EU donors until the 2010s, when China’s economy surpassed some of the world biggest economies, and when China’s Belt and Road Initiative officially launched in 2013. Compared to other donors, the EU had been the most generous donor in terms of grants, followed by NGO core funding, and the US. But as of 2010, China alone is the biggest donor to Cambodia (see Figure 1).

Figure 1: Foreign aid to Cambodia (US$ million)^[5]

Following the 1998 elections, Cambodia reformed its economy by amending investment laws and regulations to attract foreign capital as well as to integrate Cambodia into the region, and into the larger global economy. Cambodia’s trade with the US has benefited from the granting of a “Generalised System of Preference”, which allows the country to export duty-free products into the US market. Because of this, a huge number of garment factories were opened and operated within Cambodia. In 2001, Cambodia was listed as a least developing country, able to receive the EU’s Everything But Arms (EBA) trade preference, which allowed Cambodia to export products to EU countries, tariff and quota-free. The inflow of foreign capital also increased significantly starting in the early 2010s, from around US$800 million in 2010, to more than US$1billion in 2012-13, and US$3.5 billion in 2018 (Figure 2). While intra-ASEAN investments played a significant part in this rapid inflow of capital, China alone has provided approximately 20.40% of total foreign investment to Cambodia, and has thus become the single most important strategic investment partner to Cambodia.

Figure 2: Total foreign investment to Cambodia (US$ million)^[6]. 

However, Cambodia has been ranked low in ease of doing business enabling environment ranking, placed at 138^th out of 190^th (World Bank, 2019)^[7]. The enforcement of regulations is generally weak and uncertain, as admitted by investors^[8],[9]. This has caused obstacles for most Western investors, but not for China. Since 2005, the inflow of Chinese investment exploits the government’s economic policies, including the privatisation of public resources, such as land, water, forest, and mines, by endorsing a number of regulations, such as the economic land concession (ELC) in 2005^[10]. Foreign investors, including the Chinese, have flocked to Cambodia to acquire licenses for resource extraction. Investing in real estate has also been popular among Chinese individual investors and companies. One of the most popular areas is the coastal area is Sihanouk province, where casino and real estate are owned predominately by Chinese businessmen. These investments, though not all, often sparked grassroots communities’ reaction against the regulatory enforcement of license permits^[11].

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Cambodia’s socio-political culture, patronage and clientelism

The uncertainty in Cambodia’s regulatory enforcement appears to oppose the deregulation or race to the bottom theories (which enabled the inflow of foreign investment). This uncertainty instead seems to encourage multinational corporations, not only from China but now also from European countries, though China still predominates. How do these Chinese companies: i) acquire investment licenses; ii) secure their business operations over a long-term period; and iii) cope with risks in the uncertain regulatory enforcement environment? Based on my observation and case studies, these questions can be addressed through a careful study of Cambodia’s socio-political culture in relation to an entrenched patronage and client network.

Both clientelism and patronage imply the politically motivated distribution of favours that aims to promote personal and political interests. The two terms are often combined when speaking of patron-client relationship, which can be understood as a dyadic tie involving a largely instrumental friendship[12]. In this friendship, an individual of higher socio-economic status (the patron) uses their own influence and resources to provide protection or benefits, or both, for a person of lower status (the client) who, for their part, reciprocates by offering general support and assistance to the patron. Developing a clientelist network is a means by which to gain protection and achieve goals in a situation of societal uncertainty created by public institutions which may behave in ways that are not predictable.

Patron-client network has been generally accepted by Cambodia’s political culture, having the ruler as the central patron of the neo-patrimonial regime. Characterising Hun Sen as a man of prowess, scholars assert that he has remained in power because he is culturally perceived as a man possessing merit or bunn, which can be translated to power[13]. In essence, all decision-making must be referred to the patrons of the regime (having Hun Sen as chair or central patron).

To maintain their patronage system, the patron of the regime has, since the early 1990s, not only awarded lucrative positions to clients, but also allocated natural resources[14]. For instance, the awarding of licences for resource extraction (mining, oil, agricultural land, commercial forest logging and energy) and the privatising of state properties has been given to those individuals who support and are loyal to the ruling party (see Figure 3).

Figure 3: A model of Chinese investors operating in Cambodia

Generally, government officials seek lucrative positions and use their positions to extract rent. These appointments are not made freely, but based on rents. As the rent increases, so does the price of the position. In so doing, the allocation of lucrative positions is subject to (invisible) auctions and competition within the network, and relies on connections with the patrons and the ruling party. “They have to pay a certain amount of money to secure their position.”^[15] If someone, in addition to his or her popularity, dares to pay more or contribute more to the party’s patrons, they will be offered the position. To ensure access to ministries with authority over resources and power, including lucrative sectors, a strong network is highly necessary[16].

The foregoing political culture of doing internal business in Cambodia has become a contact point of the foreign investors. Foreign investors (the clients) need powerful politico-commercial officials (the middle patrons) to support long-term business operations in Cambodia, where lax regulation enforcement and an uncertain business environment persistently prevail (Young, 2016), see figure 3. The network of middle patrons and client (foreign investors) is installed through one of two pathways: being a local joint venture partner, or being a broker who later becomes a local partner. Without these pathways, it is extremely difficult for foreign investors to get access to natural resources^[17]; no business can enjoy the medium term in Cambodia without connecting to the patron’s affiliates. Through joint ventures with local reliable and powerful businesspersons, foreign investors can be granted ELCs and secure long-term successful investments. If there is no such relationship, foreign investors will not be able to access the resources. If there is no powerful local partner, foreign investors are likely to face high risk and fail in securing an ELC or long-term investments.^[18] For example, a Chinese state-owned company, Fuchan and China Cooperative State Farm Group, partnered with Cambodian Pheapimex to develop agricultural plantations in the north-eastern province of Mondulkiri, and in Kampong Chhnang and Pursat provinces; such an arrangement caused adverse impacts on the socio-economic conditions of the local communities, including displacement, loss of access to natural resources and land, food insecurity and impoverishment[19]. These investments have nevertheless been secured in Cambodia through a joint venture between Chinese investors and Cambodian magnates, dominated by Sino-Khmers[20]. In this instance, this patron-client network has been installed not only within the government administration, but also between these politico-commercial elites and foreign investors or investment projects in Cambodia. Another pathway is through a broker (or licence trader) who later becomes a local joint venture partner. Foreign investors have to find a local broker who is powerful and has strong connections with senior government officials in order to facilitate the process of requesting ELCs. The foreign investors have to pay a substantial amount that is not indicated in the regulations. On receiving ELC licences, foreign investors have to allocate some number of shares to the broker free of charge^[21] and then the broker becomes a local partner to protect the business operation. Otherwise, other corrupt or influential senior government officials might intrude into the business during its operations.^[22] In so doing, the domestic partners become middle patrons of the foreign investors (the clients). The patrons have an obligation to protect the client in return for rent; for example, confronting allegations from affected communities, activists and NGOs.

In a case of Sino-Khmer who facilitated Chinese investment in Cambodia, a senior government official unveils that “… They, the foreign investors, do not know the entry point for investment in Cambodia, where to go and how to process the legal documents.”^[23] Such a process is confirmed by a legal advisor who facilitates access to granting ELC licences. She argues that if investors had no connection and wanted to follow the procedure stated in the concession regulatory framework, the concerned ministries of the government would not be available to talk and work with them. Investors have to seek local investors or facilitators/brokers who are powerful and have strong connection with powerful officials to get an ELC approved within a short-period, although they have to pay transition fees^[24]. She pointed out that: “Newcomers [investors] … find someone who has good networks and relationships, and the process of granting licence goes smoothly…”^[25]

In this case, by connecting with a local Sino-tycoon, it took a Chinese foreign investor only three months to obtain from the council of ministers (CoM),^[26] much faster than for most companies. Acting on this advantage, the joint company did not conduct proper public consultation or social and environmental impact assessments (EIA|), as required by the sub-decrees of economic concession (2005), Land Law (2001) and EIA (1999), before approval by the CoM. This concession is thus accused of violating these regulations. As stated in the Land Law, no concession is granted to a private company of greater than 10,000 hectares. This agro-sugar industrial investment was, however, awarded up to 19,100 hectares, as it claimed to be two companies but was, in fact, operating as a single company.^[27] This case has suggested how a local Sino-Khmer could influence regulatory process in doing and securing business in Cambodia in the amid of rampant protests of the civil society organisations and the affected communities.

Conclusion

With long historical migration, business and diplomatic relations between the two countries, the influx of new generations of Chinese foreign investments and aid to Cambodia is the by-product of geopolitical expansion, but complementing both the host and foreign country’s political economic interests. The continuance of Chinese investment to Cambodia’s least favorable business environment has been secured and maintained as new Chinese investors have exploited socio-political cultural practices instilled by older generations of Sino-Khmer (tracing back to the 12^th century, and very clearly from the end of the French protectorate era in Cambodia). Cambodia’s long established clientelism and patronage culture are seen as a mesh network, within which the stronger influence the weaker, and both share reciprocal but not always equal benefits. This culture has influenced regulatory enforcement and become an invisible form of business regulatory practice in Cambodia, where their ruler, also known as the patron at the apex of the pyramid, has been in power for decades. The patron, the middle-patron and the client (including the new generation of Chinese investors) become what is called “paralegal” mediating and easing doing business in the host country’s ambiguous regulatory enforcement environment. The ability to embrace and adopt the entrenched patron-client networks in the host country is a powerful weapon to ensure and secure long-term business operations (generally enabled by high-level bilateral diplomatic and political economic relations).  

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^[1] Chanda Nayan, China and Cambodia: In the mirror of history, 9(2), Asia Pacific Review, 1, 11 (2002).

^[2] Groslier, 1958 cited in Chin J.K. (2017) Ethnicized Networks and Local Embeddedness: The New Chinese Migrant Community in Cambodia. In: Zhou M. (eds) Contemporary Chinese Diasporas. Palgrave, Singapore

^[3] Nyíri Pál. Investors, managers, brokers, and culture workers: How the” New” Chinese are changing the meaning of Chineseness in Cambodia, 1(2), Cross-Currents: East Asian History and Culture Review, 369-397 (2012)

^[4] Chanda (2002)

^[5] CDC (Council for the Development of Cambodia). 2018. Development Cooperation and Partnerships Report. Phnom Penh: CDC, available at http://www.cdc-crdb.gov.kh/cdc/dcpr_images/docs/english.pdf (accessed 24 August 2019)

^[6] ASEA Statistic: https://data.aseanstats.org/fdi-by-hosts-and-sources (accessed 02 September 2019)

^[7] World Bank (2019). Doing Business 2019: Training for reform, economy profile Cambodia. https://www.doingbusiness.org/content/dam/doingBusiness/country/c/cambodia/KHM.pdf (accessed September 03, 2019).

^[8] Subedi Surya P Land rights in countries in transition: A case study of human rights impact of economic land concessions in Cambodia. In Asian Yearbook of International Law, 1, 46 (2018). Brill Nijhoff.

^[9] Young Sokphea, Movement of indigenous communities targeting an agro-industrial investment in North-Eastern Cambodia 44 (1.2), Asian Journal of Social Science 187, 213 (2016).

^[10] Subedi (2018)

^[11] Young Sokphea, Protests, Regulations, and Environmental Accountability in Cambodia 38(1), Journal of Current Southeast Asian Affairs 33, 54 (2019)

[12] Scott, James, The erosion of patron-client bonds and social change in rural Southeast Asia 32(01). The Journal of Asian Studies, 5, 37 (1972).

[13] Jacobsen Trude & Stuart-Fox Martin, Power and political culture in Cambodia Working Paper 200. Singapore: Asia Research Institute, National University of Singapore (2013).

[14] Hughes Caroline. Political economy of the Cambodian transition (2003). London: Routledge.

^[15] An interview with a member of parliament and standing committee of the party (18 Dec 2013)

[16] Hughes Caroline & Conway Tim, Understanding pro-poor political change: The policy process–Cambodia (2004). London: Overseas Development Institute.

^[17] Senior legal advisor (09 Dec 2013); a company Chief Executive Officer (CEO) (18 Dec 2013) & ELC general manager (27 Nov 2013)

^[18] ELC general manager (27 Nov 2013) & Senior legal advisor (09 Dec 2013).

[19] Un Kheang, China’s foreign investment and assistance: Implications for Cambodia’ development and democratization16(2) Peace & Conflict Studies, 65, 81 (2009).

[20] Un Kheang (2009)

^[21] A deputy provincial governor (15 Dec 2013) confessed that foreign investors allocate certain shares to their Cambodian brokers and they later become local partners.

^[22] A CEO (18 Dec 2013) & ELC general manager (27 Nov 2013).

^[23] A deputy provincial governor (15 Dec 2013).

^[24] NGO deputy director (20 Dec 2013) & senior legal advisor (09 Dec 2013)

^[25] Senior legal advisor (09 Dec 2013).

^[26] The licence is approved by the council of minister in the form of a notification (sor chor nor in Khmer), which is usually exaggerated by companies and local and provincial authorities as a ‘law’ or chbab.

^[27] NGO lawyer (20 Dec 2013).

Citation: Young, S. (2020). How Chinese Investors build patron and client networks to secure their investment in Cambodia. Insights on Southeast Asia. Retrieved from https://sea-insights.com/2020/11/18/how-chinese-investors-build-patron-and-client-networks-to-secure-their-investment-in-cambodia/(opens in a new tab)

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