Take better care of economic alliances

via Khmer NZ

Monday, 16 August 2010 15:00 Steve Finch

MAINTAINING economic partnerships with key international trade and investment partners can be a difficult balancing act. But that’s no reason to botch alliances as badly as the Cambodian government has managed over the past few weeks.

Prime Minister Hun Sen’s recent bizarre public comments barring the establishment of Taiwanese delegations at the local level may have reassured the Kingdom’s largest foreign investor, China, but they have only served to antagonise another key investor, Taiwan.

The prime minister’s timing could not have been worse. Taiwan sent a business delegation to the Kingdom in July, expressing the hope of raising its economic profile in Cambodia during a visit that was largely deemed a success. In the first half of this year, trade with Taiwan rose 60 percent, meaning it is one of the country’s fastest-improving trade relationships and is set to reach about US$350 million this year.

However, a Taiwanese government statement last week in response to Hun Sen’s comments warned that this flourishing economic cooperation could be damaged were the Cambodian government to continue such “unfriendly remarks”.

Why did Hun Sen feel it necessary to pander to China so overtly in the first place? Other countries have managed a much more calibrated approach to the thorny issue of China-Taiwan relations without antagonising either side. And it remains unclear what advantage the government gained with regard to China, anyway – the world’s third-largest economy had been pouring in investment, soft loans and increasing trade regardless. The government’s One-China policy was already clear.

Perhaps stranger is Cambodia’s sudden economic cooperation with Iran, a country that generated just $180,000 in bilateral trade with the Kingdom in the second quarter and remains subject to economic sanctions, mostly directed by Washington.

With the government pushing United States energy firm Chevron to begin production in offshore Block A in the Gulf of Thailand by 2012, and oil and gas technicians regularly heading to the US for training, Cambodia’s decision to stress energy cooperation with Iran at this time could prove counterproductive.

The US is also Cambodia’s largest export market, taking about 70 percent of garments produced in the Kingdom. Was Foreign Minister Hor Namhong’s delegation to Tehran last week considering this relationship when he was quoted criticising sanctions against Iran? Whether you agree with UN sanctions against Iran or not, surely the government needs to be less na?ve in making these comments when so much is at stake.

This is especially true of a country with such a small geopolitical and economic stature on the world stage, meaning it could be more susceptible to any subsequent fallout.

Cambodia should be encouraged to engage on trade and investment with countries that can bring in capital and jobs, along with good business practice. However, from this perspective, the government’s recent efforts to win economic friends and influence people look all the more misplaced.