Monday, 14 July 2008

Cambodia: Indian inertia versus growing Chinese presence

IndiaPost.com
Sunday, 07.13.2008

Working towards greater economic cooperation forms an important part of India's Look East Policy. In the last two decades India's bilateral trade and investment with this region has increased significantly. However, the increase remains asymmetrical.

The case of Cambodia, for example, shows that India's interaction with the country is far below potential. In 2007, India's total trade with Cambodia was just US$53.7 million.

Although there was an exceptional increase of more than 100 per cent in annual trade over 2006 trade. However, this amount of trade is minimal in the overall trade of both countries.

Interestingly India's exports are far higher than the imports from Cambodia. There is hardly an Indian contribution in investments in Cambodia of around $2.8 billion in 2007. The latest data available shows that till 2002 India had invested only $1.1 million in Cambodia.

In recent times, some Indian companies such as Kirloskar have opened their offices in Cambodia.

Even as Cambodian authorities have made it very clear that they are looking for long term investments, the Indian government seems to be happy with paltry measures like lines of credit, donation of some money for Khmer Rouge trials, temple restoration, IT kiosks and gifting jars of indelible ink.

On the other hand, in an obvious indication of assertion in Southeast Asia, China is using economic means as a readily available tool to achieve its strategic objectives. The Chinese economic presence in Cambodia is not only expanding but also growing in strength.

The component of Chinese economic diplomacy largely contains investments and trade.

Although China is also a major donor, the focus is on increasing Chinese presence by means of foreign direct investment. The total volume of Chinese investment from 1994 to 2007 was US$1.76 billion.

There are 3,016 Chinese businesses operating in Cambodia which produced more than US$1.5 billion at the end of 2007. China-Cambodia bilateral trade is heading towards the US$1 billion mark having crossed US$900 million in 2007 with an annual growth of 30 per cent. China is present in every possible economic sector in Cambodia.

Chinese and French companies are major players in the emerging oil and gas sector and as Cambodia plans to build more than 10 hydropower plants in the near future, the Chinese are vying to grab the opportunity. Around four major Chinese steel companies are also engaged in joint ventures to develop iron ore mines in Cambodia.

The above facts make it very clear that while Chinese economic presence in Cambodia is overwhelming, the Indian presence is negligible by contrast. There is, therefore, an urgent need to identify some areas where Indian presence can be increased.

Cambodia has untapped natural resources, which makes it attractive destination for investment. According to recent estimates Cambodia has potential offshore oil deposits of about 700 million barrels and natural gas reserves of around 4 to 5 TCF (trillion cubic feet).

According to the Director-General of Cambodian National Petroleum Authority, there are significant onshore reserves in provinces of Kampong Chhnang, Kampong Thom and Pursat.

Other than petroleum reserves, Cambodia has iron ore reserves and gold. Given the India's energy needs and its expertise in the mining sector there lie greater possibilities of cooperation in these sectors.

More than 50 per cent of Cambodia's population is under 21 years of age. This population structure coupled with a growing economy makes Cambodia a fertile ground for knowledge-based industries. Given India's expertise in this field, this provides an opportunity for India to explore the human resource development sector in Cambodia.

Cambodia still remains an agriculture-based economy and diversification in agro-based products is its top priority in this sector. Indian companies can find a niche, here with their experience in bio-technology that can be used by Cambodia to improve yields in agriculture.

In recent times, Cambodia has also emerged as an attractive tourist destination. However, the lack of basic tourism-related infrastructure hinders the growth of this sector in Cambodia. Here, Indian hotel and resorts can play a vital role by investing in Cambodia's tourism sector.

To facilitate the growth of trade, adequate transportation, infrastructure and minimization of trade costs is needed. Here the physical connectivity from India through other Mekong region states will be a revolutionary step.

Institution-building is another important aspect in developing the economic linkages; a joint trade promotion mechanism of possible players will be a fruitful step. Above all, a good communication mechanism should be developed by the Indian government to inform the business community in India about the opportunities available in Cambodia.

(The writer is a Research Officer at IPCS)
Pranav Kumar

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