Chinese Energy Investment in Cambodia: Fuelling Industrialisation or Undermining Development Goals?

In early 2020, Cambodian authorities fast-tracked approval of two new coal plants. Soon after, they also signed a memorandum of understanding with the Lao Government committing to purchase energy imports from two proposed coal plants in southern Laos. This marked a significant shift in the evolution of Cambodia’s energy planning, from a model heavily dependent on hydropower to one in which fossil fuels will play a dominant role. This move towards fossil fuels will have significant implications for the Cambodian economy. In addition to the obvious environmental and social impacts, this change in strategy threatens Cambodia’s long-term viability as a base for export-oriented manufacturing targeting Western markets, as buyers in the latter are increasingly adopting policies seeking to ‘green’ their supply chains.

China plays a unique and diverse role in this complex landscape. More than a decade of aid and state-backed investment and assistance for energy and transport infrastructure have facilitated the expansion of Cambodian manufacturing, which is now dominated by private Chinese firms. While much of China’s engagement in the country is now framed under the narrative of the Belt and Road Initiative (BRI), inflows of Chinese investment and aid in Cambodia very much foster Cambodia’s export-oriented economy, which remains heavily focused on exports to the United States and Europe. In such a context, this essay explores how the energy investment priorities of Chinese companies and banks, along with the development decisions of the Cambodian Government, in the long term could set back industrial upgrading, diversification, and job creation, ultimately harming Cambodia’s economy …

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