Two Chinese companies have signed a memorandum of understanding with the Cambodian government to build an US$11.2 billion project in the south-east Asian nation.

 

The project, which includes a seaport, a steel mill and a 400-kilometre cross-country rail line linking the two, is worth nearly 90% of Cambodia’s current gross domestic product. 

 

The new rail line will link a steel mill in Preah Vihear – a northern province believed to have iron ore deposits – to a new seaport to be built on an island off southern Koh Kong province. Construction will begin this year and could take up to four years to complete, Cambodia Iron & Steel Mining Industry Group chairman Zhang Chuan Li told reporters at a Phnom Penh press conference following the December 31 signing.

 

“There is an important demand for transport of mined materials for export to China and to the world,” he said.

 

Cambodia Iron & Steel, formed in 2006, will break ground on the railroad this month and the steel plant in July. The company contracted China Railway Group to provide the train line. 

 

Despite the project’s massive physical and economic footprint, and the company’s urgent timeline, no environmental impact assessments have been submitted, environment Minister Mok Mareth told the Cambodia Daily newspaper.

 

Local government officials of provinces affected by the project also said they had not yet been consulted. Even the minister of Transport confessed to knowing few details of the dazzlingly large investment.

 

“I don’t know what the companies will do. Let’s wait and see all together,” transport minister Tram Iv Tek told the Cambodia Daily. “If they can really do it, it will help Cambodia’s economy a lot.”

 

It’s not the only major deal China has recently inked in Cambodia. Three days before the railway announcement, a Cambodian company and China’s Sinomach China Perfect Machinery Industry announced joint plans for a US$2.3 billion oil refinery, the country’s first.

 

The projects are evidence of China’s upped engagement in south-east Asia, which will become a unified economic zone in 2015. Chinese investment in the resource-rich region is growing at double-digits annually, the Guardian reported last year, and is set to reach US$500 billion by 2015 – more than double its 2010 presence.

 

It is also another manoeuvre in a tussle between China and the US for influence in the strategically important region. In countries such as Cambodia and Laos, where Chinese companies are building a US$7 billion, 400-kilometre high-speed rail line, China is looking to replace western donors who have typically attached human rights improvements and other conditions to their aid.

 

At the same time, the US is angling to get closer to countries such as Burma, Vietnam and Philippines that are put off by China’s political aggression on issues such as the South China Sea.

 

In a 2008 diplomatic cable released by Wikileaks, a US embassy official referred to China’s presence in Cambodia as “a model of ‘blank check’ diplomacy.”

 

As for this most recent venture, Cambodian press reported that Cambodia Iron & Steel donated US$200,000 for a new headquarters in Preah Vihear province for the ruling Cambodian People’s Party, completed last year. Government officials said it had no bearing on their decision.