June 6, 2018 / 6:09 AM / 6 months ago

In Cambodia, stalled Chinese casino resort embodies Silk Road secrecy, risks

BOTUM SAKOR, Cambodia (Reuters) - The Dara Sakor Seashore Resort seems a long way off the new Silk Road that China is building to connect Asia with Europe.

A five-hour drive from Cambodia’s capital, Phnom Penh, Dara Sakor was once touted by the Chinese company building it as a city-sized casino resort for “extravagant feasting and revelry”.

Today, it is a sprawl of mostly empty hotel buildings, deserted beach bars and the unfinished shell of a casino on a remote part of the Cambodian coast. Beyond the resort, the dusty foundations of a planned investment zone stretch down to a container port - both unfinished and idle.

Despite its troubles, the resort and surrounding development has been lauded as a champion of China’s Belt and Road initiative, as the new Silk Road is officially known.

But the embrace of developments like Dara Sakor, whose operations are opaque and economically unclear, seems to run counter to Chinese pledges that Belt and Road projects will be open, transparent and environmentally friendly.

Work began on the project in 2008 after Cambodia leased 45,000 hectares in a national park to China’s Tianjin Union Development Group (UDG) for 99 years. That was long before the Belt and Road initiative was launched in 2013 by China’s President Xi Jinping and gained steam with a summit he hosted in Beijing in 2017.

Little information about the project and its progress is available, and it is unclear how much money has been spent on it, and which parties have benefited.

The project has also resulted in extensive environmental damage as forest was cleared for construction sites, and the displacement of thousands of people, according to villagers and non-governmental groups. They say they have seen little work on the project over the past three years.

UDG didn’t respond to requests for comment, nor did Cambodia’s environment ministry, which oversees the project for the central government.

BELT AND ROAD BOND

Dara Sakor appears to have been adopted as a Belt and Road project around 2017. That May, the China Development Bank (CDB), told the People’s Daily newspaper that it had underwritten a 100 million yuan ($15 million) “Belt and Road” bond to support UDG’s building of a holiday resort on Cambodia’s coast. It didn’t mention Dara Sakor by name.

The project was also included in a 2017 Belt and Road yearbook published by an affiliate of China’s Ministry of Commerce, which called it the Cambodia-China Investment and Development Zone and described it as “the biggest project of the Belt and Road initiative so far”.

The yearbook’s editor, Zhang Gaoping, said the guide had included projects chosen by the “leading group” that Beijing set up in 2015 to manage the initiative.

However, China’s National Development and Reform Commission, which oversees the leading group, said in an e-mail that it had yet to certify any Belt and Road projects.

“We recommend that companies publish as much information as possible before projects are launched, and also provide known information to the public,” it said.

CDB said in an email that it had financed infrastructure such as roads, water supply and power stations. It also said the two governments agreed to cooperate on the project during a visit to Cambodia by Xi in October 2016.

While tourism is often cited in Belt and Road projects, the initiative is primarily related to infrastructure that supports the development of trade routes.

However, unrelated projects are being pitched with the Belt and Road label to smooth approvals and get access to funding, Belt and Road analysts and industry executives say.

Jonathan Hillman, a fellow with the Washington-based Center for Strategic and International Studies said a lack of quality control posed reputational risks for China.

“This has the potential to undermine the Belt and Road coherence and its ability to achieve the goals that Chinese officials actually talk about,” said Hillman, who runs a database tracking Asian infrastructure projects.

$3.8 BILLION INVESTMENT

According to registration records, UDG is a subsidiary of Tianjin Wanlong Group, a Chinese property developer, and was established in 1994.

UDG planned to invest $3.8 billion in the project, which also includes an airport, according to a 2013 report commissioned by Cambodia’s environment ministry.

UDG was to spend $45 million on the port and $76 million to build almost 110 kilometres (70 miles) of roads, according to the report, compiled by the Cambodia-based Sawac Consultants for Development.

The company would also spend $1.1 million for tree-planting and environmental protection.

The Phnom Penh Post quoted UDG as saying in 2014 that about $10 million had been allocated for relocation and compensation expenses for villagers.

Over 1,000 families have likely been affected by the project and UDG is locked in multiple land disputes, according to rights groups and local media. In March, the Cambodian government told the environment ministry to give some of the UDG-claimed land back to villagers.

Some are still protesting for more compensation, saying that UDG did not give them what they promised.

A man stands near a Union Development Group helicopter in front of an old casino at Dara Sakor hotel at Botum Sakor in Koh Kong province, Cambodia, May 6, 2018. Picture taken May 6, 2018. REUTERS/Samrang Pring

UNFINISHED, FEW TOURISTS

It is unclear how much money has been spent on the project so far. UDG does not publish financial reports.

“They don’t give out a lot of information,” said Soeng Sen Karuna, an investigator for Adhoc, a Cambodian group advocating for displaced villagers.

On a recent visit by Reuters, access to the port, which the Sawac report said would be able to handle up to four 20,000-tonne container ships, was blocked by a Cambodian military officer. Viewed from a speedboat, parts of the port – which UDG had told local media would begin operating in 2015 - appeared unfinished.

Pou Nor, a local boatman, said he hadn’t seen ships dock or workers at the site in three years. Sometimes, soldiers would allow villagers to fish from the dock, he said.

Work on the airport, however, was underway. UDG’s website predicts that the airport will be completed in 2020. Zhou Jianning, a UDG employee who was overseeing construction, said the firm was building a 3.2 kilometre-long runway, which would be large enough for Airbus A380 planes.

At the resort, a large neo-classical building, which employees said was meant to house a hotel and casino, lay unfinished amid concrete dust and broken tiles. A pool outside had no water.

Across the road was a 102-room hotel and two completed 18-hole golf courses. Employees said the hotel, which opened in 2015, was focused on hosting prospective investors.

“We only cater to VIPs,” said the manager of one of the beach bars. “You have to be the boss’ friend.”

OPENNESS, SECRETS

Reuters was unable to verify statements UDG made on its website about investments from other Chinese companies in the investment zone or find evidence of their presence there.

Last year, UDG said it had signed agreements with Tai’an Jintai International Park Development & Management and Jilin Agricultural Economic and Trade Cooperation Zone to develop business parks that would host industries such as machinery manufacturing as well as juice and cashew processing.

It said the first batch of enterprises would enter the resort in July 2017.

Tai’an Jintai didn’t respond to calls for comment while Reuters was unable to reach the Jilin trade zone.

One resort building has been turned into a showroom with a model of the project, its walls decorated with pictures of visits by Cambodian officials. One showed former Chinese Vice Premier Zhang Gaoli attending the 2008 land transfer ceremony while he was the mayor of Tianjin. Zhang was appointed to head the Belt and Road leading group in 2015.

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Mithona Phouthorng, the governor of Koh Kong province, where the project is located, said she didn’t know which companies would be investing in the zone but that business and jobs would eventually be created there.

“They have their plan but I don’t remember all of it.”

Additional Reporting by SHANGHAI Newsroom; Editing by Philip McClellan

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