US-China Fight over Union Development Group Could Harm Cambodia’s FDI and Real Estate Market

• 21 September 2020
• Local News
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Economists, analysts, and real estate experts are concerned that the geopolitical fight between US and China over the Union Development Group (UDG) in Cambodia could hurt Cambodia’s Foreign Direct Investment (FDI) and real estate market, especially in Koh Kong province.

On 15 September, the US Treasury Department issued a statement imposing sanctions on the UDG and its US$3.8 billion Dara Sakor Project in Koh Kong province over serious human rights abuse and corruption, based on the Global Magnitsky Human Rights Accountability Act.

The statement allegedly accused UDG of burning down villagers’ houses and using private security and Cambodian officials to seize land from Cambodians. The statement also added that China had used UDG’s projects to advance its power ambitions globally.

According to a statement, the sanctions include blocking the firm’s financial transactions and the provision of goods and services within the United States.

The Cambodian government, the China Embassy in Cambodia, and UDG in response condemned the US sanctions stating that the UDG’s investment procedure in Cambodia is legally conducted, and the move by the US is more likely to reflect its own geopolitical ambition.

According to The Khmer Times, UDG also responded that the US is seeking to invoke domestic laws to impose “long-arm jurisdiction” on the enterprise on baseless and unnecessary charges. However, the firm has not revealed to what extent the sanctions will affect the progress of the Dara Sakor Project in Cambodia.

Though without clear outcome from the sanctions yet, local analysts are concerned that Cambodia is becoming the victim between this zero-sum game between two major powers.

Director-General of the Royal Academy of Cambodia’s International Relations Institute Kin Phea told The Khmer Times that the sanctions are an unreasonable move. Even though the US is focusing on a Chinese enterprise, it can negatively impact Cambodia’s investment climate. Given this, which Chinese firms in Cambodia will be the next target? He added that when elephants fight the grass suffers.

Cambodian political analyst Leap Chanthavy also worried that this move would hurt FDI and Official Development Assistance (ODA) in Cambodia amid the current pandemic and global economic slowdown.

Quoted in The Khmer Times Chanthavy said the sanctions could lead result in thousands of job losses and the immense loss of value-added development and benefits to the country as well as in Koh Kong province.

Meanwhile, several local real estate experts also said if this move affects Koh Kong’s economy, undeniably the real estate sector will also be affected. If the FDI declined, the real estate market flow would also decrease as the majority of investors are from China.

President of KW Cambodia Dr Kim Heang told Construction & Property Magazine that this incident would affect economy and real estate market in Koh Kong, but not severe.

“To be frank, Cambodia real estate market does not benefit much from the Dara Sakor project. The project is built by the Chinese firm and sold to Chinese buyers. However, definitely, if the project halts, it will affect local employment rather than the real estate market,” said Dr Heang.

Dr Heang also added that this would not discourage new investment to Cambodia, as the US sanction has its specific target, not to all Chinese firms.

“There are specific reasons behind the sanction on the UDG. There are many other Chinese firms out there that are fine. The US does not do it randomly. So, there is nothing to concern from other companies who conduct their business legally in Cambodia,” Dr Heang said.

The Dara Sakor Airport project is a long-controversial issue, receiving significant criticism from international analysts who say it is really being built to serve the Chinese military due to its massive size.  (Read more)

However, the Cambodian government has repeatedly denied the allegations, claiming the project was only being built for tourism (Read More).

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