VZCZCXRO0520
OO RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHPF #0696/01 1020938
ZNR UUUUU ZZH
O 120938Z APR 06
FM AMEMBASSY PHNOM PENH
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6469
INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 2358
RUEHKO/AMEMBASSY TOKYO PRIORITY 3058
RUEHCN/AMCONSUL CHENGDU PRIORITY 0004
RUEHGZ/AMCONSUL GUANGZHOU PRIORITY 0060
RUEHHK/AMCONSUL HONG KONG PRIORITY 0583
RUEHGH/AMCONSUL SHANGHAI PRIORITY 0001
RUEHSH/AMCONSUL SHENYANG PRIORITY 0008
RHHMUNA/HQ USPACOM  PRIORITY
RUEHGV/USMISSION GENEVA PRIORITY 1400

UNCLAS SECTION 01 OF 02 PHNOM PENH 000696 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS, EAP/CM; GENEVA FOR RMA 
 
E.O. 12958: N/A 
TAGS: PREL EAID CB CH
SUBJECT: CHINESE PM VISITS CAMBODIA, CHINESE ASSISTANCE 
SHOWCASED 
 
 
PHNOM PENH 00000696  001.2 OF 002 
 
 
¶1.  (SBU)  Summary.  Chinese Prime Minister Wen Jiabao 
visited Cambodia April 7-8 as part of his tour of Australia, 
New Zealand, and Fiji.  The PM announced an assistance 
package worth approximately USD 600 million, although some 
projects (the hydro-electric dam project in Kampot province 
financed by a USD 280 million GOC loan to a private Chinese 
firm) had been announced earlier by the Chinese government. 
In their joint communiqu, the two governments announced a 
comprehensive partnership to strengthen bilateral ties. 
Eleven accords were signed during the official visit, 
totaling USD 300 million dollars; most of the money (USD 200 
million) was low-interest loans, rather than grants.  As part 
of a diplomatic quid pro quo, Cambodia reinforced the One 
China Policy, slamming Taiwan, while China pushed for APEC 
membership for Cambodia.  Cambodian PM Hun Sen hailed the 
visit, noting with satisfaction that the Chinese money does 
not come with conditions or benchmarks -- a slap at the 
Consultative Group process in which China does not 
participate.  End Summary. 
 
China's PM Visit Cambodia 
------------------------- 
 
¶2.  (U)  During a two-day visit to Cambodia April 7-8, 
Chinese Prime Minister Wen Jiabao participated in two public 
events showcasing Chinese assistance to Cambodia:  the 
groundbreaking ceremony for the new Council of Ministers 
building financed by China with an estimated cost of USD 35 
million, and the launch of the hydro-electric dam project in 
Kampot province.  The Kampot dam project is being financed by 
a GOC low-interest loan to a private Chinese firm that won 
the bid to build the dam.  The Chinese announced low-interest 
loans to assist in the construction of two bridges -- one for 
the Tonle Sap river and other for the upper Mekong where 
Route 6 crosses at Prek Tamak.  The two countries discussed 
the upcoming fiftieth anniversary of bilateral relations in 
2008, according to press reports.  Deliverables included 30 
fire trucks and a scanner for checking shipping containers at 
the port of Sihanoukville. 
 
¶3.  (U)  In a joint communiqu, the two sides outlined the 
establishment of a Comprehensive Partnership of Cooperation 
aimed at deepening the bilateral relationship and focused on 
six areas:  (1) consolidating friendship and mutual ties 
through increased exchanges at all levels -- ministerial, 
local government, military, political parties and NGOs; (2) 
promoting economic cooperation and trade, especially in 
infrastructure, mineral, gas and oil exploration, 
manufacturing; (3) promoting other forms of cooperation in 
sports, culture, tourism, agriculture; (4) enhancing 
party-to-party and parliamentary exchanges; (5) expanding 
mil-to-mil cooperation and expanding cooperation on 
non-traditional security issues like transnational crime; (6) 
strengthening bilateral and multilateral diplomatic 
consultation, particularly within ASEAN and other 
multilateral organizations. 
 
¶4.  (U)  FM Hor Namhong characterized the visit as historic, 
and a new page in Sino-Cambodian relations.  From a business 
and investment standpoint, PM Hun Sen reported that PM Jiabao 
would press Chinese businessmen to increase foreign 
investment in Cambodia, and look for new avenues for opening 
businesses.  (Note:  Chinese investment in Cambodia 
reportedly topped USD 400 million in 2005, accounting for 43% 
of foreign investment projects approved by the Council for 
the Development of Cambodia (CDC) statistics.  End Note.) 
The RGC thanked the GOC for lowering or eliminating import 
duties and taxes on more than 400 products exported by 
Cambodia to China.  The two sides called for greater 
representation by developing countries on the UN Security 
Council, and Wen Jaibao invited Hun Sen to participate in an 
ASEAN plus China Summit to be held this year.  The Cambodian 
government reaffirmed its "One China" policy, clearly at the 
behest of Beijing.  In a separate public launch of a Korean 
factory on April 11, PM Hun Sen referred to Taiwan as "a 
province of China," and reiterated Cambodia's opposition to 
Taiwanese independence.  In return for the RGC references to 
Taiwan, China publicly called for Cambodia to become a member 
of APEC. 
 
PHNOM PENH 00000696  002.2 OF 002 
 
 
 
¶5.  (U)  In reviewing Chinese assistance to Cambodia, Prime 
Minister Hun Sen publicly thanked China on April 11, praising 
the GOC for helping Cambodia without setting conditionality 
or performance benchmarks.  Noting that promised Chinese 
assistance totaled nearly USD 600 million -- nearly the same 
amount as that promised by the Consultative Group (CG) of 
donors, RGC government spokesperson and Minister of 
Information Khieu Kanharith said that conditionality is a 
pretext by countries who do not want to provide aid.  In 
deference to Tokyo's sensitivities and sizable assistance to 
Cambodia, Kanharith singled out Japan from the CG group as 
another country that does not place requirements on the 
Cambodian government as a precondition to assistance. 
 
¶6.  (U)  Opposition Sam Rainsy Party (SRP) members were 
quoted in the local press as having reservations about the 
RGC's warm embrace of China, and downplayed the notion that 
Chinese assistance comes without strings.  Yim Sovann, an SRP 
parliamentarian, noted that Chinese largesse could mean that 
the RGC would not monitor closely Chinese firms that exploit 
the Cambodian environment.  Another SRP member of the 
National Assembly, Keo Remy, warned that Cambodia must remain 
independent and guard against being drawn into China's sphere 
of influence and larger geo-political designs in the region. 
 
Comment 
------- 
 
¶7.  (SBU)  Despite the hoopla regarding the USD 600 million 
assistance numbers equaling the CG donor figure, much of the 
assistance is old news and announced more than a year ago by 
the Chinese.  One Asian diplomat characterized it as recycled 
money and inflated figures.  The new assistance is mostly 
loans, and reportedly the Cambodians feel a bit squeezed on 
the terms.  According to diplomatic sources, the loans are 
not as good as those provided by the Japanese, and the RGC is 
reportedly not happy with the interest rates (the Cambodians 
wanted 1-3% but the Chinese did not agree).  We have heard 
that out of all the announcements resulting from the visit, 
the Cambodians are most pleased with getting final Chinese 
agreement on the long-awaited construction of the new Council 
of Ministers building as well as the dam in Kampot -- 
although with reservations.  We understand the RGC believes 
the Japanese do a better job on infrastructure projects, and 
that Chinese construction standards are not as good.  We will 
check with other sources regarding the significance of the 
Comprehensive Partnership and if it will translate into a 
real broadening of Chinese interests in Cambodia or if it 
will remain largely words on paper.   End Comment. 
Mussomeli