23 May 2019
BRI-Backed Cambodian Road Link Set to Boost Local Logistics Sector
Once completed, new Phnom Penh-Sihanoukville toll road should drastically cut congestion and slash transit times.
Construction is now well underway on the first Cambodian toll highway connecting Phnom Penh, the national capital, with the country's main seaport at Sihanoukville. Commencement of work on the highway, a cornerstone project of China's Belt and Road Initiative (BRI) in Cambodia, was facilitated by the signing of a build-operate-transfer (BOT) contract early last year with the China Road and Bridge Corporation, a subsidiary of the state-owned Chinese Communication Construction Company.
The agreement was initially signed during Chinese Premier Li Keqiang's visit to Cambodia in January 2018. The 190km highway is scheduled to be completed in 2023, and will run alongside the existing, typically highly congested National Road 4, which will remain in use after the new highway's completion.
A significant feature of the deal is that, under the BOT structure, financing of the US$1.9 billion project will not require the Cambodian government to incur any significant debt. Critics of BRI projects have generally focused on the dangers of national "debt traps", which this project completely avoids.
Under the BOT arrangement, the Chinese counterparty will be responsible for nearly all the financing for the project and will then receive income from tolls charged for the period that it operates the route. The only financing that the Cambodian government will need to contribute is the $150-200 million compensation paid to those affected by construction, a cost that will be shared between the Cambodian and Chinese governments.
Given that the existing National Road 4 is the busiest thoroughfare in the country and that the new highway will be 40km shorter and have four lanes in places, the project's finance is said to be very much based on hard-nosed commercial projections. Highlighting this, Sin Chanthy, President of the Cambodia Freight Forwarders Association, said: "Even if drivers have to pay [tolls] to take the expressway, considering the state of current small, crowded road they have to take now and the nearly 40km it will save, it's easy to see that not spending so much on petrol will make it cheaper, while transit times will also be slashed."
Travel time between the two cities on the existing road is currently between six and eight hours over a distance of just 232km. The new highway, with its proposed speed limit of 100 km/h, should reduce that substantially.
The port of Sihanoukville is also booming – largely on the back of substantial Chinese investment. Yet this has also brought with it a number of problems. Highlighting these, Hiroshi Suzuki, Chief Executive of the Business Research Institute for Cambodia, said: "The people in Sihanoukville are facing such problems as increasing rents, strong pressure to relocate and other problems related to public order and security."
Despite this, the highway has generally been perceived as a model BRI project. Sok Kha, a Consultant regional co-operation specialist for the Asian Development Bank's Study of the Belt and Road Initiative, said: "Presently, Cambodia has inadequate infrastructure capacity and significantly lower performance when it comes to logistics than others in the region, resulting in higher costs that subsequently affect the country's economic competitiveness. As a result, the expressway project has huge potential in terms of enhancing connectivity and logistics within Cambodia and beyond, improving logistical efficiency and reducing trade costs."
Geoff de Freitas, Special Correspondent, Phnom Penh