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Big trouble in little China?
Exploring Chinese investment in Sihanoukville

The coastal city of Sihanoukville is undergoing a massive transformation. Once perceived as a seedy haunt for lethargic backpackers and expats, a flood of Chinese tourists and investors has begun to alter the landscape by setting up everything from gaudy casinos to towering luxury resorts as well as restaurants, street stalls and shops on the once-sleepy city streets.

But as the beach town changes and the government welcomes the surge in development spending, it is becoming clear that Chinese investment has created a closed loop with few new opportunities for Cambodians, forcing locals out of any potential economic gain.

While Sihanoukville has long been a part of the government’s plan to develop the southern coast as Cambodia’s next tourism hotspot after Siem Reap, Taing Socheat Kroesna, director of the Preah Sihanouk Provincial Tourism Department, said that this year has seen a dramatic surge in Chinese visitors primarily drawn to Chinese-run casinos.

Currently there are 24 legally registered casinos in Sihanoukville, up from the 15 there were at the end of 2015, he said, with the vast majority owned and operated by Chinese investors looking to cash in on increased flight connections from the mainland.

Jin Bei Casino in Sihanoukville. Kali Kotoski

“The Chinese are being drawn to Sihanoukville because they like to gamble, and there are more casinos and junket operations that cater to them,” he said, adding that the coastal town is now connected to eight Chinese provinces with regular commercial and charter flights.

According to provincial tourism statistics, Chinese arrivals have skyrocketed by a staggering 170 percent in the first nine months of this year, reaching 87,900 arrivals. The total number of foreign tourist arrivals for the first nine months of this year stands at 347,000, an increase of 18.4 percent.

While Kroesna explained that the arrivals have spawned a huge increase in Chinese investment, he admitted that the benefits to the economy have been lopsided, with the majority of new jobs going to staff that the Chinese fly in themselves.

“The Chinese have their own tourism operators and buses that bring tourists from the airport directly to casinos and resorts. And they have their own restaurants and businesses to cater to them because we don’t have Cambodians with the right skills for the job,” he explained.

Kroesna said he hoped that this trend would be short-lived, and that locals would soon benefit from the vast wealth being generated by the coastal tourism sector.

“The government needs to control and manage this growth to make sure that not just foreigners are benefitting from more jobs,” he said, adding that the Chinese now account for 5 percent of the 11,000 jobs in the beach town’s hospitality sector.

A Chinese tourist enjoys a foot massage at the beach. Sahiba Chawdhary

Sok Song, vice president of Preah Sihanouk Chamber of Commerce, downplayed concerns that locals were losing out on the development of what he dubbed “Chinatown”, adding that the main concern was that “dirty” money or speculation was fuelling Sihanoukville’s unprecedented boom.

“While there are some labour concerns, we are more concerned that there are Chinese investment commitments that may not materialise,” he said, adding that 20 new Chinese hotel and casino projects are expected to break ground next year.

However, he said that land and rental prices have already tripled in certain areas since the beginning of the year as the Chinese have bought entire residential areas and unfinished developments to house their staff.

“We need to closely control how much investment is coming in, especially if growth is going to be led by speculative casino investments,” he said. “If we don’t, then we all lose out, especially the land owners who are renting to the Chinese.”

Despite the economic potential of hotels, casinos and increased tourism numbers, Cambodia’s gambling industry has long maintained a murky reputation, with the coastal destination rarely earning positive headlines.

Major General Kul Phaly, deputy commissioner of the Preah Sihanouk provincial police, admitted that money laundering, illegal casino operations and human trafficking have become acute concerns.

“But we are fully capable of handling any criminal element with our team of spies and special expert units that patrol 24 hours a day to check for valid work permits and monitor gaming operations,” he said.

While he couldn’t provide statistics for the amount of arrests or deportations the provincial police have made, he did say that special units had raided and shuttered five Chinese-run online casinos so far this year.

Meanwhile, The Post reported in October that the police had caught at least 346 Chinese nationals implicated in illicit online gaming and Voice over Internet Protocol (VoIP) extortion schemes in 2017 alone.

Slot machines at a casino in Sihanoukville. Sahiba Chawdhary

Nevertheless, Phaly noted that the police had become more confident in their abilities after the instatement of a new provincial police chief in April 2015. Morale had been even further bolstered by the seeming demise of what he dubbed the “Russian mafia” following the deportation of Russian property tycoon Sergei Polonsky and the ousting of Ostap Doroshenko, the son of Russian businessman Nikolai Doroshenko and a former police officer in Preah Sihanouk province.

Even Doroshenko’s eponymous Snake House restaurant and snakebite NGO appears to have fallen prey to Chinese investment, with the once slithering restaurant now festooned with Chinese characters and a single sea turtle remaining in the aquatic tank as the sounds of construction fill the air.

“Once we got Polonsky out of the country and Ostap out of our police force here, it got better for us because the Chinese are scared of prison and have more respect for us than the Russians did,” he said, adding that there have been only two notable violent incidents with Chinese due to “drinking and dancing”.

However, Jonny Ferrari, managing director of Ferrari Gaming, an online gaming consultancy based in Sihanoukville, said that a lack of effective government regulations in the gambling sector and what he characterised as the authorities’ apparent willingness to accept bribes has created an environment “where it is easier to get a casino licence than a restaurant licence”.

“It is no secret that the local authorities can be paid off to look the other way and let unregulated Chinese casinos operate,” he said. “But the problem is that it makes around 90 percent of the Chinese casinos fly by night investments, which can quickly close up shop by breaking lease agreements.”

“I am worried that if all they attract is gamblers, it will be a disaster for us.”

While Ferrari predicted there would be no slowdown in the near future of new Chinese casinos, each decked out in glittering lights and plastered with advertisements offering easy wins and expensive thrills, he maintained that the day would come when many poorly managed operations would close, allowing big names and players to step in and make Sihanoukville the “new Macau”.

But until then, local businesses are struggling to adapt and many are afraid that they will be further edged out by the influx of Chinese investment.

By Vanny, who runs the Beautiful Beach 168 bar on Ochheuteal beach, said that the boom of Chinese tourists has hurt local businesses, as many are unwilling to go to Cambodian-owned venues. What’s more, she added, as businesses catering to Chinese tourists push out ones that traditionally catered to Westerners and locals, there are fewer other tourists to patronise the local businesses that remain.

“We don’t receive any business from the Chinese,” she said. “I am not happy with the growth of Chinese tourists and investors, and I am worried that if all they attract is gamblers, it will be a disaster for us.”

Chinese tourists at a beach in Sihanoukville. Sahiba Chawdhary

Restaurant owner Chay Piseth, who runs the Nice Ocean restaurant, was even more vehement about the damage that the unmitigated flow of Chinese tourists and investors would inflict on the once-sleepy town.

He fears that his restaurant on Serendipity Road would be shuttered next month after he was handed a letter of eviction three weeks ago saying that an unnamed Chinese investor had purchased the land for “renovations”.

“I can’t survive the flood of Chinese tourists and investors because they only support each other and don’t care about locals,” he said. “When I lose my business next month, I will just be another slave to Chinese investors unless the government helps to block them from entering the industry.”

“The Chinese view Cambodians as low-class workers, while they take up all the high positions, despite some of us having businesses here for over 10 years,” he said.

However, not everyone is bad-mouthing the boom.

Robert Heiduczek, a German national who has been operating Sun Tours, a boat service company, for the last 13 years, said he had little sympathy for the local businesses that “have and will continue to close as Chinese set up shop”.

“The Cambodian business model down here has never been sustainable, and finally some real cash is just starting to come in,” he said.

“How can local businesses sell 50 cent beers along the beach and expect to remain open?” he asked, complaining that local businesses had already cannibalised themselves by keeping prices artificially low to remain competitive. “Chinese investment is the best thing to happen to Sihanoukville and it is finally putting the town on the map.”