BRE581 International Construction

Projects

Term Paper - Group 2

Date of Submission: 03rd April 2022

Student Name Student ID Programme

CHAN HOI YING 20020443G MSc in Project Management

WANG TAT 19012107G MSc in Project Management

NG KA MAN 20006376G MSc in Construction Law and Dispute Resolution

YU NGA SZE 20001571G MSc in Construction Law and Dispute Resolution

 The Hong Kong Polytechnic University
Department of Building and Real Estate
BRE581 – International Construction Projects

ASSESSMENT FORM FOR GROUP TERM PAPER

A+ Exceptionally B+ Very Good C+ Wholly D+ Barely Adequate
Outstanding Satisfactory
A Outstanding B Good C Satisfactory D Weak
A- Excellent B- Wholly C- Barely F Inadequate
Good Satisfactory

Overall Grade : ________________________________

Programme Name Student Name Student ID No
MSc in Project Management Chan Hoi Ying 20020043G
MSc in Project Management Wang Tat 19012107G
MSc in Construction Law and Dispute Resolution Ng Ka Man 20006376G
MSc in Construction Law and Dispute Resolution Yu Nga Sze 20001571G

Assessment Criteria for Group Term Paper

A A A B B B C C C D D F
+ + + +
- - -
Relevant focus and depth Irrelevant & superficial
Effective use of theory Ineffective or none
Good analysis of practice Poor or none
Creative Thought Lacks originality
Wide range of sources Restricted scope
Appropriate length Inappropriate length
Competent Incompetent
Communication communication
Sources accurately cited Plagiarism
Correct referencing Incorrect or none

Comments:
__________________________________________________________________________________

__________________________________________________________________________________

__________________________________________________________________________________

__________________________________________________________________________________

__________________________________________________________________________________

Assessor’s Name: _________________ Signature: _________________ Date: ________________

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 Content
1. Abstract 5

2. Introduction 5

2.1 Objectives of report 5

2.2 Business Background 5

2.3 Background of the Designated Development 6

3. Selection of Project Delivery System 9

3.1 PESTEL Analysis for determination of project delivery system 9

3.2 Value Chain Analysis for determination of project delivery system 11

3.3 Procurement System Selection Model 11

3.4 Procurement Method Selection Criteria Evaluation 14

4. Contractual arrangements 16

4.1 Selection of Contracting Partnership 17

4.2 Selection of Payment Mechanisms 18

5. Risks and challenges of the joint venture construction project in Cambodia 19

5.1 Political aspect 19

5.1.1 Relatively weak governance system in Cambodia 19

5.1.2 Legal risks 20

5.2 Economic aspect 20

5.2.1 Lack of financial capacity 20

5.2.2 Currency and Exchange Rates 21

5.3 Social aspect 21

5.3.1 Cultural differences in communication 21

5.4 Environmental aspect 21

5.4.1 Environmental and Safety management 21

5.4.2 Hygiene and Public Health 22

6. Recommendation 22

6.1 Political - Cultural Difference 22

6.2 Topography and geography 23

6.3 Economic Sustainability/ Financial Capacity 23

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 6.4 Agreement, Contracting or Law 23

6.5 Continuous Development and Partnering 24

6.6 Law and Regulations about safeguard policies and procedures 24

7. Conclusions 24

References 25

List of Figure
Figure 1 Geographical location of Krong Preach Sihanouk ............................................. 7

Figure 2 Project life cycle orientated value chain chart of the project .......................... 11

Figure 3 Categorisation of procurement systems, Chan et al (2001).............................. 12

Figure 4 list of panels of experts for the Delphi method .................................................. 13

Figure 5 Concordance coefficient of different procurement systems ............................. 14

Figure 6 Overall score resulted for different procurement method under multi-
attribute procurement selection model ..................................................................... 16

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1. Abstract
As one of the members of JV partnership, our Client Developer X joined a complex
development project which includes exhibition centre, office and hotel in Krong Preah
Sihanouk, Cambodia. As requested by Client analysis was conducted to identify suitable
procurement strategy, delivery systems and contractual arrangements for accomplish this
project. Within the partnership relationship on the project, the potential risks and challenges
were identified for our client’s position, which recommendations to protect our client’s
position and rights, was given for the consideration and implementation.

2. Introduction
2.1 Objectives of report

This report is to conduct an analysis for joint venture (JV) bid for the exhibition centre /
office / hotel complex development project at Central Business District fringe of Krong Preah
Sihanouk, Cambodia as local contractor X, which therefore provide a fully justified
recommendation on appropriate procurement strategy, delivery systems and contractual
arrangement for the complex development, and identify and discuss all the potential risks and
challenges that may be encountered as a partner member of the JV, and advise X how to
protect the position as the key participant of the project.

2.2 Business Background

2.2.1 Business Nature of the Development and Position of JV

JV was set up amongst Chinese investor and X for bidding of construction contract from the
Client developer, who was awarded development partnership contract with Krong Preach
Sihanouk, that the municipality sponsored 70% of land and the Client developer acquired
another 30% land for the development. Land and property ownership will belong to Client
developer. Operation of exhibition centre and its revenue will belong to Krong Preach
Sihanouk and operation of hotel / office and its revenue will belong to Client developer. The
JV will be responsible for the design and construction of the property and the injection of
capital throughout the construction period. In exchange of the provision of the property, the
Client developer will pay the JV for the lump sum amount on the bidding upon completion of

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the project (including all statutory license for commencement of operation was acquired by
JV).

2.3 Background of the Designated Development

2.3.1 Economic Drivers of Cambodia

“Over the past two decades, Cambodia has undergone a significant transition, reaching lower
middle-income status in 2015 and aspiring to attain upper middle-income status by 2030.
Driven by garment exports and tourism, Cambodia’s economy has sustained an average
annual growth rate of 7.7 percent between 1998 and 2019, making it one of the fastest-
growing economies in the world.” (World Bank, 2022)

It is observed that the major economic driver of Cambodia was garment exports and tourism,
which is expected that the economic growth is sustainable and is aligned with the proposed
development.

2.3.2 Background of Krong Preah Sihanouk

Krong Preach Sihanouk is a coastal city located at southwest of Cambodia, which is at the
seashore of Gulf of Siam in South Asia Sea, see Figure 1. (Wikipedia, 2022)

The area of city is 195.9km2. The population of the city is 73,380. (World Bank, 2018)

As costal city and capital Sihanouk Province, Krong Preah Sihanouk is one of the major
tourist attractions of Cambodia. (World Bank, 2018)

An urbanization potential study by World Bank (2018), Krong Preah Sihanouk was ranked
high potential for urbanization, by indicating the overall scoring is high with indicators
including market accessibility, and transport connectivity, economic density, urbanization
rate and human capital. In view of the current economic structure, 90.1% of economic was
driven by services industry.

One significant feature of Krong Preach Sihanouk is the logistic infrastructure established for
the import and export traffic for the nation. The Sihanoukville International Port is a port
established in Krong Preach Sihanouk, which is consisting of a 350,000 TEU/year container
terminal, 0.9 million ton/year general/bulk cargo terminal, and 270,000 person/year passenger

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terminal, and occupies more than 60% of total national logistics, was constructed in 1956 as
the only deep-water harbor in Cambodia. (World Bank, 2018)

Figure 1 Geographical location of Krong Preach Sihanouk

2.3.3 Opportunities Driven by “One Belt, One Road” to Krong Preah Sihanouk

“Overseas economic and trade cooperation zones (economic zones) developed by Chinese
enterprises under the Belt and Road Initiative have been driving economic growth along the
Belt and Road, providing an important platform for fostering international cooperation and
financial integration.” (HKTDC, 2022)

According to SSEZ (2022), Sihanoukville Special Economic Zone (SSEZ) was set up, which
is jointly developed and constructed by private companies from both Cambodia and China, is
also as a part of development strategy of Belt and Road Initiative (BRI). It is expected that as
the capital of Sihanoukville Province, SSEZ will further boost the demand of exhibition,
office and hotel in Krong Preah Sihanouk, as well as the geographic proximity between
Krong Preah Sihanouk and SSEZ, that the Krong Preach Sihanouk and SSEZ is connected by
12km length national road.

Krong Preah Sihanouk is well-known for the established Chinese investment and settlement.
In 2019, nearly 80,000 Chinese lives in the city which is accounting for 90% of the city’s
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expat population. As a reflection on this, city scene is changed. An example is the Mandarin
signage increasingly replacing Khmer and English signage in the city. (Wikipedia, 2022)
Based on settlement of Chinese investors, the importance of Krong Preah Sihanouk for the
nation on the Belt and Road Initiative is further strengthened.

2.3.4 Elaboration of Potential Opportunities

Based on the background of Krong Preah Sihanouk, the potential opportunities for both
exhibition centre, office and hotel would be elaborated as follows, for the Client’s
understanding on the potential benefit and revenue can be driven for the project and therefore
how the Client can place his best position to the contract relationship to optimize his return.

Exhibition Centre

As one of the important cities for the planning of BRI, the exhibition centre can boost the
available business opportunities for Krong Preah Sihanouk by conducting and holding the
different kinds of conference and events like Jewellery fair, Business Expo etc. If it can be
the hosting venue international level expo, visitors from worldwide would be attracted to the
city and opportunity of personal sightseeing to the details of the city would hugely increase
the investor’s interest to the place. Adding to the existing import and export infrastructure as
established and the Sihanoukville Special Economic Zone for BRI, it is very high potential
that the Krong Preah Sihanouk would eventually become the South Asia and even world class
capital and business hub in South Asia, which is similar position to Hong Kong in East Asia,
and therefore generate revenue by boosting the overall economy to the region. It is observed
that the long-term benefit to the city by operating the exhibition centre is much huger than the
annual revenue it can be generated by holding the events, which therefore the municipality
would be interested to operate the exhibition centre by themselves.

Office

By boosting of the overall economy of Krong Preah Sihanouk, the need of office space shall
also be boosted for the increasing business and new local offices which is forecasted to be set
up by new investors, who are going to invest the city and SSEZ to meet the opportunities
given by the BRI. Also, if the proposed exhibition centre is progressed to world-class
exhibition centre, it is expected that international expo holders and international companies
will set up local office for their convenience for holding their events. By the convenience of

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location and providing integrating services with the exhibition centre, the room and
sustainability of increasing of renting value and therefore the revenue on providing office
spaces in the complex will be secured.

Hotel

As one of the major components of the complex development, the hotel shall majorly focus
on providing hospitality and accommodation services to person who have business trip to
Krong Preah Sihanouk and participation of exhibition hold by the proposed exhibition centre.
By the synergy effect of the exhibition centre, office and hotel, it is expected that the room
and sustainability of increasing revenue from providing the hospitality services for the
proposed hotel is highly viable.

In overall, the exhibition centre, office and hotel complex shall be a good combination on
sustainable development and subject to the overall economy development of the city, all the
components would contribute great function and provide valuable return to the investors.

3. Selection of Project Delivery System

3.1 PESTEL Analysis for determination of project delivery system

PESTEL Analysis is conducted to Cambodia to identify the characteristics of the area on the
potential risks and opportunities to the concerned project carried out in Krong Preah
Sihanouk, in order to further analyse the suitable value chain of project delivery and
procurement system.

Political

Along with the domination of Cambodian People's Party (CCP) in Cambodia, it is foreseen
that the political stabilities remain unchanged which the potential risks on change of policies
due to change of power in Cambodia during the period of development is minimum.
Furthermore, the good relationship is maintained between China and Cambodia, it is foreseen
that the JV partnership of the concerned development with Mainland Chinese investor shall
be an advantage to enhance the smoothness of the project operation.

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Economical

According to World Bank (2022), as driven by garment export and tourism, Cambodia
attained average annual growth rate of 7.7% between 1998 and 2019, which considered as
one of the fastest-growing economies within the global market. By the attraction of potential
profit driven by the economic growth, it is expected that even if the capital injection of the JV
is coming from Mainland Chinese investor is discontinued, financing from other foreign
investors would be available to overcome this potential risk.

World Bank (2022) mentioned that the COVID-19 epidemic slowed down the recovery of
construction and real estate sectors, which it is expected that the local resources including the
local manpower for construction would remain low-cost level initially in post-epidemic
period.

Technological

According to research conducted by UNESCO Institute for Statistics in 2015, capital inputs
on research and development are 0.1% of GDP. In view of current low-level technological
status of the state and low input research and development, it is foreseen that the construction
technologies and high-end equipment which would be adopted for the concerned
development project should be sourced from foreign countries, which might lead to
uncertainties on construction cost.

Environmental

Although Krong Preah Sihanouk is one of most developed area in the state and the
environmental restriction in the area is low currently, up to the raised concern and
accumulative problem during the development of the area, the environmental management
restriction strengthening is foreseen to be implemented within the project development period,
which may induce cost implication to the development.

Legal

Along with the stability of political power, it is foreseen that the legal risk to the development
is very minimal.

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3.2 Value Chain Analysis for determination of project delivery system

Based on the PESTEL analysis, the recommended the project life cycle orientated value chain
of the project is illustrated in Figure 2.

Figure 2 Project life cycle orientated value chain chart of the project

In summary, a suitable procurement system should efficiently utilize the local and
international resources to meet the designated project delivery goals including time and cost
control and etc.

3.3 Procurement System Selection Model

Refer to Chan et al (2001), major categorization of procurement system for normally adopted
for international construction project is illustrated in Figure 3.

Since enormous factors and considerations which many of them interact with each other on
the evaluation of selection of appropriate procurement system of the project, Delphi method
is chosen to derive the multi-attribute procurement selection model for the selection of the
appropriate procurement system.

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 Figure 3 Categorisation of procurement systems, Chan et al (2001)

As experts’ system, local experts and international experts from shareholders and
professionals from academic institutes and potential partners, which observed from the value
chain analysis were invited to set up the system, as listed in Figure 4.

According to the procedures of Delphi method, the concordance coefficient of different

procurement systems, are derived as Figure 5.

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 Local / Organization
Name Position Section International currently works for
1. Mr. A Chief Public Local Commercial
Secretary of Development
Department Department of
Municipality of Krong
Preach Sihanouk
2. Ms. B Chief Public Local Lands Department of
Secretary of Municipality of Krong
Department Preach Sihanouk
3. Mr. C Senior Private Local Facility Management
Manager Firm Y
4. Mr. D Management Private Local Main Contractor AA
Director (potential local
contractor partner)
5. Ms. E Director Private Local Surveyor Firm BB
(potential local partner
for statutory
procedures)
6. Mr. F Project Private International Developer / Main
Director Contractor X
7. Ms. G CFO Private International Chinese Investor of
Project
8. Dr. H Professor Private International International
(Head of Construction Project
Research) Research Department of
University CC
9. Ms. I Director Private International Architectural Firm DD
(potential partner for
architectural designs)
10.Ms. J Director Private International Structural & E&M
Consultant EE
(potential partner for
structural and E&M
design)

Figure 4 list of panels of experts for the Delphi method

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 Figure 5 Concordance coefficient of different procurement systems

3.4 Procurement Method Selection Criteria Evaluation

To make use of the multi-attribute procurement selection model, the relative importance of
criterion was filled from 1 (least important) to 5 (most important) in order to return the
priority with utilities factors.

1. Price Completion is rated in 3. The complexity of exhibition centre / hotel / office is

relatively low and more than 50% of manpower and building material can be sourced
from local resources and nearby regions which the overall price risk is low for the project.
2. Time available is rated in 5. The Municipality of Krong Preach Sihanouk would desire to
obtain the exhibition centre as soon as possible in order to boost the promotion of
business to the region, which is the key motivation and pre-requisite of Municipality of
Krong Preach Sihanouk to form this relationship contracting.
3. Competent Contractor is rated in 1. As the level of complexity of exhibition centre / hotel
/ office is relatively low, the importance of competent contractor is low. At the same time,
according to the value chain analysis, the project shall make use of strengths of both
international contractors and local contractors in order to optimize the outcome of the
project, therefore the dependence of competent contractors should be minimum.
4. Clear user’s requirement is rated 5. As the level of complexity of exhibition centre / hotel
/ office is relatively low, it is expected not difficult to obtain and consolidate clear user’s
requirements in tender stage.

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5. Complexity is rated in 1. The complexity of exhibition centre / hotel / office is relatively
low as the system required to facilitate the usage and building technology required is very
general,
6. Certainty of Cost is rated in 5. The Chinese Investor would require the total cost can be
ascertained in the tendering stage to facilitate the financial planning of capital injection to
the project.
7. Flexibility is rated in 2. Although it is supposed to freeze the design is very early stage,
some flexibility is reserved for minor adjustment of the project in case there is any change
of external environment.
8. Risk Management is rated in 5. The project team would require the certainty of project
delivery is controllable in order to facilitate the overall scheme of commercial
development in the region.
9. Familiarity is rated in 4. Both the Client side and the Contractor side would like to use a
familiar delivery system to execute the project which all parties will not have potential
dispute on responsibility, payment terms and so on.
10. Responsibility is rated in 3. As the contracting relationship of the project is tented to be
partnering style with “shared pain, shared gain” principle. The need of single point of
responsibility is not the major consideration, in considering the low complexity of project,
that the dependence of professional liability is relatively low.

The overall score of different procurement method based on the multi-attribute procurement
selection model, is demonstrated in Figure 6.

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 Figure 6 Overall score resulted for different procurement method under multi-attribute procurement
selection model

In conclusion, the Competitive Design and Build is revealed as the most suitable procurement
method to meet the project objective and pre-requisite of main stakeholders.

4. Contractual arrangements
Generally, when the client develops a construction project, their main objective is to
complete the construction project at the lowest price and maintain it at the lowest cost. By
looking for competent contractors to assist them in carrying out these projects, most of the
clients want to both delegate execution responsibility to the contractor and reduce the risk of
taking on these projects themselves. Therefore, a construction contract needs to be signed
between the client and the contractor to transfer the construction responsibility of the
development project. At the same time, the capital risk also had been transferred. The
purpose of all tendering procedures and contractual arrangements is usually to select the most
suitable contractor for the project, obtain the appropriate quotation and use this as a basis for
agreement prior to project implementation.

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Therefore, as the main contractor, it is necessary for contractor X to realize that when the
client considers tendering, negotiating, etc., the arrangement of the contract is the only one
tool for them to select the contractor and determine the terms of liability transfer. Therefore,
all contractual arrangements of the contractor should not only optimize the client's
requirements in terms of quality, time, price, etc., but also protect the main contractor's own
interests.

4.1 Selection of Contracting Partnership

In this project, relational contracting is a better choice for contractor X. As the name implies,
a "relational contracting" is a contract that governs the relationship between two or more
parties. Although a relationship contract sounds like any other contract, it contains a number
of specific requirements designed to help the parties maintain a lasting and productive
relationship over an extended period of time. These contracts encourage both parties to focus
more on their relationship than just their transaction.

According to the Chan et al. (2010), there are six main types of relational contracts. They are
project cooperation (PP), strategic cooperation (SP), project alliance (PA), strategic alliance
(SA), public-private partnership (PPP) and joint venture (JV).

Relational contracting can benefit clients, main contractors, consultants and subcontractors.
Key elements of the different forms of relational contracting include trust, commitment,
cooperation and communication, common goals and objectives, and the concept of win-win,
with plans including due consideration of the interests of all parties at all levels. Relationship
contracts are projected in the context of a broader procurement system and implicitly
incorporate supply chain engagement, which is critical if performance indicators of optimal
value, community benefit and innovation are to be achieved.

Since Public-private partnership (PPP) is a type of agreement in which the public and private
sectors work together to share resources, returns and risks. It is not suitable for this project.
Therefore, joint venture is selected.

In construction industry, the use of joint venture relationships has become a convenient and
necessary means of pooling economic resources, skills and knowledge in order to negotiate,
connect and complete a new large-scale construction project (Grab,1988). A joint venture (JV)
is defined as two or more independent organizations, each of which participates in the
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decision-making activities of the parties. A joint venture is an arrangement in which at least
two legally separated interest groups provide funds, facilities and services to the enterprise
over a long period of time for the common benefit.

The joint venture will take the form of a partnership in the true sense of the law, in which
more than one or a group of companies agree to engage in joint business activities, even for
profit. Dealing with such partnerships will undoubtedly bring some benefits to the client.
Joint ventures allow partners to share the upfront work and costs of a project, such as bidding,
negotiation, research or development. It also allows partners to centralize business contacts or
learn about customers or markets.

Joint ventures provide a large amount of capital and also require risk sharing among partners.
In addition, the parties to the joint venture bring different kinds of technology, technology,
people and marketing skills. Grouping efforts increases synergy.

In Hong Kong's past big infrastructure projects, they have always used joint ventures for
delivery. This is because joint venture relationships in the construction industry can provide
the concentration of economic resources, skills and knowledge needed to negotiate, combine
and complete a new large-scale construction project. On the other hand, the application of
joint ventures in new buildings can be extended to the development and management of
facilities, as well as the delivery and maintenance phases. All these can prove that in this
project, choosing a joint venture is a correct choice.

4.2 Selection of Payment Mechanisms

The Engineering and Construction Contract (ECC) of New Works Contract 4 (NEC4) is a
more appropriate payment mechanism for this project. There are several main advantages
which are listed as follows:

First of all, compared to the traditional form of contract, NEC 4 can be used for all contract
relationships. It has more options enable chosen procurement and risk strategies. For example,
ECC has 7 main clauses and 22 secondary optional clauses. It is easier to read and use since it
did not include any cross-referencing and use plain English. Also, it has a greater role clarity
for better accountability.

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Secondly, an early warning clause is included in NEC4. According to clause 15, it requires
that Project Manager or the Contractor has the duty to warn of events that may affect the key
project objective. The early warning system is a very simple but very important aspect of the
contract. Simply put, it requires both parties to notify each other when they become aware of
any issues that could affect time, cost or quality. Once formally notified, the Party can first
review whether this is a problem and, if so, how to manage it to avoid or minimize its impact
on the project. The main premise of the system is that parties give early warning of potential
problems. The parties can then discuss the issue and work together to reduce (or completely
eliminate) the possible impact of the event. Only when all this has been done will it be
necessary to consider who is responsible for the incident under the contract.

Thirdly, in ECC NEC4, change management will consider the cost and time impact. In
additional, there is a time bound process (for max 6 weeks) to be provided for a rolling final
count. Also, according to Clause 60.1 sets out a number of events which are identified as
compensation events. In either case, if the issue causes the Contractor to incur additional
costs in carrying out the Works or delays in completion, these costs and additional time will
be recovered through the compensation event procedure. For Contractor X, who is going to a
new city for development, there will be many unpredictable risks during the project. This
clause can protect the interests of both parties.

Therefore, NEC4, as an overall contractual arrangement for a more equitable, cooperative

and productive method, allows contractor X to manage this project with greater effectiveness
and efficiency.

5. Risks and challenges of the joint venture construction project

in Cambodia
Although One Belt One Road project in Cambodia could bring economic growth, there a
several risks and challenges while implementing the construction project. The challenges will
be discussed as below, including political, economic, social, cultural and environmental
aspects.

5.1 Political aspect

5.1.1 Relatively weak governance system in Cambodia

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The governance system in Cambodia is relatively weak as their corruption problem obstruct
to a fair and equitable share of economic growth. This corruption phenomenon has caused
Cambodians and some foreign citizens doing business in the country to believe corruption is
a way of life in Cambodia. As a result, the investors are not willing to make investment to
that place.

5.1.2 Legal risks

The One Belt One Road project consists nearly 70 countries, different countries have
different legal policies, a numerous dispute will be raised during the project. In the meantime,
the construction project involves a several sub-contracts and parties, it consists different
conditions of contract. Different parties may have their own preferences for adopting
specified type of contract. Therefore, the better way to minimize the disputes for the
developer, main contractor and other parties is to try to align the contract conditions. On the
other hand, the developer and the main contractor shall communicate for getting clear
understanding the contract mechanism.

5.2 Economic aspect

5.2.1 Lack of financial capacity

Initially, Cambodia is one of the countries identified as “risk of debt distress” by the Centre
for Global Development while the outstanding external debt in Cambodia has reached to
$9.18 billion which China accounted for nearly 45 percent of the Cambodia’s debt (Camboja,
2021).

In the meantime, implementing one belt one road projects in this country, it could bring
significantly increased risks of sovereign debt default as the project cost in an expeditious
manner and financed with sovereign guarantees and/or loans. Therefore, an unhealthy and
undeveloped financial system in Cambodia is a crucial factor to affect investors’ long-term
investment.

On the other hand, Cambodia’s engagement in the one belt one road project is overreliance
on Chinese investments and loans which may induce Cambodia to fall into a debt trap,
resulting in the loss of trust and autonomy as a sovereign state.

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5.2.2 Currency and Exchange Rates

The taxes imposed to the venture and fluctuation of currency exchange rates will be the
difficult issue to deal with. The foreign investor may annotate those taxes imposed to the
venture will be their major external economic challenges. Therefore, the local government
need to supervise the taxes rate and fluctuation of currency in the country as the factors
influence the survivals of the foreign investor’s joint venture.

5.3 Social aspect

5.3.1 Cultural differences in communication

Although Cambodia provides a greater amount of construction workers, most of them are
unskilled and untrained. Therefore, as a joint venture project, China may need to send
sufficient skilled workers to Cambodia for the aim of training their local people and thus
accelerate the construction process and reduce construction accidents. However, cultural
difference between Cambodian and Chinese will lead to communication problems and will
hinder knowledge exchange and inter-organizational learning. Kivrak, et al. (2014) claimed
that language difficulties were critical barriers to successful knowledge sharing in
multicultural project teams. Therefore, communication challenges will be a barrier for worker
training on multinational project.

5.4 Environmental aspect

5.4.1 Environmental and Safety management

In accordance with the World Health Organization’s guidelines, the air quality in Cambodia
is considered moderately unsafe. The data in 2021 has indicated the county’s annual mean
concentration of PM2.5 is mg/m3 which exceeds the recommended maximum of 10mg/m3.
The major sources include vehicle emissions, road dust, the garment industry, tourism,
agriculture, power generation and traffic congestion. The lack of social and environment
impact assessment and safeguard measures is the key shortcoming of one belt one road
projects in Cambodia. Therefore, environmental impact assessment and appropriate measures
shall be taken for mitigating the environmental impact especially during the construction of
the infrastructure.

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Apart from that there are several safety concerns need to be addressed during the construction
project. Some of the workers are interviewed by the China Labour Bulletin noted that
unregistered construction and unsafe conditions are still commonplace in the construction.
The International Labour Organization investigated that more than 1500 workers are killed
each year by occupational accidents in Cambodia. Most of these accidents occur in
construction sites, brick kilns and small enterprises that have neither the knowledge nor
system in place to protect workers. Therefore, safety control and safety trainings shall be held
regularly by the safety officer for the aim of raising workers’ awareness.

5.4.2 Hygiene and Public Health

The hygiene issue is an essential problem in Cambodia, their medical and healthcare system
is far behind the world standard. This issue is no doubt that influence the foreign investment
as the construction expertise are not going to make investment in the place with poor level in
hygiene and medical system.

6. Recommendation
X wishes to expand its business under “One Belt One Road” Initiative of China to Cambodia
and wishes to get the maximum benefit under “OBOR”, it is essential to prepare and advise X
how to protect their position as the participant.

The following advice for Local developer X in consideration of culture difference, law, and
regulations for working with JV partners are recommended as below: -

6.1 Political - Cultural Difference

Cultural difference and shocks existed between two international Joint Venture organization.
To develop an effective partnership, mutual trust is one of the main factors. By emphasizing
the mutual trust in JV partners, it can minimize the distance between two countries. Peterson
(1978) stated that the joint ventures can be attribute to the inability of JV partners to
understand the cultural for each other. To influence the joint venture performance and the
impact on thrust, it is suggested that the post-formation process is used to overcome the
national culture barriers and trust can be created. Besides, the main factor is the mutual trust
for emphasizing the partner’s trust and minimize the cultural distance for providing effective
partnership. National condition and cultural background between China and Cambodia
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should be studies and considered for ensuring the culture management are suitable. For
example, the national condition, the organization, personnel information and incentive are
related to their culture differences should be fully understand.

6.2 Topography and geography

For Mainland China and Cambodia, the topography and geography are not equal and same. It
is recommended that it should be considered about the topography condition about the
distance, high topography, low topography, forest area and high mountain for planning and
construction.

6.3 Economic Sustainability/ Financial Capacity

Nowadays, China is facing an economic slowdown, a large amount of infrastructure

development is facing difficulties and pressure in economic aspect. Therefore, it is required
to have a financial partner to solve this problem. X should pay attention for bring proper
economic benefit from One Belt One road initiative. X should be considered the effectiveness
of infrastructure development of One Belt One Road initiative. JV partnership shall
encourage all parties to obtain and lets the development become a more competitiveness
business.

Most Cambodia and Chinese Banks are less experienced in international transactions or on
large scale. Therefore, we may focus on how to work with that investment decision and
identify the risk. Such as the Security Law or Security arrangement are discussed how to
protect the assets for two Country.

6.4 Agreement, Contracting or Law

Binding contract/agreement should be made to avoid the dispute between them. At the
beginning of two JV parties should raise all potential problem to divide the obligation, rights
and implement the contract terms. According to Rooney G (2006), partnering is a project
approach designed to allow the design and construction process to be performed within an
environment of mutual trust, commitment to shared goals, and open communication among
client, engineer, manager, contractor, and sub-contractor. To strive for the benefit in the long
term of JV partners, the binding agreement is important to avoid any adverse effect, speech,

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or action to each part to maintain a good relationship. Clifford stated that the investment
decision and the contracts should be negotiated, and risk are identified.

6.5 Continuous Development and Partnering

For partnering, it should keep a continuous development and improvement of the quality in a
high level. JV partner shall encourage two parties and staffs to works as a team. It should be a
continuous improvement recognizes to obtain a higher influence on the project to make it
become business competitive.

According to William H. (1004), Partnering is a teamwork approach, there are number of

essential elements of a partnering agreement. The partnering charter developed the JV parties
to identify the specific mutual goals and objectives of the participants for continuous
evaluation and review against the agreed mutual goals.

6.6 Law and Regulations about safeguard policies and procedures

Cambodian government and China can formulate different variety of laws and regulations for
accommodating safeguard policies and develop partners procedures with China. It is
suggested that strong coordination among the Joint Venture parties

Is necessary to get the success through the law, regulations, transparent and safeguard
policies. As there are different legal regimes in two countries, it may create barriers if legal
dispute arises.

7. Conclusions
In conclusion, we will recommend our client X to choose competitive Design and Build as
the score among the procurement system is the highest.

Client X should participate in the JV partnership with China Investor to enter to the
development market in Krong Preah Sihanouk. Client X is recommended to keep
independent and not to be affected by the underperformance parties through the strategic
partner.

This demonstrates your final judgments and answers to the question.

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