Cambodian conglomerate LYP Group is preparing to ink a $1.5 billion deal with China’s largest private investment group to develop a subdivision within a 2,000-hectare satellite city the group is building north of the capital, according to company sources.

Ly Yong Phat, president of LYP Group and a powerful senator of the ruling Cambodia People’s Party, said yesterday his company would work with China Minsheng Investment Group (CMIG) to develop “Cambodia-Chinese Friendship City” on 550 hectares.

The deal is expected to be signed on December 1 during the Cambodia-Chinese Business Forum in Phnom Penh.

“It is a joint venture investment between our company and CMIG,” Phat said yesterday, without giving further details. “After the agreement is signed we will discuss the investment project more deeply.”

According to Seng Nhak, director of LYP Group and Phat’s son-in-law, construction on the Cambodia-Chinese Friendship City will begin next year with $1.5 billion in investment capital. The project will include a convention centre, logistics centres, schools and other facilities, he said on Tuesday in a broadcast aired on LYP Group-owned PNN TV.

He added that the project would take shape inside Garden City, a satellite city project announced in 2012 that LYP Group is developing some 10 kilometres north of the capital’s centre. The purpose-built community is envisioned to sprawl 2,000 hectares between national roads 5 and 6, and include residential areas, commercial centres, entertainment and sporting venues, and a river port. Its golf course and country club have been operational since 2013.

Officials at the Council for the Development of Cambodia (CDC) could not be reached for comment on the investment project yesterday.

CMIG, China’s largest private investment group, has asserted itself as a major player in Chinese cross-border investments. In 2015, it announced it would partner with private enterprises to invest $5 billion to develop an industrial park in Indonesia to support China’s “One Belt, One Road” initiative.

The company currently holds more than 200 billion yuan ($29 billion) in assets and is reportedly targeting a valuation of 1 trillion yuan ($145 billion) by 2019 through investments and acquisitions.

Nguon Meng Tech, director general of the Cambodian Chamber of Commerce, confirmed that a large Chinese business delegation – including senior executives from CMIG – was due in Phnom Penh to attend the Cambodia-Chinese Business Forum on December 1. While he declined to comment on a possible deal between LYP Group and CMIG, he said many business deals were expected to be signed during the event.

David Van, local managing director of the Bower Group Asia, said if a deal was in fact brewing to build the Cambodia-China Friendship City, it would reflect the good relations between the two countries. However, he said $1.5 billion was simply too big on an investment for Cambodia’s small market, and unlikely to materialise.

“Cambodia is not ready for this kind of giant project because consumer society here is not yet that sophisticated,” Van said. “If it is built for expats, how many foreigners who work and run businesses in Cambodia can be a client of this project?”

He added that many investment projects in Cambodia committed billions of dollars in investment, yet were never completed.