The good and bad of Cambodian investment

By Roderick Brazier

PHNOM PENH - What's happening today on Bokor Mountain in Cambodia speaks volumes about what is good and bad about new investment in Cambodia in 2007. Bokor Mountain is just 37 kilometers from the sleepy Cambodian riverside town of Kampot, yet the journey to the 1,000-meter peak takes more than two and a half hours by sport-utility vehicle.

The steep, winding road was built by French engineers in the 1920s, and not a centimeter of it has seen a road-maintenance crew since. Today vehicles climbing the mountain crawl over an uneven surface of large, loose stones, deep ruts cut by rushing rainwater, and mesa-like vestiges of the bitumen that covered the original road. The result is a bone-jangling, exhausting journey.

Once reaching the broad, boggy plateau at Bokor's summit, the visitor is greeted by one of the world's strangest sights: a casino, a Catholic church, and a guesthouse brood in the misty gloom. Built by the French, all are long-abandoned. Left to the dank elements, the buildings are coated in dense, rust-colored moss.

Inside, they are strewn with debris: glass, broken floor tiles, lengths of electrical wire. A wall in the ballroom wears a sinister cluster of bullet holes at chest height: the Khmer Rouge were particularly active here. A metal sign resting on the floor warns tourists not to sleep in the casino.

A Cambodian business conglomerate called the Sokimex Group recently announced its intention to repair the neglected road and renovate the hilltop casino and hotel at Bokor. A group spokesman assured that the original French buildings would be renovated, not demolished, as part of the ambitious and costly project. In addition to the renovations, insiders in Phnom Penh talk of cable cars, golf courses, and helipads.

Sokimex was established in the early 1980s by Sok Kong, and is today one of Cambodia's biggest business groups. Closely associated with the ruling Cambodian People's Party, Sokimex's mainstay is the distribution and retail sale of petroleum. Notable among its many other interests is the lucrative concession to collect entry fees at the world-famous Angkor temples.

After decades of misery and instability, observers are cheered by the prospect of bold, imaginative investments that will create many jobs for ordinary Cambodian people and spur progress. And although Western tourists get a kick from visiting the unearthly Bokor ruins, who can blame Cambodians for wanting to fix up this creepy vestige of war and colonialism?

The Bokor property sits in the heart of Preah Monivong National Park, meaning it belongs to the state, not Sokimex. The casino project can only start if the government awards Sokimex a time-bound concession to redevelop and manage Bokor. In exchange for this privilege, Sokimex will likely pay the government an annual fee. As often is the case in Cambodia, these arrangements are being concluded without competition, and in secret. The fee will likely be revealed to the public only after the deal has been struck, if at all.

Sokimex's concession to manage the Angkor temples was awarded in a similarly opaque manner. The International Monetary Fund has repeatedly urged the government to tender the lucrative Angkor concession, but closed-door negotiations remain the preferred approach. The bad habit is being repeated in Bokor.

Why does it matter how such concessions are awarded?

The trouble is that in the absence of a competitive tender, the true value of such concessions cannot be known, and the state could miss out on valuable revenue. Secret negotiations also create lucrative rent-seeking opportunities that again deprive the state coffers of valuable revenue. Soliciting a range of redevelopment proposals would give maximum value to the state, and a well-designed tender could encourage environment- and heritage-sensitive plans that will not just attract tourists, but bring employment and business opportunities to a poor corner of the country.

The Bokor Mountain project is a worthy idea, and an experienced group such as Sokimex may well be the best party to implement it. But the Cambodian government and society more broadly could get far more value from it if the concession were competitively tendered, rather than negotiated in secret.

Roderick Brazier is The Asia Foundation's country representative in Cambodia.