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Thursday, February 05, 2009

Sokimex in line for black rewards

By Geoffrey Cain

PHNOM PENH - If Cambodia's much touted oil and gas finds in the past few years comes to fruition, Sokimex Group, the country's largest business conglomerate, is expected to be one of the bigger local winners. With top level political connections and a firm grip on local oil and gas distribution, the historically opaque and often controversial company will also face more pressure to publicly disclose its accounts and practices.

The World Bank earlier estimated the fuel find, made and managed by US oil giant Chevron, could entail 2 billion barrels of oil and 10 trillion cubic feet of natural gas. Chevron has remained tightlipped about its in-house estimates and plans, and some industry analysts have deflated earlier high-end estimates, contending the fuel actually lies in hard-to-reach and scattered pockets rather than in one concentrated area. Exploitation is nonetheless expected to commence in either 2010 or 2011, though a recent tax dispute between the government and Chevron could delay drilling indefinitely, one analyst says. It's also unclear how the collapse in global oil prices - from a high of US$147 per barrel in July last year to its current level of around $41 - might have impacted on the project's economics and projected profitability.

None of that has so far dampened Sokimex's outlook. One Sokimex representative, who spoke with Asia Times Online and requested anonymity, said the company expects to benefit from a proposed scheme to export and re-import oil from the find. He said Sokimex also had plans to build an oil refinery to process the fuel. The representative would not divulge any further details about those plans and its not clear if the government is pressuring Chevron to process the fuel in Cambodia rather than at established modern refineries in Thailand or Singapore.

Yet the lack of disclosure is par for Sokimex's course: the company, which spans businesses as diverse as energy, tourism, aviation and property development, does not publicly release annual profit and loss statements. The homegrown company was founded in 1990 by rubber baron and ethnic Chinese entrepreneur Sok Kong, coinciding with the country's transition towards a free-market economy in line with the United Nations-sponsored Paris Peace Accords.

Sok Kong laid the foundations for the company in 1980s, when he supplied rubber tires to the Vietnamese army after Hanoi seized power over the country. He also exported the product throughout that era. Yet the domestic deals have sparked allegations the company remains close to perceived Vietnamese allies in the government, including Prime Minister Hun Sen.

Sokimex entered the petroleum business in May 1996 through its purchase of state-owned oil company, Compagnie Kampuchea des Carburants, which was then tasked with the import, storage and distribution of petroleum in Cambodia. The deal was part of the government's market-oriented privatization program, but raised further speculation of Sok Kong's close ties to Hun Sen's now dominant Cambodian People's Party.

According to the company's website, Sokimex is Cambodia's largest petroleum company with a market share of 40%. It boasts a US$15 million oil jetty with the capacity to handle oil carriers of up to 46,000 tons, five storage terminals, 184 petrol stations and a complex petroleum transport system that serves as the country's power "lifeline".

The site also says that "the main success venture that propelled Sokimex ... is petroleum" and that "Sok Kong's visionary mind coupled with his optimistic courage led him to dive into the petroleum industry without much hesitation." The site, however, fails to disclose Sokimex's recent profits, losses or average return on investments nor those of its various subsidiaries.

Privileged position

With its money-spinning oil assets and top government contacts, Sokimex has reached into a wide range of businesses, including garments, hotels, property development and even an exclusive contract to supply the Cambodian military with clothing and fuel. Sokimex is among Cambodia's big five oil and gas distributors, alongside international oil giants Total, Shell, and Caltex, as well as the country's other main local distributor, Tela Petroleum Group.

Industry analysts note that Sokimex has a proven knack for securing lucrative government contracts and believe that based on that track record the company could receive special treatment if and when the spoils of the Chevron oil find are realized.

Critics point in particular to the murky circumstances surrounding the concession Sokimex won to manage ticket sales to Angkor Wat, one of the preeminent tourist destinations in Southeast Asia, and its comparative ease in starting new businesses while foreign investors often have their new ventures ensnared in bureaucratic tape. The company also won government permission in 2006 to launch a domestic airline, Sarika Air.

Sokimex's lack of transparency, some contend, could ground future fund raising, particularly if the conglomerate does not substantially change its practices before listing shares on the country's new stock exchange, which is scheduled to commence trading in December despite the global economic downturn. Cambodia's economy is losing steam after years of breakneck growth, with gross domestic product projected to expand just 4.75% this year, the lowest level since 1998.

Sokimex representatives declined to provide this correspondent with basic revenue and profit figures for its oil and gas operations. Company executives who previously agreed to meet requested later that questions be sent via e-mail but failed to respond to queries. Follow-up inquiries made by telephone were met with one-word "yes", "no", or "I don't know" replies.

Cambodia's general lack of disclosure has raised concerns the country could go the way of Venezuela, Nigeria and Iraq, where major fuel resources have been squandered and pilfered by corrupt governments. The World Bank recently ranked Cambodia in the bottom 15% of countries on commitment to the rule of law and the bottom 10% for overall control of corruption. Transparency International downgraded Cambodia further in its 2008 Corruption Perception Index, ranking it the 14th most corrupt.

It's unclear, analysts say, if the government is trying to convince Chevron to process all or part of the fuel find in-country to help build up Sokimex's capabilities. The same analysts question Sokimex's ability to handle an energy bonanza, given that it has never run a refinery, lacks a pool of home-grown energy experts, and has no prior experience working with a find of this magnitude. "

The crude will probably be shipped to Singapore to be refined," said Michael McWalter, the Asian Development Bank's oil and gas adviser to the Cambodian National Petroleum Authority. "Any attempt to build pipelines, a refinery, or sell the oil in Cambodia will probably mean local companies will gouge prices."

Ou Virak, an economist by training and activist by profession, said: "They say they're planning to build a refinery in Cambodia, but they lack all expertise to do so unless they can hire expensive foreign advisors. It's political connections that keep them afloat, as they've demonstrated in their previous contracts that have operated without regard for the market."

Others see signs that Hun Sen's government, particularly after it consolidated power at last year's general elections, has started to put more pressure on Cambodian companies, including Sokimex, to operate with more transparency. They point in particular to Hun Sen's recent call to Sokimex and other oil distributors to sharply lower their prices in line with global trends or be summoned to a personal meeting at his offices.

Those concerns are widely shared. The United Nations Development Program held a petroleum conference last year to address how the government should best manage expected future oil and gas revenues. Delegates from the Cambodian National Petroleum Authority, Supreme National Economic Council, and Norwegian Petroleum Directorate discussed the possibility of establishing a sovereign fund to manage future oil revenues ethically and transparently for the national interest.

They also discussed the possibility of creating a professional, market-oriented national oil company, potentially modeled after Malaysia's Petronas. One year later, with questions and criticisms still swirling about the company's accounts and technical capabilities, it's not clear to most that Sokimex will emerge any time soon as an outward-looking and modern regional energy player.

Geoffrey Cain is based in Phnom Penh and a contributor to the Far Eastern Economic Review and Integrated Regional Information Networks, a United Nations-run news wire service. He may be reached at

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Cambodian waste flowing into Vietnam via border

Waste management in Cambodia is unprotected by authority and flowing into Vietnam as trade business by land and water without any controlling are spelling corruption and illegal trafficking drugs and heroin.

VietNamNet Bridge – A huge volume of rubbish from Cambodia is running into Vietnam through border gates in southwestern provinces.

Most of the waste is coming into the country via the provinces of An Giang and Dong Thap. In these localities, dozens of tonnes of waste are transported by water and land each day.

At the Tinh Bien international border gate in An Giang province, we saw lines of trucks with Cambodian registration numbers carrying waste parked near the border-gate check point of Vietnam. Waste mainly comes from Phnom Penh and Ta Keo, goes along National Highway 2 of Cambodia to the border gate.

Vietnamese waste traders receive the waste at the border gate. They even pay in advance to Cambodian partners to collect waste, which includes banned things in Vietnam.

A Vietnamese-Cambodian said that in Thamau, Ta Keo province, Cambodia there is a spacious ground for waste, comprising used electronic products. This kind of waste is transported from Ta Keo to Chau Doc town, An Giang and then is distributed everywhere in Vietnam.

The chief of the An Giang provincial Customs Agency, Nguyen Thanh Tam, said: “Vietnam permits the import of some types of waste. Waste is checked at border gates and only waste that is allowed by the Ministry of Natural Resources and the Environment can pass.”

A customs officer at the Tinh Bien border gate said on average dozens of tonnes of waste goes through this border gate.

Yet, waste not only comes into Vietnam through the border gate, but on boats, which authorities can’t control. In An Giang, waste is transported from Cambodia to Vietnam along the Vinh Te canal and in Dong Thap province, waste boats run from Prey Veng to So Thuong, Hong Ngu, Tan Hong to HCM City. Some other boats continue to run down the Tien River to other locations.

According to Tien Phong daily, waste from Cambodia includes steel scrap, waste paper, nylon, plastic, glass bottles, used batteries, electronic waste, and pesticide containers, etc.
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Thai PM: Thai-Cambodian talks on ancient temple must continue

BANGKOK, Thai Prime Minister Abhisit Vejjajiva reiterated on Thursday the Thai-Cambodian Joint Boundary Commission (JBC) talks would continue under the "existing framework" despite unfruitful results in the latest meeting on Wednesday in Bangkok.

Admitting that the Preah Vihear temple problem was "sensitive", Mr. Abhisit said negotiations between Thai and Cambodian officials would continue to resolve the border conflict over areas adjacent to the Preah Vihear temple.

The Thai-Cambodian JBC held a two-day meeting here, which ended Wednesday without making any headway as officials of the two neighbouring countries disagreed on the name of the surveillance group to be stationed in the area around the ancient temple and the official name of the temple.

Thailand proposed "the military monitoring group" which was opposed by Cambodia. They preferred to use the name "the temporary coordinating team" for joint operations in the 4.6-square-kilometre area claimed by both countries.

The joint meeting also had yet to settle on a name for the site, as Cambodia refused Thailand's proposed official name of the Temple of Phra Viharn instead of The Temple of Preah Vihear as Cambodia preferred.

The next JBC meeting is scheduled for the second week of April in Cambodia.

Reiterating that future talks on the problem are needed, Mr. Abhisit said negotiations on the problem, however, must be based on the peace process. It was not a problem if it took time.

Tension rose after Preah Vihear was awarded heritage status by the United Nations last year. The International Court of Justice ruled in 1962 that the 11th-century temple belongs to Cambodia, but the demarcation of the surrounding land remains in dispute.

Thailand insists on using the watershed as the border, while Cambodia maintains that demarcation of the area must be based on a map drawn in 1908. (TNA)

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UN wants accelerated farm aid to support Cambodia

PHNOM PENH, The United Nations asked donors on Thursday to speed up farm aid to help Cambodia increase rice exports, at a time when its important garment sector and tourism are suffering because of the global financial crisis.

Douglas Broderick, resident representative of the United Nations Development Programme (UNDP), told an economic forum that Cambodia had great potential in terms of its location in Southeast Asia but required financial support.

"A fertile agricultural sector produces white gold to set Cambodia apart and propel its economic growth," Broderick told the forum, referring to rice.

Cambodian officials said the government had lent private millers $30 million to buy rice from farmers to ensure domestic supplies but was seeking another $300 million to increase capacity for collecting, stocking and processing the crop.

Aid donors including the World Bank and Asian Development Bank have pledged around $950 million in aid this year, and Prime Minister Hun Sen urged them to accelerate disbursements to help agriculture, on which 85 percent of Cambodia's 14 million people depend.

"Agriculture is important for sustaining growth and reducing poverty," Hun Sen told the forum.

Cambodia's total rice production is put at 7 million tonnes in 2008/09 (June/Feb) after 6.7 million tonnes in the previous harvest, and Deputy Agriculture Minister Chan Tong Eves told Reuters there was a surplus of 2 million tonnes for export.

According to the U.S. Department of Agriculture, the country shipped 450,000 tonnes of rice in 2007, when it was the ninth-biggest exporter in the world.

The UNDP is facilitating Cambodia's rice exports to a few countries in Africa, including Senegal and Guinea.

Hun Sen said the garment sector, Cambodia's biggest export earner, and tourism had been hit by the global slowdown, and that economic growth could slip to 6 percent this year from an estimated 7 percent in 2008.

Cambodia received 2 million tourists last year and garment exports totalled about $2.78 billion, with a drop of up to 10 percent expected for 2009, industry officials said. (Reporting by Ek Madra; Editing by Alan Raybould)
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Thai opposition party members plan to meet Thaksin in Cambodia

BANGKOK, A group of 30 Pheu Thai Party's MPs are planning to meet ousted Premier Thaksin Shinawatra in the coming weeks, possibly in the border town of Koh Kong in Cambodia, local media reported Thursday.

The opposition Puea Thai Party is the incarnation of the People Power Party (PPP), which was established by supporters of Thaksin, after the PPP was dissolved by the Constitution Court in early December last year on election fraud charges.

"Thaksin's brother Payap is in charge of organizing the meeting," The website by The Nation newspaper quoted MP Sakda Kongphet as saying.

Fellow lawmakers wanted to meet Thaksin to exchange views on the political situation and Thaksin was likely to travel to a neighboring country such as Cambodia or Laos, said Sakda on Wednesday

He said Thaksin's phone-in to a party seminar on Monday had been successful in rallying MPs to support his political aspirations, including a planned comeback for the position of prime minister in two years.

The Pheu Thai Party was ready to help Thaksin grab power again, added Sakda.

It was the time for an all-out war, Saksda said, voicing optimism of a political victory guided by Thaksin and his family members such as his siblings Yaowapha, Payap, Yaowaret and Yingluck.

Opposition chief whip Withaya Buranasiri said Pheu Thai would launch 200 party branches nationwide next Sunday.

Thaksin was ousted by Thai Military leaders in September 2006, accusing him of corruption, keeping him in exile and controlling the country for an interim period until new elections in December 2007 did bring Thaksin's allies back into power.

Thaksin returned to Thailand in February 2008 to face corruption charges, but he later fled into exile again and was convicted in absentia.
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Cambodian Oil, Mineral Wealth Sold To Corrupt Elites-Watchdog

BANGKOK (AFP)--Cambodia's political elite has captured the country's oil and mineral wealth, putting its economic future at risk while international donors turn a blind eye, an environmental watchdog said Thursday.

London-based Global Witness said impoverished Cambodia has enough natural wealth to wean itself off foreign aid but international donors must do more to ensure the assets are properly managed.

In its new report entitled: "Country for Sale," the group said earnings from oil, gas and minerals were being "jeopardized by high-level corruption, nepotism and patronage" in allocating and managing the assets.

"The same political elite that pillaged the country's timber resources has now gained control of its mineral and petroleum wealth," said Global Witness Campaigns Director, Gavin Hayman.

"Unless this is changed, there is a real risk that the opportunity to lift a whole generation out of poverty will be squandered," he added.

The Cambodian government banned a previous damning report published by Global Witness on Cambodia's forests in June 2007, which claimed the same elites were illegally logging the nation's forests.

In its new report the group said oil, gas and mineral assets had been parceled out by a small number of powerbrokers surrounding Prime Minister Hun Sen and other senior officials.

It also suggested that millions of dollars paid by oil and mining companies to secure access to the resources might be missing from national accounts.

"Companies need to come clean on what they have paid to the government to secure access to these natural resources, or risk becoming complicit in a corrupt system," Hayman said.

So far more than 75 companies are working in Cambodia's extractive sectors, the report said, including some internationally known operators such as Chevron Corp. (CVX) and BHP Billiton Ltd. (BHP).

Last month international donors pledged nearly $1 billion in development aid to Cambodia, their most generous aid package ever to the impoverished Southeast Asian nation.

But Global Witness said the agreements didn't go far enough in securing new governance measures for natural resources.

Cambodia expects to begin oil production of its offshore fields in 2011, following the discovery of oil in 2005 by Chevron.

The kingdom is sitting on an estimated hundreds of millions of barrels of crude - and three times as much natural gas - but it remains unclear how much of the black gold can actually be recovered.

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