The Riel Deal: Risky deals may cost

[PHNOM PENH POST]

By Tom Brennan

WHILE the opening of the Cambodia Securities Exchange garnered the most attention on Monday, another project in Canadia Tower’s shadow also saw its official start: the Boeung Kak lake development.

The fact the CSX launched with no companies ready to trade illustrates the problems entrenched in Cambodian business, namely the lack of transparency and accountability. Although the exchange does hold the possibility that it could eventually deliver that transparency, and boost confidence in the Kingdom among foreign investors.

But Boeung Kak shows much more the inherent flaws of the Kingdom’s race to development, and how progress is often sacrificed in the name of profit and personal gain.

The project, of course, is being run by Shukaku Inc, a company owned by Cambodian People’s Party Senator Lao Meng Khin. Shukaku holds a 99-year lease to develop the 133-hectare area, and will do so in a joint venture with China’s Inner Mongolia Erdos Hung Jun Investment Co.

Boeung Kak’s development does not come without collateral damage, though. Thousands of area residents have been forcibly evicted to make way for the construction that began on Monday. Protests over those evictions have turned violent. And residents claim they are being denied adequate compensation.

No doubt all eyes have been watching these events play out, most especially potential investors eyeing Cambodia. The implications of how the Boeung Kak deal came to be can’t be lost on them: that the local government granted another government official a concession, and the very people most affected by it lack any viable recourse.

Lao Meng Khin recently was at the heart of another government-to-government deal that raised eyebrows as well. The National Assembly last month voted to guarantee payments by state-owned Electricité du Cambodge to his energy company, Cambodia International Investment Development Group Co Ltd, a joint venture with a separate Chinese firm.

The vote, which could be worth millions of dollars to the JV, was hailed by Minister of Economy and Finance Keat Chhon. Observers, though, and rightly so, called into question the transparency of the operation, as well as the impact Lao Meng Khin’s Sihanoukville coal-fired plant could have on the local environment.

One has to wonder if either of these Lao Meng Khin ventures would ever satisfy the Securities and Exchange Commission of Cambodia’s requirements for listing on the CSX. Because if the companies involved in some of the Kingdom’s largest development projects are not suitable for public trading, then what does that say about the future of the exchange?

The Cambodian government’s pitch for investing in the Kingdom is well known: political stability, low-cost labour, untapped natural resources and a favourable regulatory environment.

But these kinds of deals may frighten off the very investment it so desperately seeks to attract.