BUSINESS: Cambodia: The Wild East of Capitalism
By Salil Tripathi
The Good The Bad And The Ugly
Malaysian cowboy capitalists are rushing in where others fear to tread: Cambodia
The Royal Air Cambodge Boeing 737 rolls to a halt at Phnom Penh’s Pochentong
International Airport and passengers step out into the Terminal from Hell.
On all sides is mayhem. No fewer than five customs and immigration forms
have to be processed by slow-motion officials intent on shuffling the documentation
ineffectually. Meanwhile, the visa-on-arrival queue degenerates into a scrum
of businessmen frantically waving $20 bills.
And then the final insult. Amid the chaos, one group of grinning passengers
breezes through, brandishing their passports. We’re Malaysians. We don’t
need visas, beams Ibrahim Ismail, a vice president of Technology Resources
Industries Bhd. (TRI). We’re the biggest investors in Cambodia.
These days, Cambodia could be mistaken for Malaysia’s 14th state. TRI affiliate
Malaysian Helicopter Services Bhd. (MHS) has a 40 percent stake in Royal
Air Cambodge, whose fleet, crew included, is on lease from MHS-controlled
Malaysian Airline System. A Malaysian-French consortium is spending $250
million to redevelop Pochentong airport. Another TRI subsidiary, TRI Cellular
Communications Cambodia Co. (Tricelcam), runs one of Phnom Penh’s cellular-telephone
networks. The ever-expanding list of Malaysian investors includes Samling
Corp. of Sarawak, which has secured logging concessions in the lush northern
forests, and Delcom Bhd., which is prospecting for gold in the land-mine-ridden
northern province of Preah Vihear.
Evidently, the difficulties of operating in a fledging economy haven’t deterred
the Malaysians, who are leading the Asian investment drive into Cambodia
(see chart, page 46). The secretary of state in the Ministry of Economy and
Finance, Sun Chanthol, says: When people are only two hours away from Cambodia,
they can assess risks better than those who are far away. Asian investors
do not see a civil war here. They see a platform to sell to the greater Mekong
region. Collectively, Malaysians command 75.6 percent of the $1.97 billion
in foreign investment committed making them Cambodia’s biggest investors
by a huge margin.
Cambodia is emerging from nearly three decades of war and devastation that
began with the U.S. bombing of the Ho Chi Minh Trail and continued through
the civil war between Pol Pot’s genocidal army and Lon Nol’s decadent regime,
the evil Khmer Rouge years, the Vietnamese invasion of 1978 and the prolonged
fighting that followed. Those years have left deep scars, but Cambodia’s
leadership, elected in 1993, is desperate to bring new life to the troubled
land and catch up with its fast-advancing neighbors. With Vietnam’s inclusion
in the Association of Southeast Asian Nations (ASEAN) last year, Cambodia
doesn’t want to be humbled by Laos in the race to be accepted as the next
fully fledged member of the regional group. Both countries were granted observer
status in 1995.
To attract foreign cash, Cambodia has established liberal investment laws.
Corporate tax is a low 9 percent, tax holidays are negotiable and foreign-exchange
controls are nonexistent. If it is to be another dynamo in Southeast Asia,
however, the country must clean up its reputation of being a haven for criminals
and money launderers, and encourage job-generating and export-driven industries.
Making money quickly and running the economy like a corporation (critics
say like a privately held corporation) are the cornerstones of the new Cambodia.
Bangkok-based consultant Christopher Bruton says Cambodia is perhaps the
only country whose investment law mentions setting up a one-stop service
organization, a catch-all phrase that sounds great to inves- tors but means
nothing to a lawyer. Wags say this organization, the Council for the Development
of Cambodia (CDC), is actually just the first stop; a bureaucratic paper
Cambodian officials are indeed quick to sign memoranda of understanding and
approve projects. But investors should beware of unexpected roadblocks such
as import duties on items that are supposedly duty-free and the need for
multiple permissions from government departments that spring up overnight
like the makeshift checkpoints run by teenage toll operators who nonchalantly
carry rocket launchers on their shoulders and demand about 20 cents for right
of passage. Not surprisingly, traffic ebbs at sundown. A TRI executive says
his staff is unwilling to go to Cambodia’s Thai-border province of Battambang
after dark, when the Khmer Rouge emerges like a nocturnal army of occupation,
shrouding the border regions.
For Malaysians, however, the smell of money somehow masks that of danger.
Opportunistic Malaysians are everywhere in Cambodia, stung by higher costs
at home and spurred by an overseas-investment drive set in motion by the
Mahathir administration (see The Malaysian Wave, Asia, Inc., August 1995).
The biggest player is Ipoh-born Chen Lip Keong, who in January 1995 committed
$1.3 billion to building a casino resort, a power station, sewage-treatment
and water plants and a residential, industrial and commercial complex in
the southern seaport of Sihanoukville (Kompong Som), which is linked to Phnom
Penh by a route so notorious for kidnappings that it is nicknamed The Cannonball
Run. Chen’s ability to deliver, however, is being questioned because work
has yet to start on any of the projects. Recent legal problems will likely
set back development even further.
The physician-turned-businessman may have been overestimating his Midas touch
last May when he opened a floating casino in Phnom Penh named Golden World.
The 10,000-ton gambling tub has been at the center of a dispute involving
the gaming arm of Chen’s otherwise low-profile Ariston Sdn. Bhd. and the
vessel’s owner, Unicentral Corp. In January this year, Singapore-based Unicentral
terminated the charter of Golden World and sued Ariston for non-payment.
Whatever the outcome, the reclusive Chen will have to work hard to restore
Ariston, a Kuala Lumpur-based company, won the contract to develop Sihanoukville
in an international tender that included Unicentral as one of the shortlisted
bidders. Since its victory, however, Ariston has been stalling, complain
other investors that are waiting for the company to build infrastructure
before they begin their own projects. For instance, Francis Yeoh’s YTL Corp.
says it will start renovating the historic Independence Hotel only after
Ariston has extended the runway at Sihanoukville’s airport to accommodate
larger aircraft. Ariston is like a stone; it does not move, one Cambodian
businessman says. Counters an Ariston spokesman: This is a mammoth project.
It can’t happen overnight. It can only be developed in phases, over 15 years.
We do not want to build a white elephant.
Perhaps lying low is the best tactic, considering the number of complaints
that have surfaced since Ariston was awarded the project. It may be just
a case of sour grapes, but Unicentral estimates that the Sihanoukville developments
should cost only about $400 million. Chen brushes off criticism, however,
and says: We had prepared a comprehensive proposal; some bidders had submitted
their bid on a single sheet.
In its lawsuit over Golden World, Unicentral accused Ariston of failing to
pay the $235,000-a-month rent for six months last year and failing to renew
the bank guarantee and insurance. The vessel’s owner says it invoked the
bank guarantee of $1.4 million because no rent had been paid by last December,
when the bank guarantee and insurance were to lapse. Ariston, however, contends
that it had the right to keep payments in abeyance because talks were ongoing
over how much the vessel was worth. As the charterer, Ariston had to pay
a monthly insurance premium based on the ship’s value, which it estimates
is only $10.7 million not $27.5 million as Unicentral contends.
The Cambodia Daily (a foreign-aid-supported and expatriate-edited news-paper)
has reported that Ariston also owes $47,000 in back taxes from its casino
operations. Unfazed, Chen says: The Cambodian government has yet to draw
up the casino law. Once they do, we shall comply and pay any necessary tax.
It may not be that simple, however. The termination of the casino’s charter
has led to finger pointing among Cambodian officials who do not want to take
responsibility for giving Ariston the go-ahead. Says Ith Vichit, secretary
general of the CDC’s Cambodian Investment Board: We didn’t approve Ariston;
the Tourism Ministry did. They issued the tender, ask them.
Chen, meanwhile, seems to be in no hurry to move ahead. He says that for
safety’s sake, Ariston cannot begin other projects until the Cambodian National
Assembly formally adopts the internationally recognized Torrens land title
system. Chen isn’t sitting idle, though. He has other interests in Cambodia,
among them a lottery, Cambodia Asia Bank in downtown Phnom Penh and one of
the three Malaysian-owned Cambodian newspapers, Cambodia Times.
In addition, Chen is president and CEO of Kuala Lumpur-listed First Allied
Corp. Bhd. (1995 turnover $102 million), which he wants to build into a regional
conglomerate. The company in 1994 joined hands with Composite Technology
Research Malaysia Sdn. Bhd. owned by the Malaysian government to build an
aerospace park in Malacca. With such wide interests, it’s no wonder Chen
seems unperturbed by the criticism the floating casino has sparked. Of Malaysia’s
relationship with Cambodia, he says: We are good friends and neighbors and
we have no quarrels with each other.
More pertinently, Malaysians are not Thais, notes Michael Leifer, Southeast
Asia expert at the London School of Economics, alluding to the millennia-old
rivalry between the Thais and Khmers. Successive Khmer kingdoms ruled parts
of Thailand, Laos and Vietnam until the fall of the Angkor civilization in
the 15th century. Thai kings won back much of that territory when France
ruled Cambodia. In the 1980s, Thailand gave sanctuary to the resistance armies
fighting the Vietnam-imposed Heng Samrin regime in Cambodia. Even today,
the Thai military turns a blind eye to the Khmer Rouge rebels who conduct
a lucrative trade in gems and timber with Thai intermediaries. A Thai-Cambodian
irrigation project run by the Thai army in Cambodia’s western province of
Koh Kong intends to use the rebels as laborers. Former Thai Prime Minister
Chuan Leekpai told a business seminar in 1994: Thai investment [in Cambodia]
should be based on mutual interest with no exploitation, a request that went
But as Malaysians begin to dominate vital sectors of Cambodia’s economy,
some critics question their motives. Eleanor Mannikka, an art historian at
the University of Michigan, is appalled by Francis Yeoh’s plan to stage a
nightly sound-and-light show at the 12th-century Angkor Wat. Yeoh’s YTL Corp.
promises that the show will be the most spectacular in the world, with laser
beams, the latest in sound technology and a narrative written by the world’s
leading scriptwriters. Mannikka isn’t convinced, however. She wrote recently:
Does the government really believe that Angkor Wat has so little to offer
that it has to be sold by vaudeville-like shows created by entrepreneurs
whose only goal is to make a profit?
Yeoh retorts: As nobody has seen our plans, it’s premature to jump to any
conclusion. We will be sensitive. My goal is to put smiles back on the faces
of young Cambodian children. Tourist guides in nearby Siem Reap are already
smiling as they point out large tracts of land on the way to the temples,
saying (Malaysian-owned) Aman Resorts will be here, Raffles International
there, Novotel here and Le Meridien there. In addition, the area is earmarked
as home to a $1 billion tourism-development zone, again courtesy of YTL Corp.
The zone, about 700 meters from the Siem Reap River, is to feature a Khmer-style
town square, three hotels, a conference center, a museum, a cultural library,
shops and an arts-and-crafts center. TRI Chairman Tajudin Ramli is another
investor hoping to reap profits from Siem Reap. His Monomas group has been
given the green light to build a five-star, 400-room hotel in the area.
Malaysians also are hungrily eyeing Cambodia’s fast-dwindling forests. Although
Indonesian banking giant Panin has the largest individual logging concession,
of 1.4 million hectares, Malaysians collectively reign supreme with a total
of 1.7 million hectares. Of that, Malaysia’s Samling Corp. has acquired 787,810
hectares. The London-based nongovernmental organization Global Witness released
a study last November in which its directors conclude: The current forestry
policy borders on the grossly irresponsible. They have sold everything. Only
about 35 percent of Cambodia remains forested, the group estimates. Adds
Lao Mong Hay, executive director of a local rights group, the Khmer Institute
of Democracy: Under the guise of plantation, logging concessions are being
given. Ousted Finance Minister Sam Rainsy has called such investors mafia
and warned that logging threatens the future of the country in terms of the
A Malaysian timber company that has been criticized for flouting the law
is GAT Co., which last year defied a shutdown order from Sihanoukville’s
first deputy governor, Khim Bo. I regard the company as illegal, he has said
in reference to GAT’s refusal to halt construction of a timber-processing
factory and a small seaport 10 kilometers west of Sihanoukville despite the
fact that its logging concessions are in another province.
One expatriate aid worker says: Exploitation is the name of the game here.
Cambodia is the discount store of the region. Cheap girls, cheap timber,
cheap labor take your pick. If you were a businessman without scruples, you’d
do quite well here. This place appeals to the worst kind of cowboys, and
they are eating Cambodia for breakfast. Many plans sketched on the napkins
of breakfast tables may remain just that, however, unless Cambodia figures
out how to improve its human resource profile, generate jobs and tame crime.
Pol Pot’S reign drastically altered Cambodia’s demographic profile. Intellectuals
and ethnic-Chinese businessmen were particularly targeted. Eva Mysliwiec
observes in her 1988 book, Punishing the Poor, that only 7,000 of the 22,000
teachers in 1970 survived the Khmer Rouge years. The director of the Cambodian
Development Research Institute adds in the book that only 10 percent of the
country’s 450 doctors survived, and half of them left when the Vietnamese
Today, 46 percent of Cambodia’s population is under 15, and women outnumber
men three to two. In some provinces 40 percent of school-age children do
not attend school, notes Joan Anderson, Cambodia representative of Britain’s
Save the Children Fund. Inevitably, some young Cambodians are working beyond
their talent and capacity. Slowly, however, ethnic-Chinese businessmen are
returning to their homeland and injecting life into the markets (see box,
page 45). In addition, a new wave of mainland Chinese companies is sweeping
But Cambodia is still too small, its systems too fragile, and its market
too underdeveloped. Given Cambodia’s population of only 10.5 million and
a per capita income of $230 a year, the lack of queues outside the impressive
colonial building that houses the CDC is understandable. Despite the problems,
however, there is evidence of change in Cambodia, such as the tiny rich class
that has emerged overnight one that buys three or four BMWs a month and a
budding middle class.
According to International Management & Investment Consultants Ltd.,
a typical urban household owns $1,732 worth of branded goods. Signs of revived
economic activity abound, not least in the vicinity of the bridge across
the Tonle Bassac river that was rebuilt last year. After the bridge was completed,
one restaurant opened, a fishing-rod shop started, then a classy restaurant
came, then a petrol pump, says Craig Martin, general manager of International
Management & Investment Consultants. That 18 feet of concrete has injected
life across the river. Children play soccer in the fields at sunrise without
the fear of land mines, while lovers stroll in the jasmine-scented breeze.
The prevalence of crime, however, casts a pall over Cambodia. Interpol estimates
that at least 100 of its most wanted criminals are hiding in the country.
Nevertheless, the Interpol liaison office functions without computers, phones
or copiers. On top of that many of the 51-member force have to buy their
own weapons. The absence of banking regulations has created a potential bonanza
for money launderers. No inflows are measured, everything is totally free,
says Tioulong Saumura, who resigned as deputy governor of the central bank
last September. This is the law of the jungle. Conditions in Cambodia are
good for laundering because of total lack of control. Banks are not obliged
to report large cash transactions, so you can deposit $10 million and instruct
the bank to transmit it and it will be done in a second. Nobody will question
Both Saumura and the Interior Ministry have said that the operations of 19
of Cambodia’s 29 banks are a mystery. Ex-Finance Minister Rainsy, Saumura’s
husband, maintains that anybody who applies for a banking license gets one.
One financial institution the august-sounding Emperor International Bank
is involved in futures trading even though Cambodia still lacks regulations
on the practice. Emperor stands alongside others with equally splendid names
Bank of National Wealth of Cambodia, Global Commercial Bank and Great International
Bank vying for respectability in the shadows of Malaysia’s MayBank and Public
Bank, Bangkok Bank, Standard Chartered Bank and Banque Indosuez.
Small-time thugs, too, can cause problems, as Tricelcam has discovered. Once,
the company disconnected the phone of a businessman because he hadn’t paid
his bill. He finally paid up, but only after complaining about loss of face
and soothing his bruised ego by brandishing a gun. Gerard Van Dort, a former
marketing consultant in Kuala Lumpur, puts it well: You’re in a jungle; follow
the rules and you’re OK. Van Dort, who now runs a catering business in Phnom
Penh, adds: People will come to your restaurant and sometimes they won’t
pay. They will take out a revolver. Ask yourself, ÔIs it worth risking
your life over an unpaid drink?’
This Cambodia IS very different from the version the Finance Ministry’s Secretary
Chanthol and the Investment Board’s Vichit have presented to the international
community. They must have reddened, however, when Chanthol’s father-in-law,
Khaou Chuly, was robbed of $120,000 last December by none other than his
own bodyguard. That incident took place the same week Chuly had formed a
joint venture with Thai and American partners to develop luxury housing and
an international school in Phnom Penh at the cost of $94 million. Downplaying
the robbery, Chanthol says: That was a fluke occurrence.
Despite such assurances, it’s little wonder some foreigners find it difficult
to think long-term about Cambodia. The fact that many dual nationals hold
important positions in Cambodia doesn’t help either. Besides Chanthol and
Vichit, both of whom have U.S. nationality, many ministers in the royalist
Funcinpec party have two passports. They include Americans Pou Sothirak (the
industries minister) and You Hockry (the interior minister), and First Prime
Minister Norodom Ranariddh, who has a French passport.
But Chanthol prefers to look on the bright side: I challenge any country
that has been through an experience like ours to progress like we have. .
. . A generation was killed by the Khmer Rouge. People did not have enough
to eat. We have started from scratch and rebuilt the nation.
In the relatively peaceful past five years, Cambodia has indeed made remarkable
progress. According to one estimate, inflation dropped to 9.6 percent in
1995 from 26 percent the year before, real economic growth was 7 percent
last year and foreign aid commitments exceed $800 million, with Japan offering
the lion’s share.
Moreover, tourism looks set to take off, whetting the appetite of investors
who are counting on early payoffs. The Tourism Ministry last year cleared
projects worth $400 million, in anticipation of 1 million arrivals by 2001.
Tourism Minister Veng Sereyvuth talks enthusiastically about the sound-and-light
show in Angkor, when, as if choreographed, a blackout occurs. Without missing
a beat he describes how the infrastructure will be in place. Problems, problems,
so many problems to control, he mutters as the lights flicker back on after
20 minutes. In her bungalow nearby, Saumura shakes her head and sighs: In
Cambodia today, nothing is under control. Nothing.
But back amid the anarchy that is Pochentong airport, being Malaysian means
you can at least enter and leave the country with a semblance of normality.
Return Of The Chinese
The offspring of Chinese businessmen murdered by the Khmer Rouge are going
home to pick up where their parents left off
When Pol Pot's army entered Phnom Penh in 1975, its early targets were class
enemies like businessmen, many of whom happened to be ethnic Chinese. In
the strange logic of bamboo-curtain politics, communist China was arming
an ultra-Maoist organization that was annihilating people of its own blood.
But today children of some of the Chinese victims are back in Phnom Penh,
running lucrative enterprises. In addition, about 80 mainland-Chinese companies
have made a quiet entry into Cambodia. The Chinese influence goes further.
Ethnic-Chinese businessmen recently swept the polls of Cambodia’s Chamber
of Commerce, and at present 15 of the 24 members in the chamber are ethnic
Chinese who don’t speak English.
Consider 31-year-old Meng Kith. His father, Kith Peng Ike, was a businessman
and landlord who died of starvation because the Khmer Rouge decided to make
an example of him. Meng, who moved to Australia in 1974, returned to Cambodia
in 1990, the year before King Norodom Sihanouk’s return from exile. Soon
after, Meng began a small business supplying furniture, bread and office
equipment to the 22,000-strong United Nations Transitional Authority that
was in Cambodia to prepare and supervise the 1993 election.
Meng’s Royal Group of Companies, which brought the first photocopiers to
Cambodia, has assets worth $30 million. The group’s Canon copier franchise,
which has an 85 percent market share, recently strengthened its ties with
the government by giving Prince Norodom Ranariddh and Hun Sen (the first
and second prime ministers) color copiers worth $25,000 each.
Meng who owns a bank as well as businesses in translation, brick-making,
construction and paging was also responsible for setting up a Motorola Radio
network in 1992 for the government. Pol Pot killed all the smart people,
he says. But I’m a Christian, so we have to learn to forgive and forget.
Meng’s ability to put the past behind him is laudable, if not startling,
considering his elder brother Sophan Kith, 42, died under mysterious circumstances
in January 1994, only a few weeks after he had told Asia, Inc. he felt comfortable
being back in Cambodia (see Indochina: Battlefields into Marketplaces, Asia,
Inc., February 1994).
Cambodia’s richest and most controversial returnee businessman is Teng Boonma,
who declined an interview with Asia, Inc. despite having recently won the
Cambodian Chamber of Commerce’s presidential race. Fluent in Chinese, Thai
and Khmer, Boonma has interests ranging from a controlling stake in the Inter-Continental
Phnom Penh hotel to property and trading. His company, Thai Boon Roong Group,
has been reported as Cambodia’s biggest taxpayer. Boonma’s unwillingness
to be interviewed is not surprising considering the allegations that have
arisen over his background. He was arrested in 1972 on suspicion of opium
smuggling, according to the Voice of the Khmer Youth, a newspaper whose editor
died mysteriously after the report appeared. Not only has Boonma vehemently
denied the allegation, but in January he threatened to sue the Hong Kong-based
Far Eastern Economic Review for what he contends was a libelous article alleging
that he has been involved in drug trafficking and other dubious activities.
Boonma insists that his wealth is legitimate, generated from smart moves
made before the upswing in the Bangkok property cycle.
California’s Mr. Donut, Ted Ngoy, is another returnee who has made his presence
felt in Cambodia. Despite having been an army major under Lon Nol, Ngoy was
able to flee to the U.S. because he was in Bangkok working as a military
attache when the Khmer Rouge marched into Phnom Penh. In the U.S., he pumped
gas and sold cars before setting up a successful chain of donut outlets and
becoming active in Republican Party politics. Ngoy has had two major political
setbacks since his return forming a party that lost badly in the 1993 election
and failing to win a seat in the Chamber of Commerce. But he appears unfazed.
You can’t compare life in America with Cambodia, he says, but the future
is here. Today he is tying up with a mainland Chinese state-owned enterprise
to bid for an independent power project. Ngoy also runs Phnom Penh’s leading
real estate agency; among the sites he is selling is an estate in Orange