Fraud? International Cooperation for Transparency – Sunday, 25.4.2010

Posted on 26 April 2010. Filed under: *Editorial*, Week 661 | Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , |

The Mirror, Vol. 14, No. 661

Cambodia entered into many different international relations since the new Constitution of the Kingdom of Cambodia was promulgated in 1993 and a new phase of history for the country began. International integration was one of the main policy goals of the government – regaining the seat for Cambodia in the United Nations, which had been held by a representative of the Khmer Rouge until 1991, long after the Khmer Rouge had lost their grip on the country, establishing new diplomatic relations, gaining membership in ASEAN, in the World Trade Organization [WTO], etc., and entering into many bilateral agreements – with other governments, with international organizations like the Asia Development Bank, and with Non-Government Organizations through the Ministry of Ministry of Foreign Affairs and International Cooperation.

Some of these agreements have consequences in detail, which were not all foreseen or discussed with those who are affected – for example: the membership in the WTO will require that copyrights of international companies for computer software will have to be enforced from 2013 onward, and the import of goods and services from other countries has to be liberalized. Though this may have difficult consequences for some sections of the Cambodian economy, other sectors welcome it.

During the past week, a five-year Accountability in Governance and Politics program, financed by the USA, was inaugurated by Deputy Prime Minister Sok An and the US Ambassador Carol A. Rodley, according to which the Cambodian government will cooperate, implementing specific projects, with the International Republican Institute, the National Democratic Institute, and the International Foundation for Electoral Systems. According to the nature of this program, international transparency will be necessarily be enhanced, even when this may relate to difficult challenges to be faced internationally.

What this can mean can be deducted from a difficult processes developing at present in the USA. Goldman Sachs – a full-service global investment banking and securities firm – one of the top financial institutions of the USA, is facing at present charges by the US Securities and Exchange Commission [“The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation”] of fraudulently having contributed to the wide breakdown of financial systems, by systematically entering into contract with people and companies who were supposed not to be able to pay back what they borrowed. To give a small-scale example: one internal e-mail, now leaked, says “I’ve managed to sell bonds to widows and orphans” making “some serious money” for the bank; one section manager made a profit of $1 billion for the bank – but then the whole system collapsed and needed much higher government assistance. The future will show how this will be handled.

Once international government agencies get involved, the chance of achieving real transparency is higher. Repeated corruption allegations raised, for example, by the non-government agency Global Witness in the UK were easily dismissed here as not coming from a government agency, without dealing with their specific documentations. They had also raised questions related to the role of the – then – head of the Forestry Department, Mr. Ty Sokun, which were quickly and strongly rejected as “nonsense” and “lies” at that time, but recently he was removed from his position. The situation will be different in a case which is receiving ever more prominence recently.

The Australian Company BHP Billiton – “the world’s largest diversified natural resources company” – entered into a mineral exploration agreement with the Cambodian government in 2006 to explore for bauxite in Mondolkiri – unprocessed aluminum ore; parts of the exploration site, a 996-hectare mining concession, were in protected natural forest areas. It had also been announced that this was just for exploration, a decision could be found only later, as the transport of bauxite, or the production of aluminum which requires huge amounts of electricity, need further studies. But this plan was abandoned in 2009 because the studies had shown that bauxite mining in Mondolkiri would not be cost-effective.

But recently, during this month of April 2010, BHP Billiton announced that United States Securities and Exchange Commission is investigating corruption allegations which may relate to Cambodia, though this is not yet sure.

According to the Foreign Corrupt Practices Act of the USA, a company which has made illegal payments, can be fined to pay “up to twice the benefit that it sought to obtain by making a corrupt payment,” and staff involved may have to serve five years in prison.

Neither the US Securities and Exchange Commission nor BHP Billiton has stated that there were actually illegal payments. But the present investigations are based on some reports dating back to 2007.

According to various sources on the Internet, the Minister of Water Resources Lim Kean Hor had reported in the National Assembly at that time that the Prime Minister had informed him from Australia that BHP had paid US$2.5 million as “tea money” for the concession. BHP said, however, that this money was designated for a “social development fund” for health and education projects in Mondolkiri. According to other sources, BHP confirmed to have paid US$1 million to the government in 2006 to secure the concession agreement.

Later inquiries produced various incongruous pieces of information: that the money was not used, as designated, for health and education in Mondolkiri, but for irrigation in Pursat, and the records of the the Ministry of Economy and Finance show for 2006 only US$443,866 as income from mining concessions.

By Saturday, not only the US Securities and Exchange Commission was dealing with the BHP case, but also the UK Serious Fraud Office [“an independent Government department that investigates and prosecutes serious or complex fraud, and corruption. We are part of the UK criminal justice system”].

A “social development fund” of the Cambodian government had also been mentioned before, in relation to substantial payments from Caltex, having obtained the right for off-shore oil exploration. While one government argument, why an NGO law is urgently needed, was the request to gain more transparency about social and development funds (which are, for NGOs, regularly audited by public auditing companies anyway), we have not seen any similar reporting so far about the government’s social development fund – its purpose, its administrative arrangements and it’s oversight bodies, and its assets and disbursements.

The Cambodia Daily carried on 24/25.4.2010 an article, “Precise Meaning of ‘Tea Money’ Up for Debate.” And Mr. Phay Siphan, the spokesperson of the Council of Ministers, is quoted to have pointed to the new anti-corruption legislation which shows that the government is committed to “highlight transparency.” – He will surely be able to shed more light onto this affair.

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Links and Lessons from Far Away Africa – Sunday, 28.12.2008

Posted on 30 December 2008. Filed under: *Editorial*, Week 592 | Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , |

The Mirror, Vol. 12, No. 592

When we mirrored, on 26 December 2008, that Captain Moussa Dadis Camara had declared himself president of Guinea, after a coup following the death of President Lansana Conte, 74, I first did not think that this deserved much attention in the Mirror.

Then I remembered some connections: on 19 June 2008 we had mirrored that the Cambodian Prime Minister had decided to sell 120,000 tonnes of rice and to send agricultural experts to Guinea, responding to a request by the prime minister of Guinea. At that time I had wondered what kind of link might exist to this small country in Africa – hardly anybody knows where it is located.

But already in 2001 an ambassador of Guinea had presented his credentials and diplomatic relations were established – though Cambodia does not have an embassy anywhere in Africa, while having diplomatic relations with 17 countries in Africa.

In March 2008, 15 artists from the circus school in Guinea “Centre d’Art Acrobatique Keïta Fodéba” were in Cambodia for 3 months.

In November 2008, during the opening of the Least Developed Countries Ministerial Conference in Siem Reap, the Prime Minister spoke about new possibilities of cooperation at a time of rising prices for rice: “I have looked at the list of participants and it reminds me of a number of countries in Africa that I visited in the times when I was Deputy Prime Minister and Minister for Foreign Affairs [1979 to 1990]. Recently Guinea contacted Cambodia to purchase some agricultural products. This has made me think that in time of crisis there are always opportunities as at the time of fuel and food crisis, Cambodia could see the opportunity of expanding production to provide food for both local and the world.”

Research brought to light more and more facts that seem worthwhile to consider in relation to Cambodia. Guinea is obviously a country which has had a lot of problems. The death of the president was considered by a group of younger military leaders as a chance to act They seem to have seen no other possibility to rectify the situation but a coup d’etat – against the constitution and the laws of their country, though completely without bloodshed or using force.

What had happened?

Guinea is in West Africa, about one third bigger than Cambodia, but with only 10 million people compared to Cambodia’s 14 million. It is rich in minerals and has the world’s biggest reserves of bauxite, which is the basis to create aluminum. At present it is fourth in the world in bauxite production, after Australia, Brazil and China. It has also diamonds, gold, iron, nickel, and uranium.

Since its independence from France in 1958 – five years after Cambodia – it has had only two presidents: Sékou Touré until 1984, and General Lansana Conte, who seized power after the death of his predecessor; the support of the armed forces was essential for his power throughout the years. During these years, multi-party elections were held for the first time in 1993 when General Conte, as head of the military government, was elected president of a civilian government – this was the same year that the elections organized by UNTAC were held in Cambodia. Conte was reelected in 1998 and in 2003, but all three elections were said to have had irregularities. In the meantime, an electoral term was extended from 5 to 7 years, after the president’s party had won 91 of the 114 seats. It is said that “he ruled the country with an iron fist for 24 years.”

Guinea’s immense riches have attracted the major mining companies from different countries: AngloGold Ashanti (from South Africa), Billiton (the world’s largest mining company, from Australia – since 2006, Billiton is also conducting bauxite exploration in Mondolkiri, with “the exclusive rights to negotiate a mining agreement with the government” at the end of their study, and there is also a Billiton Petroleum office in Phnom Penh), Global Alumina (from the USA), Rio Tinto (UK and Australia), and RusAl (from Russia). Some pictures show how the bauxite is collected by big machines, and then transported to be shipped out of the country. A major contractor on the Guinean side says:

“In collaboration with the Government and people of Guinea, Guinea Alumina Corporation will develop a world class alumina business that provides value to shareholders, sustained economic and social benefits to the people of Guinea, and a quality supply of alumina to the world.”

But in spite of such lofty declarations and the riches of the country, Guinea is listed in position 202 when comparing the per capita income in different countries – lower than Cambodia. Cambodia is in position 180 on the same list of 225 countries.

A lack of transparency about how “the people of Guinea” benefit from these riches, compared to the share taken by the international companies, led to dissatisfaction, accusations of high level corruption, and strikes in 2006 and 2007, and violent protests.

When Captain Moussa Dadis Camara declared himself president and suspended the constitution, he stated as the justification the mismanagement and corruption of the former government. He created a 32-member National Council for Democracy and Development – replacing the ministers with 26 military officers and 6 civilians – and promised to hold elections in two years. There had been tensions in the military since several months, when younger officers had expressed their opposition to the corrupt practices of some of the higher level officers.

During the coup nobody was arrested, but the members of government were dismissed, as well as 22 generals close to the former political powers. It is reported that Captain Moussa Dadis Camara met with politicians, religious leaders, trade union representatives, and members of civil society, declaring that the main motive for taking power is to fight corruption and to secure the interests of the country: all contracts with international companies, which had invested billions of dollars, will be canceled for review, to root out corruption; whoever has misappropriated state assets or personally benefited from public resources will be punished.

The international reaction? A voice representing the international companies said: “It is very likely that the new regime may seek to extort monies from current operators and prospectors and that a new democratic regime may try to impose heavier royalties and taxes,” even calling it “extortionary pressure” if the new government would try to negotiate more balanced agreements about their own resources being sold abroad.

It is interesting that voices from the international community, which had not questioned the corruption involved in the arrangements of “exporting” the mineral wealth of the country without transparency and without benefits for the people, is now raising mainly the concern about having violated the results of the electoral system of the country.

It is remarkable, however, that President Abdoulaye Wade of Senegal, one of the neighboring countries, is calling to recognize and to support the new government, because of its positive goals.



Considering this history of Guinea – allegations of corruption based on bad governance and misuse of resources, which finally led to an effort for a radical new beginning – it is appropriate to remember that Prime Minister Hun Sen has repeatedly spoken about his concerns of a similar situation for Cambodia: growing dissatisfaction by people who do not see that the society provides them justice, who might resort to attempts to bring about a radical change. On the other hand, he has also raised concerns that people who see their chances of illegal enrichment too much controlled by the government might attempt to grab power in order to exercise their greed without restraint. These statements shall not be forgotten.

In 1999, the Prime Minister had said: “Should we not manage the land issue in a good manner, we might have to face a farmers’ revolution.” He mentioned this again in 2004, addressing the National Forum on Land Management in the presence of national and international representatives.

In 2002, opening the Consultative Group Meeting between representatives of the Cambodian Government and representatives of cooperating countries and international institutions, he said:

“We are conscious that corruption in the public machinery, be it judiciary or administrative or any other, increases transaction costs for everyone and reduces predictability in law enforcement and implementation of the government’s policies… The government believes that enactment of adequate laws and regulations to prevent and punish corruption is crucial for addressing this problem. In this spirit, the Royal Government is committed to finalize the draft of the Anti -Corruption Law before the end of June 2003.”

In February 2007, the Chinese People’s Daily Online quoted the Cambodian Prime Minister:

“The land grabbers dare to get a lot of land illegally while we have always appealed again and again to stop… The land grabbers are not simple people, they must be powerful people in the government. I asked the question, do they dare to conduct a coup d’etat in the future?” And he is quoted to have replied himself that they really dare to do so. “So before they conduct a coup d’etat, we need to take action against them.”

What happened in Guinea should not happen in Cambodia. The political action necessary has been pointed out by the Prime Minister clearly enough.

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