Fraud? International Cooperation for Transparency

Fraud? International Cooperation for Transparency

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 [3] – 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 [4] 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 [5], 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 [6] – “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 [7] [“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.

This article was first published by The Mirror, [8] Vol. 14, No. 661 - Sunday, 25.4.2010
Have a look at the last editorial - you can access it directly from the main page of The Mirror. [8]

Norbert Klein is the Editor of The Mirror [9] – The Mirror is a daily comprehensive summary and translation of the major Khmer language press - More about The Mirror [10]