31^st December 2011

We may well look back on the year 2011 as a watershed – both from a global viewpoint as well as here in Cambodia. As the aftershocks of the Global Financial Crisis continue to roll forward, possibly signalling the largest economic shifts since WWII, similar tectonic changes appear to be happening here in Cambodia.

To start with, the Cambodian People’s Party government continues to be in an unassailable position, with the opposition weak and lacking any real credibility. The upcoming elections are pretty-much a forgone conclusion – bar unforeseen events.

The premier seems to have totally outplayed the UN and the World Bank in a high stakes game of political poker, as well as putting the innumerable civil society groups that fancy themselves as providing an alternative opposition onto the back foot.

The Khmer Rouge Tribunal has collapsed even further into farce, with the UN appearing to be totally outflanked by the government, who have made it plain who is really running the show.

As well, just as foreign donors choose the worst possible time to try and make a stand over government policies it didn’t like, China stepped in to fill the breech by providing soft loans to build high profile infrastructure projects without the fussy social programmes that ran the risk of embarrassing the government by exposing its disinterest in these matters.

Moreover, the government made it clear it would look to the money markets for funds (something experts have been advising developing countries to do for years) rather than kowtow to foreign meddlers, passing a budget that included plans to borrow a $US1 billion. This may come back to bite them, however, when they realise the lenders actually expect them to pay the money back.

The government may be counting on earning some big fat cheques from the boom in oil revenues it anticipates gushing forth over the next decade, to fund the budget shortfall.

2011 was also the year that China cemented a central role for itself in the Kingdom with key stakes in telecommunications, infrastructure and power generation. 2012 is likely to see more of the same. Vietnam, meanwhile, although still an important player, appears to have lost its lock on the country. Japan has suddenly also begun sniffing around, looking to relocate some of its manufacturing units following the country’s tsunami and Thailand’s floods, which exposed the risks of concentrating these in one or two areas, which could have the benefit of diversifying manufacturing in the Kingdom.

The floods here, though less severe that in Thailand, still destroyed vast swathes of paddy in a number of provinces. Fortunately, again as in Thailand, this didn’t seem to impact the volume of the rice harvest for export significantly. Only poor subsidence farmers were affected – and they hardly count – at least as far as the authorities are concerned.

The ongoing Beoung Kak lake debacle appeared to be settled at the eleventh hour by a timely government concession. However, it failed to make everyone in the affected area happy, and another feature of 2011 was the escalation in dramatic public gestures of self-harm as a form of protest. This was accompanied by an increasing fierce fight-back by the local peasantry in many provinces against land-grabs, which are also likely to intensify in the coming year, and may yet presage trouble for the government and its well-connected friends.

The property market, that has been largely moribund since the GFC had been starting to show some signs of life despite prices – especially in the major cities – failing to float back to earth. The government is experimenting with laws that could radically change the property development game, however, designed to protect small investors by requiring developers to post a bond equivalent to the value of the project in a Cambodia-based commercial bank.

Hard to see how this could possibly work, beyond stopping the industry in its tracks.

The garment industry also had an interesting year in 2011, expanding in some areas as it benefited from consumers in the developed world moving to the cheaper purchases. One black mark, however, was the frequent occurrence of mass faintings of garment workers . While more that one cause was suspected, a common characteristic appears to have been long hours of overtime combined with inadequate nutrition. The latter was attributed to a combination of a spike in food inflation, putting pressure on many of the rural lasses in the factories to increase their remittances back to the farm, and stagnating wages.

The Maid in Malaysia controversy appears to be largely resolved with, on the one hand, a code of conduct for recruitment agencies finally hammered out, and on the other, demand for Cambodian domestic help likely to fall now that the Indonesian government has agreed to let its own return to the market.

The creation of the Anti-corruption Unit has been a nice little diversion, as well as seeing the former head of drug enforcement, Moek Dara, hoist by his own petard. The ACU may still be largely toothless when it comes to the more flagrant members of the governing class, but these things have a habit of taking on a life of their own and may yet may signal interesting things to come.

The dispute on border with Thailand, while not settled, has gone onto the back burner, at least for now, although our southern neighbour is looking increasingly unstable as their own succession looms, so anything is yet possible. The oil fields in the ocean border area may yet prove to be flashpoints.

Various laws are pending and may even be passed this year, although whether they make any real difference is moot. The NGO law remains unresolved, for example, but the government is showing every sign of confidence that it will eventually get its way. On a minor note, the authorities are threatening to force all motorcyclists to  wear helmets, which might suggest the country is becoming ‘normal’, but only time will tell. More likely, it will help the constabulary augment their meagre salaries.

The European debt crisis could still have a serious impact on exports of garments, the damming of the Mekong and other tributaries of the Tonle Sap could cause fish stocks to collapse, and global warming’s impact on the weather could yet throw a spanner in the works. This year’s rainy season could be challenging if 2011′s floods are repeated.

Nevertheless, the Prime Minister appears to be at the top of his game. Power is more concentrated than ever now that the Chea Sim network has been largely dismantled in what seems to be a piece of presumptive succession planning. No doubt there are other pretenders to the throne but truth is that the premier is one of the youngest of the leaders. However, rumours about incipient health issues have surfaced several times this year, and a handover to the next generation cannot be that far away – always a nervous time – and especially in a regime with little practice in handing over the reins.

It looks like 2012 could be an interesting year.

31^st December 2011

Hard on the heels of news that Cambodia and Thailand have also agreed in principle to resume negotiations on a plan for the joint development of an overlapping claim area (OCA) in the Gulf of Thailand, Thai MCOT online news reports that the two neighbours have agreed to set up a working committee to study plans to jointly build two new power plants, one at Stung Num and the other in Koh Kong province. Both had been on hold due to political tensions between the two over the past few years.

On Friday, Thai Energy Minister Pichai Naripthaphan told journalists that the agreement was reached during a meeting on Thursday involving him, Prime Minister Hun Sen and Thai Foreign Minister Surapong Tovichakchaikul in the Cambodian capital.

Pichai said that the Electricity Generating Authority of Thailand (EGAT), through its affiliate, EGAT International Co Ltd, would be assigned to conduct a feasibility study on the two new power plant projects.

Under the agreement, both sides agreed that the Stung Num hydro-power plant should have its dam on the Cambodian side while the plant itself on the Thai side. With investment of approximately 5.5 billion baht, the Stung Num plant should have either total capacity of between 94 and 101 megawatts.

Water from the dam will be supplied to agricultural and industrial areas around Cambodian coastal province of Koh Kong near the Thai border, plus between 200-500 cubic metres of water to Thailand’s Map Ta Phut Industrial Estate and the three eastern Thai provinces, including Rayong, Chantaburi and Trat.

Regarding the coal-fired power plant at Koh Kong, with coal to be supplied from Indonesia and Australia, Mr Pichai said the project now awaits a response from Cambodian investors for further progress. In April 2008, the Cambodian government allowed three private companies to compete for the project development. The condition is any firm succeeding in electricity sales to Thailand will be granted the right to develop such a project.

The three firms are Koh Kong Power Light (KKPL), Cambodia’s international joint venture, and Gulf JP Company (those shareholders are GJP Holding Company (GHC) and Japan’s J-Power). Koh Kong Power Light (KKPL) is a joint venture involving Italian Thai Development Plc, Egco Group Plc and Ratchaburi Power Generating Holding Plc.

The second group comprises a 72% share from Charoen Energy and Water Asia Company (CEWA) and a 28% stake from Cambodia’s joint venture partners. The power generated by these plants is expected to off-set power currently imported from Thailand.

31^st December 2011

The government has so far granted mining concessional licenses to approximately 128 local and foreign entities to conduct mineral exploration, dredging and quarrying throughout Cambodia, according to a  report, “Current Trends for Mining-Related Social and Environmental Impact in Cambodia” compiled by the fledging Extractive Industry Social and Environment Impact (EISEI) Network and released on Friday.

These 128 concessions are located in 18 provinces and cover approximately 13% of the Kingdom’s total land area. Investors come from Australia, the United States, South Korea, Vietnam, China, Japan, Singapore, Thailand and France, as well as within Cambodia.

Largely unsurveyed until recently, Cambodia is believed to be rich in metallic mineral, gold ore, bauxites, titanium, copper, as well as offshore oil and gas but much of this is, as they say in the industry, “blue sky”.

Chairman of the EISEI, Mam Sambath, said her organisation has begun to compile research on existing mining licenses, concessions and mining-related activities throughout Cambodia in November, 2009.

“The report is to update the current status of Cambodia’s mining sector and to provide interested stakeholders such as affected communities, government ministries, and private sector entities with comprehensive and up-to-date analysis of social and environmental conditions in areas potentially affected by mining activity,” he said.

31^st December 2011

The Phnom Penh Post reported yesterday that the Ministry of Economy and Finance is drafting a new law covering the development of housing projects in the Kingdom.

According to a copy of the draft law obtained by the Post, The Housing Development Law would obligate developers to deposit a sum equivalent to the value of the project in a Cambodia-based commercial bank, as well as submit regular construction progress reports to the government. The move appears designed to instil public and investor confidence in the property market.

Penalties for non-compliance, including fines ranging from US$1,250 to $5,000 and imprisonment of up to six months, would be imposed on developers which do not adhere to the law.

While the sector, largely moribund since the GFC, has lately begun showing signs of life, mainly in a number of stalled projects changing hands and coming back on stream, some – such as the South Korean-funded Gold Tower 42 and Camko City, both stand incomplete – are looking increasingly forlorn as funding has collapsed in acrimony.

“This law is very important to the construction and real estate sector here. It will pave the way to greater transparency in the market,” the Post quotes the director of the construction department at the Ministry of Land Management Urban Planning and Construction, Lao Tip Seiha. He is also a member of the inter-ministerial working group formulating the new law.

He told the Post that the law is slated for implementation in the third quarter of 2012. Although details regarding development classification were not highlighted within the draft law, Lao Tip Seiha told the Post that the law would not apply to projects comprising less than four apartments, four units and three villas.

The implementation of the law, drafted on October 13, is designed to quell the failure of further projects, according to Cheng Kheng, managing director of Cambodia Property Limited.

Most analysts expect that instead this will be the kiss of death for property development here as it will mean raising three times the amount of money usually required to fund such projects, which usually cost around 40% of the final price tag.

29^th December 2011

In a surprise move Wednesday, the Prime Minister agreed to delay the adoption of the controversial NGO Law by two years to allow the government and NGOs more time to reach an agreement on the issue.

Speaking at a university graduation ceremony in Phnom Penh, he said that despite numerous discussions between civil society groups and government officials, to date no conclusions had been possible.

However, he denied claims that provisions in the draft law were a threat to NGOs, insisting the government was making every effort to ensure that the final version was acceptable, adding that if agreement could not be reached by the end of the year, negotiations would be allowed to continue until 2014 if necessary.

“We must adopt this law. If we truly are a dictatorial government, we wouldn’t even need to collect recommendations from civil society organisations,” the PM explained. “Please stop using the word ‘dictator.’ If we were dictators we would have pushed the law through already.”

According to Radio Free Asia, NGO Forum Executive Director, Chhit Samath, said he welcomed the premier’s decision.

“This shows that the NGOs and the government are working as partners with an aim to continue discussions and produce the draft law,” he said, adding that there remain several articles in the draft law that are too “vague” and need to be addressed.

Lao Monghay, an independent political commentator, said Hun Sen had softened his stance, which he called “a positive sign for Cambodia.” He said that Hun Sen may have changed his mind after meeting strong objections to the draft law as it stands from villagers and members of the international community.

Meanwhile, the story was covered slightly differently in the Khmer language Koh Santepheap Daily, which reported on the PM’s message that if agreement cannot be reached, discussions could be extended to 2013, and if no agreement was possible by then, 2014 was another option, but added that there essentially were two options: (1) the NGO Law could be passed based on agreement between the government and NGOs, or (2) Article 42 of the Constitution that allowed all Khmer citizens the right to establish associations and political parties could be abrogated.