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Logo of Phnom Penh Post newspaper Phnom Penh Post - Ariston balks on $2m payment till law passed

Ariston balks on $2m payment till law passed

T HE Government's showpiece $1.3 billion Sihanoukville development deal with Malaysian

company Ariston is teetering.

A $2 million installment due by Ariston is three and a half months overdue because

the Malaysians are insisting - as per the January deal - that the government pass

the Casino Law first.

Once that's passed, Ariston will have a gaming monopoly in Cambodia.

Diplomats and lawyers spoken to by the Post say that Funcinpec - whose leader Prince

Norodom Ranariddh is seen as the driving force behind the deal - need CPP's numbers

in Parliament to have the law approved.

CPP, they say, has little interest in legitimizing a deal that would outlaw other

casinos - at least one of which, the Holiday International, has been operating on

a license granted before the elections.

One diplomat said: "There are other casinos which got licenses before the Royal

Government came into being with the UNTAC elections."

"They have the backing of very strong interests here, and have been operating

because they have been providing kickbacks.

"Now you take the Control Law to the National Assembly, what do you achieve?"

he said. "To pass a bill into law, a two-thirds majority is needed in the House,

but CPP controls that majority. It's a question of mathematics."

When Ariston signed Cambodia's biggest foreign investment deal in January 1995 it

paid the government $3 million - the first of a series of installments totaling $103

million that Ariston must pay by the year 2008.

According to the contract, seen by the Post, Ariston does not have to begin paying

the other installments until the Casino Law - giving it exclusive rights to run a

casino - is passed.

That should have been done already, which would have required Ariston to pay the

second installment of $2 million by Dec 5.

"The Control Law has to be passed first before Ariston can begin to pay its

installments," said Tan Teng Chye, the firm's Project Director, in an official

statement from Ariston's Kuala Lumpur headquarters.

"As far as payments are concerned, we have met all our financial obligations,"

he said.

"As of today, $3 million has been sent directly to the Council for Development

of Cambodia [CDC], which transferred the money to the Treasury of Cambodia,"

said CDC Secretary-General Chanthol Sun. "This money will be used for public

investments."

He did not say if Ariston had paid the December installment of $2 million.

Chanthol said he only signed the deal in the absence of Tourism Minister Veng Sereyvuth,

and referred all inquiries to Sereyvuth. Officials in the Tourism Ministry said all

questions should go back to Chanthol, saying he signed it.

"Nobody from Ariston came and made contract with our ministry," said Tram

Iv Tek, Secretary of State for Public Works. "We do not have a copy of the contract.

Mr Chanthol Sun is responsible for preparing the contract."

"This contract was signed by CDC," said Dr Thong Khon, Secretary of State

for Tourism. "CDC should be responsible and oversee all aspects of the development

of Sihanoukville."

A Ministry of Finance official, who asked not to be named, said that the Cambodian

Treasury had not received the second installment, but that further payments on the

premium were expected.

He said that a letter had been sent to the Council to inquire about why the cheque

had not yet made its way to the Treasury.

According to one international observer, it is in Ariston's interests to ensure that

the government pass the Control Law, but it must pay for its privileges.

"With the signing of the contract, Ariston was given (casino) exclusivity, but

the premiums are due from the day the contract was signed. The Royal Government also

has an obligation to effectively implement this exclusivity clause. This will be

enforced through the enactment of the Control Law.

"This exclusivity clause will allow Ariston to recover its investment of $1.3

billion in 20 years through the profits which will pour out of the casino."

Once the law is passed, Ariston will have a 70-year casino license. The first 20

years will be exclusive, as long as it keeps up its payments.

One lawyer who would not be named said that the lack of a Casino Law was an effective

"escape" for the government.

"So, in fact, this whole agreement is no agreement at all. The government could

walk away from this document."

A draft of the law had already been prepared by the Ministry of Tourism in August

1994 when it was tendering internationally for the Sihanoukville project, he said.

However, although an anti-gambling law had been passed cracking down on illegal betting

shops and the like, a casino Control Law - which should place strict regulations

and scrutiny on casinos - had not, he said.

Asked why Ranariddh had recently criticized Ariston for not working more quickly

on the Sihanoukville project, Cabinet spokesman Ly Thuch denied that failure to pay

the $2 million installment had anything to do with it.

"[Ranariddh] was concerned about the slow progress in technical aspects of the

contract with Ariston. There are some technical arrangements which need to be done

on both sides in order to speed up the implementation of the project."

"It is rather late for Mr Ranariddh to wake up over this issue," said one

international observer. "He wanted Sihanoukville to be a showcase of what Funcinpec

could do for this country, but it's getting desperate with the 1998 general election

approaching fast."

"It is not in Ranariddh's interest to cancel the deal. For all purposes, he'll

be made to look ridiculous."

"Either way, Ariston is in a win-win situation," he added. "They are

still able to operate a floating casino in Phnom Penh without having to pay any premiums.

Ariston meanwhile has assured that the deal will not fall through.

"We are not late in the development of the Sihanoukville development project....

Ariston Sdn Bhd will complete and deliver in 1997 the following main components of

the project: the hotel complex on Naga Island; the upgraded Kang Keng Airport; the

Independent Power Plant; and an additional 200 rooms plus an 18-hole golf course,"

the company statement said.

One observer is convinced that come the next general election, Prince Ranariddh will

take the fall for not delivering on the Sihanoukville scheme. He said Ariston was

a lot closer to the Second PM than many people think. Hun Sen and the Malaysians

are, he said, "staunch allies."

"Notice how Hun Sen has kept quiet over Ariston, yet he's been critical of SGS

and RAC. Look, to the ordinary Khmer voter, Royal Air Cambodge is a Cambodian company,

but Naga Island and Ariston is a Malaysian operation."

"CPP is offering Ariston a chance to operate a casino without paying the premium.

Hun Sen is not going to hurt Ariston," he said.

"Ariston has sufficient clout in Malaysian political circles - and the Malaysians

know well who's ruling the country."

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