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Logo of Phnom Penh Post newspaper Phnom Penh Post - Cambodian flags of convenience cause concern

Cambodian flags of convenience cause concern

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A Greenpeace photo of Benny No. 87 (background) transferring tuna

to the Hatsukari in the Atlantic

The owners of a Government concession company which sells Cambodian ship registration

to foreign vessels have lashed out at assertions that it provides Cambodian registration

to foreign vessels involved in illegal activities.

The Cambodian Shipping Corporation (CSC), owned by prominent members of Funcinpec

and a North Korean diplomat, was criticized recently by Greenpeace International

for providing Cambodian "flags of convenience" (FOC ) to foreign ships

involved in illegal fishing off the coast of Angola in May.

Khek Sakara, Chairman of the Cambodian Shipping Corporation (CSC) who along with

his mother Princess Bopha Devi and his father Khek Vandy own majority shares in the

company, rejected suggestions that CSC operations were improper or illegal.

"Many countries provide ship-flagging services; it's a common practice done

by developed countries including France," Sakara said.

According to both the CSC and the Ministry of Public Works' Maritime Marine Department,

there are between 100 and 150 foreign-owned vessels flying the Cambodian flag and

another 40 to 50 ships buying Cambodian registration each month.

According to shipping experts, FOCs are a legal "sleight of hand" that

allows ship owners to register their vessels in different countries generally to

avoid taxes and labor regulations of their home countries.

"Flags of Convenience (FOC) are all about diffusing responsibility, spreading

liability for any potential problems as widely as possible," explained a Phnom

Penh-based cargo-shipping specialist. "Shipping owners also use FOC in order

to cut costs, by registering their ships under nationalities with cheaper licenses

that allow the use of non-union crews."

Cambodia's entry into the international FOC market began in 1994, when the Government

granted concession rights to market Cambodian ship registration to the Phnom Penh-based

Cambodia Ship Registry (CSR) and its Singapore-based agent the Cambodia Shipping

Corporation (CSC).

According to CSC documents shown to the Post by former CSC chairman Khek Vandy, 16

percent of CSC's shares were bought and are controlled by Rim In Ryong, who Vandy

describes as "a Phnom Penh-based North Korean diplomat".

Vandy was uncertain whether Ryong was still at the North Korean Embassy in Phnom

Penh.

Sakara told the Post that the North Korean connection to CSC was not unreasonable

in light of the long-standing international embargo on trade with the isolated Stalinist

state and "North Korea's very close relationship to King Sihanouk".

Sakara added that the number of North Korean ships flagged by CSC had shrunk from

a high of 30 several years ago to a low of "five or six" in 2000.

The potential impact of Cambodia joining the ranks of FOC nations such as Liberia,

Belize, Honduras and Panama has been raised by SRP National Assembly member Son Chhay.

"If there's a problem, the ship owner is ultimately responsible, but Cambodia's

reputation is at stake," Chhay said. "Is such a risk worth the $1000 a

month the ships pay?"

Sakara rejected the criticisms from Greenpeace International and Son Chhay.

"People don't believe that we can do business up to international standards

in Cambodia," said Sakara.

"The fact is that our company is very strictly controlled and must abide by

Singaporean shipping rules, the regulations of the International Maritime Organization

and [ship insurer] Lloyds of London."

According to Sakara, CSC fully complies with the administrative procedures to register

foreign-owned ships, but cautions that the behavior of Cambodian-flagged ships after

they leave port - such as the vessels identified by Greenpeace International - are

not CSC's legal concern.

"We're responsible for the administrative process ... the commercial activities

of [Cambodian-flagged ships] are beyond our control," he explained.

Sakara said CSC policy required any Cambodian-flagged ships reportedly involved in

illegal activity to have its Cambodian registration immediately revoked.

"The ship Benny 87 [reported by Greenpeace International to be involved in illegal

fishing off Angola in May] had its registration canceled immediately after we were

informed," Sakara said. "We can't say we don't have problems - its impossible

for any business not to have problems - but everything we do is done legally."

While CSC registration activities are subject to international standards of scrutiny,

the transparency of the financial arrangements between the company and the Cambodian

Government are somewhat murkier.

"Where does the money go [paid by the CSC to the Government]?" Chhay asks.

"I'm not blaming [CSC], it's more a question of our Government's responsibility

to look into this issue more carefully."

According to Sakara, the concession agreement between CSC and the Cambodian Government

allocates a percentage of revenue to both the Ministries of Public Works and Transport

as well as the Ministry of Post and Telecommunication.

"Whether those ministries forward that money to the Ministry of Finance as required

is another matter," Sakara said.

The Minister of Post and Telecommunication, So Khun, confirmed that his Ministry

received the US$100 application fee and $300 annual licensing fee paid for each ship

registered by CSC, and showed the Post detailed records of payments from CSC dating

from September 1994.

Over at the Ministry of Public Works and Transport, however, the fate of the 15 percent

of CSC revenue and an additional 10 per cent "facilitation fee" Sakara

said CSC pays the ministry was uncertain.

And though Ministry of Public Works and Transport Secretary General Ahmad Yahya confirmed

that CSC made regular payments of 15 percent of company revenue to a "special

ministry account", he claimed to be unaware of the 10 percent "facilitation

fee".

Yahya said his ministry's accounting and supervision of the CSC revenue collected

had left much to be desired.

"Until now, there has been no auditing [of CSC payments to the Ministry of Public

Works and Transport]," Yahya said. "Because CSC uses our national flag,

we have to be careful and watch them all the time, but until now we have done nothing."

Yahya failed to provide details of the CSC money as promised by Post deadline.

A written Post request to the Minister of Finance, Keat Chhon, for clarification

of CSC payments also went unanswered.

The participation of the North Korean diplomat as a CSC shareholder has raised eyebrows

among the diplomatic community.

A Phnom Penh-based diplomatic source with a specialized knowledge of North Korean

affairs attributed Ryong's involvement with CSC as "a financial necessity"

for the North Korean Embassy in Phnom Penh.

"The North Korean Government doesn't provide any funding for their embassies

to manage," the source explained.

"My assessment is the [CSC investment] was based on a need to make quick money."

Just how that "quick money" might have been derived was suggested by Sandro

Calvani, the head of the UN's Drug Control Program in Asia during a conference on

drug suppression in February.

"North Korean ships are heavily involved in drug trafficking," Calvani

said, adding that North Korea's isolation and refusal to join international drug

fighting treaties made it a "natural haven" for drug trafficking.

Diplomatic sources confirmed that North Korea had been identified "a long time

ago" as using Cambodia as a base to traffic both opium from Laos as well as

illegal wildlife products such as ivory and rhino horn.

However, the source was unaware of any role played by CSC-flagged Korean ships in

the trade.

Sakara expressed skepticism at the suggestion that Cambodian-flagged North Korean

ships were involved in illegal activities.

"I don't think they [North Korean ships] are involved in anything illegal ...

most of the trade done by North Korean ships is with Japan, which is not a 'drug

country' and has some of the world's strictest [import/export] controls."

Ministry of Public Works and Transport Secretary General Ahmad Yahya was more philosophical

about the suggestion that Cambodian-flagged North Korean ships might be involved

in illegal activities.

"I don't know and we don't want to go deeper and deeper [into CSC's operations],"

he said. "We don't know or care who owns the ship or whether they're doing white

or black business ... it's not our concern."

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