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Logo of Phnom Penh Post newspaper Phnom Penh Post - Islands in the stream of cash

Islands in the stream of cash

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island.jpg

The ultra-luxury resort development, proposed by the Brocon Group for the Son Saa Islands of Koh Bong and Koh Aun, is designed to be comparable to setting in the Maldives or the Seychelles.

A massive wave of proposed investment is prompting a sea change off the coast of

Sihanoukville Municipality.

Billions of dollars worth of development projects are being promised to the Royal

Government in the hopes of luring 99-year lease agreements for Cambodia's pristine

tropical islands. The proposal price tags range from a modest $20 million to $2.5

billion, with economists and observers wondering what these figures mean in real

terms, and at what cost to the environment?

The islands are going fast: Since September 2006, seven islands and significant swaths

of oceanfront property have been officially granted to private investors.

Now, according to the Sihanoukville Tourism Department, another dozen proposals are

currently under consideration by the Cambodian Development Council, the islands'

governing body, and one source close to the negotiations claims that all 22 coastal

islands are already spoken for.

"It's an absolute explosion. It's a very unique time," said Melita Hunter,

creative director of Brocon Investment, an Australian-owned property development

firm recently awarded the concession for two islands.

Companies and consortiums from Malaysia, Russia, Japan, China and France have joined

some of Cambodia's biggest tycoons in the race for the rapidly disappearing islands.

"I struggled very hard to get my license with the government, but we had to

compete within the rules of the law," Long Sakhan, president of Vimean Seila,

a Phnom Penh-based real estate development company, which was also recently awarded

an island.

The competitive process has spawned some staggering proposals - from ultra posh island

hideaways to massive developments complete with helicopter pads, private marinas

and zoos.

According to tourism figures, of 17 documented concession proposals, 11 pledged to

build 18-hole golf courses and 14 promised to build 5-star hotels.

"If you look at the Master Plans: we simply cannot have that many golf courses

and marinas in such a small area," said Moung Sotthy, president and chief executive

officer of Action Group Ltd, a Cambodian investment firm that represents a multinational

group known as the Ream Resort and Development Company, also a 99-year lease holder.

The first lease agreement for the land of Koh Puos and Hawaii Beach was awarded to

Russian firm Koh Puos Investment Group (KPIG) on September 25, 2006, in a ceremony

presided over by Prime Minister Hun Sen and Minister of Economy and Finance Keat

Chhon.

KPIG, a conglomerate backed by a Russian investors, pledged to invest $300 million

in the project. Alexander Trofimov, chairman of KPIG, told the Post at the time that

his company would build a bridge from Hawaii Beach to Koh Puos where it would construct

a luxury hotel, bungalows and parks.

The KPIG concession agreement ended nearly a decade of developmental deadlock off

the Sihanoukville coast caused by the "inactivity" of Ariston, a Malaysian

firm that had been granted the right to Koh Puos and Ochheteual Beach in 1995 but

failed to develop the properties.

Ariston contract was cancelled in 2005, and government and CDC officials now refer

to the incident as comeuppance for investors in breach of contract. The lease agreement

with KPIG provided the framework for six other concession awarded in July, but only

after a July 5 government sub-decree transferred the lands from the State public

property to State private property.

"The Russians were the first. All subsequent leases are based on theirs, and

it's not a bad document," said Rory Hunter, chief executive officer of Brocon

Investment.

On July 27, Minister of Commerce Cham Prasidh, also deputy president of the CDC,

signed agreement with five companies for six more islands. Brocon was awarded a matching

set: the Son Saa Islands of Koh Bong and Koh Aun.

The Hunters discovered the coastal islands in March 2006, and "fell in love

with the whole area."

Inquiries about obtaining the property led them, eventually, to the CDC. They submitted

a detailed Master Plan and attended four rounds of meetings that culminated in final

approval to present the plan the Hun Sen and Keat Chhun.

"Many foreign companies are interested in development of the islands of Sihanoukville,

so before granting them a license, we have to study their proposal, hold long negotiations

and study the Master Plan," said a CDC official.

The Hunters, and Brocun, submitted a $20 million investment proposal to develop the

Son Saa islands into a ultra-luxury resort, with a 30 to 40 room hotel, built to

completely in-synch with the natural surroundings. They've brought in renowned resort

designer Bill Bensley and have been negotiating with management teams from the Four

Seasons.

"After signing the agreement, the company has one year to start their projects,"

said the CDC official. "All companies are granted a long-term investment, we

do this because we need to provide them enough time for investment and build confidence

with each other."

The Hunters were impressed with the CDC's commitment to preserving the environment,

specifically citing the contractual clause that if any tree is felled on the concession

land, the value of the wood in cubic meters must be returned to the CDC. A pristine

natural environment is what Brocon is betting on.

"Protect it and they will come," said Melita Hunter.

Working together

Sotthy of Action Group, brought together investors from Thailand, the US, France

and Cambodia to form the Ream Resort and Development Group (RRDG). The group owns

1,600 hectares just outside Ream National Park and was recently awarded a 99-year

lease on Koh Samoach.

"The development focus is on ecotourism, therefore the protection of the environment

is our main goal," he told the Post on August 9.

"But we have noticed that in Ream near the national park, there have been some

problems. Some villagers, land owners and even investors don't understand the importance

of protecting the environment."

Sotthy is calling for all investors in the area to join a round table discussion

about environmental issues, without forgetting promised long-term profits to investors.

RRDG has a four-stage development plan he puts at a minimum of $240 million.

"We'd like to manage the Ream area like the Apsara Zone [in Siem Reap] and discuss

conservation with all the stakeholders about how to do this correctly," he said.

And Sakhan of Vimean Siela, is worried as well.

"Some foreign companies plan to invest to develop these islands. But when they

come they don't protect the forest, they build high buildings and destroy everything

on the island," she said. "I'm not happy with these people and agree with

this kind of development. And frankly, I think European companies care more about

the environment than Asian companies."

Other thorny questions remain about the development of previously untouched islands.

Koh Rong, the largest island in the group and home to 1,500 people, would require

massive infrastructure development to support a thriving hospitality trade. Not only

would this impact the environment, but sewage, electricity and roads would require

tens of millions, a real estate expert said.

"Infrastructure is a long term game. What developer invests in infrastructure?

You make money by selling the land. These levels of investment, I just don't understand,"

the expert said. "The only way to get a return on all these millions is by turnover."

Sotthy and others think the new Kang Kong Airport in Sihanoukville is the answer.

"I call it 'triangle tourism,'" said Sotthy. "Tourists will come from

Siem Reap to Phnom Penh and then the beach. We are hopeful the number of tourists

will be enormous."

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