New image; new deal? Cambodia's telecommunications HQ

A

foreign business person in Phnom Penh is approached by a representa-tive of the

government-run Internet service provider (ISP) and offered access to all her competitors'

emails - at a price.

The government minister responsible for telecommunications holds an advisory position

with a mobile phone/ISP company that pays several times his monthly salary and shrugs

off suggestions of a potential conflict of interest.

From a distance, Cambodia's nascent telecommunications industry appears riven by

the same lack of adherence to transparency and ethical practices that is found elsewhere

in the Kingdom's public and private sectors

At the heart of this controversy is the Ministry of Posts and Telecommunications

(MPTC) a former "paper ministry" that the global information revolution

has rebooted into one of the largest revenue-generating sectors of the Cambodian

economy.

For consumers and investors, the MPTC is cursed for a lack of enforced industry regulations

fostering illegal internet and international telephone operators delivering poor

service at a high cost and a lack of security against password theft resulting in

the fraudulent use of internet accounts.

These suspicions are heightened by MPTC's contracting of inexperienced companies

to provide key services, the number of ministry officials on company payrolls, and

a complex web of alliances that appear to make participation in the telecommunications

industry limited to government players and a select group of investors.

Since the October 2000 conclusion of Telstra's international telephone contract,

Cambodia's telephone service sector has experienced a massive overhaul. Gateway licenses

have been awarded to Cambodia Telecom (001) and Tele2 (007), but price cuts promised

by the Government are yet to materialize. Both are MPTC joint ventures, with the

ministry holding a 51 per cent stake.

"There used to be a monopoly with Telstra - now there are two companies, but

it isn't true competition because it doesn't bring about a reduction in price,"

said opposition leader Sam Rainsy.

"It is just to make things look acceptable ... but really it is a cartel that

continues to work against customers," he said.

MPTC officials claim Telstra failed to make a request for a contract extension.

Not so, according to Telstra, which says it made numerous attempts with the ministry

to negotiate a further contract.

Louise Hand, Australian Ambassador to Cambodia, said Telstra made very strong representations

to the Government with regard to extending its contract to provide telephone services

in Cambodia. During his May 2000 bilateral visit to Cambodia, Australian Foreign

Minister Alexander Downer met with Hun Sen, Foreign Minister Hor Namhong and Finance

Minister Keat Chhon to discuss extension prospects.

"Mr Downer was very concerned to support Telstra here in Cambodia," Hand

said. "There was no doubt in anyone's mind that Telstra was pitching for a second

term, if the commercial conditions were suitable."

MP Son Chhay claims there was no tendering process to appoint a new contractor, and

Telstra's replacement had already been chosen before the contract even expired.

"[Telstra] started the business here before the peace agreement was implemented

and now another company is benefiting from all the work Telstra has done," he

said.

During the 10-year contract period Telstra invested around $15 million, and reportedly

earned around $100 million, while the Government took between $150 million and $200

million.

At the ceremony marking Telstra's departure, Hun Sen announced the Government would

now have full ownership of Cambodia's phone lines and infrastructure, but recently

he approved a partnership, Cambodia Telecom, between the MPTC and import/export business

AZ Distributions Co (AZ). Industry watchdogs are calling upon the MPTC to explain

the appointment of AZ, which has no telecommunications experience.

In October 2000 So Khun said AZ was contracted because a solely government-owned

venture would not attract future financing. He said lack of experience in the sector

would not be a problem because the Ministry of Finance had agreed to contribute $2

million to train MPTC and AZ staff.

"I haven't seen any other company ask for funding for training, because we suppose

that a company should be able to do this sort of thing itself if it is chosen for

a contract," said Chhay.

He says the contract was handed down directly from Hun Sen, rather than via recommendations

based upon ministry research. Chhay says So Khun has referred repeated enquiries

regarding AZ's appointment directly to Hun Sen.

"The Ministry and the Government are very sensitive about it," said Chhay.

Pricey phone connections: Staying in touch in Cambodia is still expensive.

The secrecy surrounding the A-Z contract is apparently characteristic of MPTC operations.

"As the chairman of the committee most of the time I receive information through

the newspaper or when people dissatisfied with the ministry send information to me,"

Chhay said.

AZ, known as Bun Hoaw & AZ Distributions Co just one month prior to the expiry

of Telstra's contract, reportedly omitted the name Bun Hoaw from its name to thwart

speculation that the company had high level official connections.

AZ declined repeated Post requests for an interview, and refused to tell the Post

the name of the person responsible for the telephone project.

Cambodia Telecom's counterpart is Tele2, a joint venture between the MPTC, Millicom,

and Royal Group under the banner of Royal Telecam International. Tele2 has invested

$15 million to set up two satellite links, an international switch system and national

microwave links for the project and will employ as many as 80 customer service, technical

and administrative staff. It promises 24-hour customer service and a rewards scheme

for regular customers, but is unable to offer either collect or credit card calls.

Hun Sen recently said the new competition would mean a drop of around 15 per cent

in call costs, but prices have not changed significantly.

So Khun accepted a list of questions from the Post about internet services, AZ, Tele2

and his payments from MobiTel, but no response was received. He refused all requests

for an interview.

Internet agonies and intrigues

Cambodia's entry to the internet age was initially lauded as a giant step toward

the nation's modernization, with the MPTC and Canada's International Development

Research Center launching CamNet, the nation's first internet service provider (ISP),

in 1997.

According to Bill Herod, a former CamNet board member and now an advisor to Khmer

Internet Development Service (KIDS), a service was set up to allow CamNet customers

to pay their bills over the counter at the bank.

Initially all bills were paid directly into the Foreign Trade Bank account of the

Minister for Posts and Telecommunications, So Khun. MPTC staff described this move

as an "anti-corruption" measure, but months later, when a CamNet account

was finally created at the Canadia Bank for the payment of bills, there were only

two signatories with authorization to make withdrawals from that account - Khun and

an MPTC administrator.

"The situation was not necessarily irregular in terms of how business is done

in Cambodia, but it was certainly an unusual way of doing things," Herod said.

CamNet general manager Koy Kim Sea said the Canadia account was created following

lobbying by Herod and another CamNet board member, Andrew McNaughton, and was intended

to cement CamNet's "financial autonomy" from the MPTC. He said despite

the account being in Khun's name, only the finance section of the MPTC had access

to the account.

Koy Kim Sea is also Undersecretary of State at the MPTC, while Secretary of State

to the ministry Phan Phin is a long-standing member of both the CamNet and Camintel

boards. Their appointments violate Article 10 of the Law on General Statute of Public

Enterprises, which states "the function of ... [a] member of the Council of

Administration is incompatible with the function of members of the National Assembly

and the Royal Government."

Neither Kim Sea nor Phin have been questioned about this apparent conflict of interest

in Parliament, and as CamNet is a wholly government-owned venture it may not be seen

as a conflict of interest by the MPTC. However, Son Chhay, head of the National Assembly's

telecommunications committee, says this is an issue his committee will investigate

when they conduct a "study visit" to the MPTC and CamNet within the coming

fortnight.

"[We] have asked them to send us information about CamNet and what the business

operations are about," Chhay said.

"We have hardly received anything so we want to visit first hand."

When Telstra's BigPond started its 49 per cent joint venture with the MPTC one month

after the CamNet launch, it signed a contract with the Government containing an exclusivity

clause stating only two ISPs would be permitted to operate in Cambodia. Within one

year, however, the Government had introduced an additional ISP called Camintel, a

joint venture between the MPTC and Indonesian state corporation IndoSat, in direct

breach of its contract with BigPond.

The Government claimed it would allow Camintel, as a re-seller of CamNet's Internet

services, to operate only in the provinces. The move prevented the creation of an

Internet monopoly in Cambodia, but also damaged the Government's reputation within

the sector with regard to its willingness to honor written contracts.

When Herod questioned whether allowing Camintel to operate in Cambodia, in either

provincial or urban areas, was in the best interests of CamNet, he was told it was

not an appropriate topic for discussion.

Kim Sea said he was a strong supporter for the introduction of Camintel, saying CamNet

did not have the capital or the staff resources to expand into the provinces. However

Sea concedes he was alarmed when Camintel began offering services in Phnom Penh.

"They did not obtain the approval of the MPTC to do this," Kim Sea said.

"They did it [on] their own [against] the MPTC."

Chhay says Camintel is an exemplar of inefficiency and incompetence, accumulating

government debt of $800,000 and a foreign debt of $7 million. He alleges massive

amounts of the company's funds have been siphoned off through corruption.

Internet cafes sprout across Phnom Penh in a lifestyle revolution.

In spite of this, Camintel's service contract, which was due to expire at the end

of February, was instead extended by the Government for another 25 years.

"You question why on earth, when it has not been performing well enough or even

fulfilling its basic contract requirements, they say, 'Well, now we'll give you another

25 years'," Son Chhay said.

MobiTel, Cambodia's largest mobile phone provider, has also created waves in the

internet industry with the March 1 launch of its TeleSurf wireless transmission project

in spite of the fact that the company lacks an ISP license. General Manager David

Spriggs told the Post the license was unnecessary, describing the new venture as

an "extension" of its other activities.

Son Chhay, however, attributes Mobitel's apparent bending of the rules governing

its operations to "special consideration" granted the company by Mobitel

"advisor" So Khun, who is paid between $2500 and $5000 monthly for his

services.

"When I challenged [Khun] under the Civic Administration Law about the right

of the Government Cabinet to receive money [from private sources] ... he answered

me very proudly that he had done nothing wrong and had the right to receive the money,"

Chhay said.

Kim Sea confirms that MobiTel requires an ISP license but says TeleSurf was established

in anticipation of a license being granted.

Cutting-edge cable stuck in the mud

In 1999 Rithy Panh filmed laborers laying Cambodia's first fiber optic cable, which

runs from Thailand, through Battambang, to Vietnam. His film, The Land of Wandering

Souls, charted the development of what Hun Sen heralded as the link that would allow

Cambodia to leapfrog into the information age.

"The Cambodian countryside can now connect with the modern world by using inexpensive

service provided by the 600km fiber optic cable," he declared.

Over a year later the 600km, $9 million cable, installed by French company Alcatel

as a gift from Germany, has failed to meet original expectations, plagued by a host

of technical problems and physical damage to the cable itself..

In late February the cable was damaged for the 12th time, severed by a bulldozer

from a Thai construction company contracted to repair National Route 1 in Prey Veng

province.

So Khun announced the MPTC's intention to sue the company, Nopawong, for repeated

damage to the cable, but company officials claim the cable is not always mapped properly

and is difficult for workers to see because of mud from last year's flooding.

As a result the costly repair job is in limbo and further complications with the

cable are predicted.

Alcatel has come under scrutiny in the media, with reports claiming the cable was

not laid at the correct depth, but according to the company's Senior Country Officer

for Cambodia and Laos, the work was done in accordance with specifications.

Sirat Chum says the German government contracted Weideplan consultants of Germany

to provide design specifications for the project, which were then accepted by KFW,

the agency responsible for German aid to developing countries.

"Weideplan's specifications gave us the obligation to lay the cable ... at a

depth of one meter outside city areas, and a depth of 60cm inside the city,"

said Chum.

"The Cambodian media has reported that the cable should have been laid at a

depth of 1.5 meters, but we had to abide by the specifications from Weideplan and

the figure of 1.5 meters is inaccurate."

Son Chhay blames the cable debacle on a perceived lack of opportunity for private

and public profit and says the Government has discouraged research into the cable's

potential and has fostered the idea that the MPTC is not responsible for its upkeep.

"From the start, the Ministry ... has taken no interest in the cable,"

he said. "They have clearly put no effort into developing the cable because

it is free, it is a gift."

MobiTel claims the network is only suitable for high capacity telephone and mobile

traffic, although Telstra says it is being used for limited and costly internet access

in Phnom Penh.

Alcatel dismisses the criticism, claiming the cable is being used for telephone,

television and internet services in both Thailand and Vietnam, with a high degree

of success.

"The cable can do whatever you want it to do," Chum said.