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Logo of Phnom Penh Post newspaper Phnom Penh Post - Sorry folks, the cheap gasoline offer has expired

Sorry folks, the cheap gasoline offer has expired

Phann Syna, an entrepreneurial businessman who claimed he could sell gasoline at

the pump in Cambodia for 1,500 riel a liter, has never received a reply to his offer

from Prime Minister Hun Sen.

At the time (in May) fuel-dependent businesses were howling about the rising cost

of petrol (and they still are). Students and motodops tried to stage a public protest

in Phnom Penh but were blocked by the city governor and police.

Sceptics scoffed at Syna's claim. But Syna said he was serious and had access to

large volumes of cheap Russian government fuel. He said he was prepared to forgo

a fat profit margin "to help the people of Cambodia". However, he also

had another agenda, and this might have poisoned the water.

The Post has obtained the petroleum tax schedule from the director of Customs and

Excise, Pen Simon. The tax on standard gasoline is 1,000 riel per liter. Simon said

petrol stations add a 500-riel-per-liter "service charge" to cover the

cost of loans to set up their retail shops. The import cost and distributor's profit

margin brings the full retail price of gasoline to 2,850 riel a liter.

Phann Syna would not be liable for the service charge; therefore, if his confidential

bulk purchase price was as low as he claimed, he could well have delivered at the

pump for 1,500 riel and at a minimum, covered his costs.

Hun Sen issued his challenge in May, that any petroleum company able to sell gasoline

for a maximum of 1,400 to 1,500 riel per liter, would be granted a monopoly on government

petroleum contracts.

Syna responded, under the letterhead of his NGO Community Development for Agriculture,

by writing to Hun Sen on May 17, accepting the challenge and asking for the monopoly.

Receiving no acknowledgment, he wrote again on May 28, with the same result. His

office told the Post last week that he still had no reply.

Syna said his window of opportunity to import cheap Russian gasoline had now expired.

Through his translator daughter Tevy, Syna said: "It's too late. We made our

announcement based on Hun Sen's public offer statement. We answered his challenge.

We had only one window open. Still we get no answer. We want to help the people.

We do not try to make money from this. We could have done it because the tax is on

volume, based on the buyer price and we have no middlemen. The price we pay is confidential

to us."

The potential financial benefit for Syna was contained in a multi-faceted agreement

with the Russian Ministry of Industry, Science and Technology, which included the

supply of one million tons of gasoline per year.

A letter from the Russian Ministry to Hun Sen (in Russian and English) described

how the contract included four new AN-24 aircraft as part of the deal, and a request

for Hun Sen to support CDA projects.

Syna said: "The aircraft would be sold to Angkor Air, the government's freight

airline. Using a $25 million short term credit facility, we would buy the aircraft

from the Russian Government and onsell to Angkor Air, at a profit, which we would

use to help fund CDA agricultural development work in Cambodia."

The current retail price of gasoline in Cambodia is 2,850 riel per liter, which includes

1,000 riel tax (comprising customs duty, special tax and value added tax). In 1994

the tax was 190, the retail price 650; by 2002 the tax had risen to 910 riel, the

retail price to 2,300 riel. In Thailand the price is 19 baht per liter, or about

2,000 riel. In Vietnam, the price ranges from 700 to 1,400 riels.

The Economic Institute of Cambodia (EIC) says the relatively high cost of gasoline

(due to the tax factor) is a disincentive to economic growth; it hurts those dependent

on fuel to earn a living, encourages fuel smuggling and reduces tax revenue collected.

The EIC director Sok Hach advocates a large tax cut to: realign the gasoline price

to that in neighboring countries, reduce smuggling, improve consumption (and tax

revenue) and stimulate jobs and productivity in Cambodia.

Smuggled gasoline sells for 2,400-to-2,500 riel a liter on the street in Phnom Penh.

Customs director Pen Simon said the level of gasoline smuggling across the borders

[with Thailand and Vietnam] is too big for his resources to deal with.

"Our people are busting 10 to 15 gasoline smuggling attempts per day, both at

the borders and inside Cambodia. We have only 1,000 staff nationwide, so we need

more co-operation from local authorities and police to be more effective."

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