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Holdings draw veil over Mfone

Holdings draw veil over Mfone

7 mfone strike
Former Mfone employee striking to demand left wages in front of Thai Embassy. Photograph: Heng Chivorn/Phnom Penh Post

When the owner of Kingsland garment factory fled the Kingdom last year, enough pressure was applied to its sourcing companies H&M and Walmart to persuade them through their intermediaries to compensate workers left jobless. Distance could no longer absolve them of responsibility.

Just like the Kingsland employees who took their protest to the US and Swedish embassies to lobby Walmart and H&M, former Mfone employees took their protest to the Thai and Singapore embassies last week to apply pressure on the parents of the failed Cambodian company.

For Dave Welsh, country director for the American Centre for International Labour Solidarity, companies that are inextricably linked to failed organisations should also be held to account.

“Look at the corporation as whole, not just at Mfone. Look at the corporate links in Singapore and Thailand,” Welsh said. “The analogy of the situation is H&M and Nike aren’t incorporated in Cambodia, but they are morally, if not legally, on the hook for things that happen in their factory.”

While in the case of H&M and WalMart, responsibility was denied through a lack of direct ownership, in the case of Mfone, its parents are protected through a web of holding companies that limit them from having to bear their subsidiaries’ liabilities.

“There is not any possible legal claim for creditors of Mfone to request compensation from their parent companies,” said Dr Naryth Hem, a managing partner with the Cambodian law firm BNG Legal, when asked about the legal structure of Mfone ownership.

Via the Singaporean holding companies Shenington Investments and Asia Mobile Holdings, Mfone effectively had just three shareholders. Thaicom holds 51 per cent. Of the remaining stake, 75 per cent is owned by telecommunications investment company Singapore Technologies Telemedia and 25 per cent by Qatar Telecom.

When Mfone filed for insolvency in January this year, Thaicom said the collapse would not affect the financial performance of the Thai telecommunications giant.

“Shenington’s decision for Mfone to file for insolvency will have no significant adverse financial impacts on Thaicom’s consolidated results because we provisioned for this eventuality in the first nine months of 2012,” Suphajee Suthumpun, Thaicom’s Chief Executive Officer and chairman of the executive committee, stated at the time.

It was during this period of recognised decline that Norwegian company Eltek – in the first of many creditors’ claims on Mfone – won a court injunction to have Mfone’s assets frozen. Thus, despite “provisioning for this eventuality” of insolvency, Mfone continued to accrue debts of over $160 million.

A month after filing for Mfone’s insolvency, Thaicom announced a 2012 consolidated profit of 174 million baht ($6 million) and 786 million baht profit of its satellite operations, boasting a performance improvement of 265 per cent.

Mfone had been a problem child for its parent companies for some time. Thaicom floated “pulling out” of Cambodia in August 2011, and at the end of 2012 it failed in a bid to off­load the debt-ridden company for just $100.

Outspoken on the need for greater transparency in protecting workers’ rights, Ou Virak, president of the Cambodian Center for Human Rights, says that while parent companies are legally protected, this is changing. For Virak, it is not just the cheap labour that makes countries like Cambodia attractive to multi-nationals: it is also the knowledge that business standards – including self-stated principles – will not be enforced.

“First of all, they choose to not take responsibility by finding different ways to circumvent, or create buffers that shield them from these kinds of responsibilities,” Virak said.

“There is a moral obligation, but I think there is a growing consensus internationally to push for legal obligations as well.

“It is actually stated in many of these parent companies’ principles; if you look at these principles, the question is: do they give full attention to comply with their own stated principles? The answer is no, obviously not.”

In a case that may set precedents for Cambodia, Welsh said that there is an opportunity to establish a standard for protecting some of the world’s lowest-paid workers.

“Because of the high political connections involved in this case, it shouldn’t be seen as an intimidating aspect; it is all the more reason to make it a model,” said Welsh.

For the workers, they will continue their protest at the embassies in the hope that Mfone’s parent companies – Thaicom, Singapore Technologies Telemedia and Qatar Telecom – will take responsibility for the performance of their child.

“This way we can send a message to the shareholders, for them to face their responsibilities for the overall claim of the compensation” said Bou Kunthea, a former Mfone employee, who continues her protest.

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