As part of the construction deal for a new T3 prison, the old T3 prison in central Phnom Penh was handed over to Sokimex, which is demolishing the buildings, above, and plans to build a hotel
Sokimex has a diverse portfolio of businesses in some of Cambodia's key areas. But
the company is shrouded in mystery. There have been consistent rumors about who owns
and controls it and even the Ministry of Commerce is coy about revealing details.
Stephen O'Connell and Yin Soeum look at Cambodia's largest company.
CAMBODIA'S largest company, Sokimex, has come under attack by opposition leader Sam
Rainsy, who claims the company's close ties with the ruling CPP allow Sokimex to
conduct business in a manner that hurts both consumers and the country.
Rainsy said Sokimex - which is involved with a variety of business ventures ranging
from petrol stations to the Angkor Wat ticket concession - is at the very heart of
Cambodia's political and commercial complex. "It is a symbiotic relationship
between a ruling party and an apparently private company."
He said Sokimex was set up with the support of the Vietnamese invading army. "At
the time, the economy was centrally planned. It was a socialist, communist country.
Sokimex was the commercial, trading, and financial arm of the Vietnamese-backed and
Rainsy said Sokimex, managed by the brothers Sok Kong and Sok Vanna, became the "financial
pillar for the ruling CPP".
"You cannot make the distinction between Sokimex, the CPP, and the State. The
CPP apparatchik is inextricably intertwined with the State. Sokimex was doing business
not only for, but in the name of the State."
In an interview with the Post, Sok Kong, Chairman of Sokimex Co Ltd, was reluctant
to discuss the company's origins, saying only that it was founded in 1980 and traded
in "handicrafts made of rubber and wood".
Kong said he was Sokimex's owner and the one and only member of its board of directors.
Although Sokimex's company registration papers should be of public record, the Ministry
of Commerce did not make them available to the Post.
A petrol industry source agreed that Sokimex enjoys unfair advantages over its competition, and said Sokimex avoids paying tax on much of the petroleum products it imports.
Sokimex business interests include petroleum and gas importing, a service station
chain, import-export, garment manufacturing, Angkor Wat ticket sales, rubber plantations,
transportation, and property development.
Kong dismissed Rainsy's claims that his company has a special connection to the Government
saying: "Sokimex is a private company. It does not invest for the Government."
But he did acknowledge the Government owes his company between $30 million and $40
The Government is cash-strapped, so Sokimex is willing to help with loans, or assist
it with development projects, said Kong.
On February 14, four Sam Rainsy MPs sent a letter to Prime Minister Hun Sen requesting
clarification about Sokimex's relationship with the Government. The Government replied
with an unsigned and undated statement.
The Government's reply said the only reason it appears to specially favor Sokimex
is because the company has proved itself highly competent and always fulfills its
The letter went on to say that Sokimex has lent Government ministries materials and
supplies and the Government owes the company "millions of dollars" which
it will pay back "step by step".
And because the Government has had problems in the past when it dealt with incompetent
companies, it now relies only on Sokimex to supply many police and military needs.
"[The Government] must not be careless or nonchalant because these sectors relate
to national security," said the letter.
The letter said the importance of a reliable company like Sokimex was demonstrated
during the troubled period surrounding the 1997 coup.
However Sokimex's competence in fulfilling Government contracts has been questioned
by human rights groups. They point to the new T3 prison as an example of a shoddy,
poorly executed building. One rights worker said the water at the prison is not of
drinking quality and there are major problems with ventilation and sanitation.
The contract to build T3 prison was an attractive one for Sokimex. As part of the
construction deal the old T3 prison in central Phnom Penh was handed over to the
company which is currently demolishing the buildings and now plans to build a hotel
on the site.
Rainsy said among the company's earliest exclusive rights was the monopoly of the
import and distribution of petroleum products, mainly gasoline and diesel. "They
supplied the whole country."
After the UNTAC elections in 1993, Rainsy was appointed Cambodia's Finance Minister.
He said he tried to introduce reforms. Rainsy learned through the Customs Department,
which was under his authority, that Sokimex avoided paying duty on imported oil because
of well-placed "friends" within the Government.
Rainsy recommended to the joint Prime Ministers that the head of customs be sacked
from his job, saying he turned a blind eye to Sokimex's activities.
"We could not let such practices go on for ever if we wanted to establish the
rule of law," said Rainsy. The plan to reform the customs department was quashed
first by Hun Sen, and then Prince Ranariddh.
Rainsy said although he was powerless to act, he continued to monitor Sokimex's business
activities. He said usually the company did not pay tax, but when it did, Sokimex
minimized the amounts owed by under-declaring the quantities it imported. Sokimex
would also misrepresent the type of product it was importing. At the time diesel
was taxed 30 per cent less than gasoline, so it would declare gasoline imports as
diesel, he said.
"So they cheat on the quantity. They cheat on the nature of the product, and
they cheat on the quality of the product - and this is very harmful to the country."
Since the early 1980s, Sokimex imported petroleum products from the Soviet Union
[and later from Russia]. "Petroleum products, especially gasoline from Russia,
were of bad quality and made worse in Vietnam," said Rainsy, explaining that
the petroleum was imported through Vietnam where it was mixed with additives that
made it even less expensive but caused damage to engines.
"People think that because Sokimex gasoline is cheap, it is economical. But
in the end, using it can prove very costly."
"Because they are a company with political protection they can do whatever they
want. I condemn the privileges enjoyed by Sokimex in relation to other companies."
Rainsy said when he was Minister of Finance he fought hard to bring competition to
Cambodia's petroleum sector and had his first success when Shell Oil was allowed
to sell fuel at Pochentong Airport.
An industry source agreed with Rainsy's allegations that Sokimex enjoys unfair advantages
over its competition. He said half of what the customer pays at the pump for gasoline
is taxes. Sokimex, said the source, avoids paying tax on much of the petroleum products
One way it avoids paying taxes is by using Duty Free Certificates. These certificates
allow companies to import petroleum products to be sold to the military. They can
also be obtained by companies making investments in Cambodia - often the promised
investment is never made and the certificates are sold on the black market.
The source said in the case of the certificates for military use, Sokimex will import
petroleum using the Duty Free Certificates and instead of that petroleum going to
the military, it ends up being sold at Sokimex service station pumps.
However, Kong told the Post that Sokimex never uses Duty Free Certificates when it
imports petroleum products. "If we did that [avoid taxes] the Government would
The industry source said Sokimex benefits, indirectly, from petroleum imports by
Caltex and Shell. These companies must pay Sokimex hundreds of thousands of dollars
each year to pump oil from ships, through a pipeline that passes across Sokimex property,
to their storage facilities in Sihanoukville.
Caltex and Shell had been given a Government guarantee that they would not be charged
for the rights to pump oil across the property when it was owned by the national
oil company CKC.
But when Sokimex took over CKC in 1996 the rules changed. Despite repeated complaints
to the Ministry of Commerce, Caltex and Shell are still "held to ransom"
by Sokimex, said the source.
Another industry source said it is very difficult for international oil companies
to do business in Cambodia and questioned the long-term commitment of some companies
to continue operations here.
Among the problems, as outlined by the source, are over-investment in what remains
a small market, high import taxes, and a costly one per cent tax on the companies'
turnover which amounts to a "tax on a tax" (about half the price customers
pay at the pump is tax). These challenges to business are compounded by unclear business
laws, and a suspicion that Sokimex and Tela - another Cambodian oil company - have
an unfair advantage due to the amount of taxes they pay the Government.
Rainsy said Sokimex sells gas at the pumps from anywhere between five to 10 per cent
less than other companies.
"It's like a miracle. Maybe Sokimex is a brilliant company - very cost efficient,
better managed than Total or Shell and they can sell cheaper than other companies.
But the main reason is [Sokimex] cheats on tax payments," said Rainsy.
Rainsy said they also get prime locations for their service stations at bargain prices
whereas other companies have to buy good locations at a premium "and that money
goes into the CPP's coffers or directly into Chea Sopara's coffers. The whole thing
is very unfair to other companies."
Sokimex now controls about 35 per cent of the market. "Before they controlled
100 per cent [of the market] but the international oil companies have moved aggressively
into the market, looking at Cambodia as a long-term investment. Although they have
gained market share, it has been very costly for them."
"The system works to the detriment of the consumer and is not in line with good
Sokimex also has the monopoly on the supply of uniforms to the army and police. Rainsy
said Sokimex inflates the cost of uniforms to two to three times the cost of the
same uniforms available at markets.
"It is ridiculous when the Government buys hundreds of thousands of uniforms.
They should be able to buy much cheaper than retail prices at the markets."
In addition to the uniforms Sokimex also supplies a large proportion of the military's
In November 1997 Sokimex was given the monopoly on the supply of medicines to the
Ministry of Health (MoH). When the Government buys medicines, it has to go through
The contract had been awarded to a company called Duong Chhiv for the years 1996
through 1998. But after the 1997 coup - when Sokimex kept the CPP supplied without
demands for payment - a grateful Hun Sen cancelled Duong Chhiv's contract and handed
it to Sokimex, explained Rainsy.
In May 1999 Sokimex took over the ticket concession for the Angkor temple area. The government says 115,000 tourists visited the temples last year, and Sokimex says 70% of them bought a $40 pass.
Kong denies this allegation as well. He told the Post that Sokimex was awarded the
contract only after the MoH contract with Duong Chiv expired.
Rainsy said the Government should be able to buy medicines at a cost some 60 per
cent less than what is charged by Sokimex, but a MoH study suggests Rainsy's figure
A written statement from the MoH to the Donor Nation/NGO Working Group on the Social
Sector said it compared the price of 69 drugs procured by Sokimex.
The statement said although prices charged to MoH had decreased 14 per cent from
1998 to 1999, prices for these drugs are still 19 per cent higher than the price
The MoH statement listed several reason why Sokimex charges more than what UNICEF
has to pay for the same drugs:
1. UNICEF does not get taxed because it is an international organization;
2. UNICEF purchases in huge quantities thus getting prices cheaper than available
3. UNICEF purchases drugs directly from pharmaceutical companies, whereas Sokimex
makes its purchases through import-export companies.
Kong told the Post that more than half of that 19 per cent margin is paid out in
In May 1999 Sokimex took over the ticket concession for Angkor Wat. Sok Kong told
the Post that Sokimex must pay the Government $1 million per year to maintain the
concession for ticket sales at Angkor Wat.
Last year, said Kong, Sokimex sold only $1.4 million worth of tickets to visitors
to the temple complex.
Ticket costs for the temples are $20 for a one-day visit, $40 for a three-day visit,
and $60 for a pass valid for seven days.
Kong said 70 per cent of visitors pay $40 for the three-day pass because they need
several days to tour the huge complex thoroughly.
According to Government tourism figures, about 115,000 tourists visited the temples
last year. If just 70 per cent of that number purchased a three-day pass then ticket
sales should have been at least $3.2 million.
But Kong said after paying the Government its concession fee, Sokimex only profited
by some $400,000. The company then spent $200,000 on a new ticket office and transportation
for the staff. "So there's not much [money] left," he said.
Rainsy said Sokimex profits from the Angkor Wat concession are substantially greater
than what the Sokimex reports and he suspects much of that profit "fills the
coffers of the CPP to further its political agenda and to make the CPP apparatchiks
Kong is aware that controversy surrounds Sokimex and its relationship with the Government,
but he insists the company is a good corporate citizen which pays its fair and legal
share of taxes.