Bullish Malaysian firms have signed $1.58 billion worth of investment contracts
in Cambodia in the past five months - and the pace may continue. However, some
are now asking just how sweet and transparent is the Malay Connection? -
Michael Hayes investigates.
MOST people would complain if asked
to spend their birthday on a crowded airplane. Not so for Cambodian Prime
Minister Norodom Ranariddh.
The Prince, an aviation enthusiast who likes
to fly remote-controlled model planes on weekends, celebrated turning 51 by
seeing his long-cherished dream of a new national flag carrier literally take to
Joined by a host of Royal government and foreign dignitaries,
Ranariddh jetted off to Malaysia on the Royal Air Cambodge (RAC) innaugural
flight on January 2. Once airborne the visibly elated premier was feted to a
round of "Happy Birthday to You" by everyone on board.
To add a hefty
layer of icing to Ranariddh's birthday cake, the Prime Minister witnessed in
Kuala Lumpur the signing of a $1.3 billion deal with the Malaysian company
Ariston Sdn Bhd to develop a resort complex in the port city of Sihanoukville -
Cambodia's largest contract to date with a foreign investor. For Ranariddh, the
party could not have been sweeter.
Its no coincidence that RAC's first
flight was to Malaysia or that Ranariddh was joined for lunch by none other than
Malaysian Prime Minister Datuk Seri Mahathir Mohammad. Besides the fact that the
new airline is a $10 million joint venture with Malaysian Helicopter Systems,
RAC's first international airlink with Kuala Lumpur should be profitable as
Malaysian corporate moghals and entrepreneurs have been flocking to Cambodia for
months to explore, negotiate and in many cases sign a variety of investment
Most importantly, the Malaysian government is bullish on
Cambodia with Mahathir taking a personal interest in helping promote the Kingdom
as an ideal investment locale for Malaysian firms.
The numbers are
telling. In the last five months since the passage of the new investment law the
Cambodian government has signed 17 contracts with Malaysian companies valued at
$1.58 billion. If, as expected, the Malaysian company Muhibbah-Masteron gets the
nod to build a new runway and terminal at Phnom Penh's Pochentong airport, the
figure will jump by another $250 million.
Recently approved projects
range from the development of the Kingdom's first racetrack and theme park to
garment factories, petrol stations, palm oil plantations, a power plant, office
blocks, a logging concession, a winery and a golf course.
economic love affair between Cambodia and Malaysia meets key interests of both
nations. Its also a function of what many observers describe as a special,
long-standing relationship between the two countries.
From the Cambodian
perspective any and all investment is positive. The cash-strapped government is
desperate to lure foreign concerns to help rebuild the country ravaged by more
than two decades of war. The government also rightly says that creating jobs and
boosting living standards of the rural poor is the only long-term solution to
the nagging Khmer Rouge insurgency which still poses a serious threat to
security in many provinces.
But why Malaysian companies to the rescue?
For a start Malaysia is in the neighborhood and Kuala Lumpur is only an 80
minute hop by air across the Gulf of Thailand, enabling executives to come in
and out of the country easily.
Moreover, unlike Thailand and Vietnam,
Malaysia with its relatively small population and no land border with Cambodia
does not pose a threat to the Cambodian job market. Cambodia already wrestles
with the presence of tens of thousands of undocumented Vietnamese workers. The
spectre of waves of job-seeking Thais pouring over the border from northeastern
Thailand is equally nightmarish. Even if the problem of illegal foreign workers
could be solved, there is still the historical antipathy which Khmers feel
towards both the Vietnamese and the Thais. In the case of Malaysia the slate is
clean - to the point where Malaysians are the only foreign nationals who don't
require visas to enter the Kingdom.
From the Malaysian side, fueled by
record GNP growth levels over the last decade, many Malaysian firms are flush
with cash and looking for places to invest. And the Mahathir government is
actively encouraging them to look abroad.
There is also the Chinese
factor. Most firms coming to Cambodia from Malaysia are owned by ethnic Chinese.
They find establishing links with local Sino-Khmer businessmen easy to
As well, given their own government's policy of promoting ethnic
Malays domestically, there is an added incentive to look abroad. "I feel more at
home here in Phnom Penh than I do back home," says one Malaysian ethnic Chinese
More broadly, government officials, diplomats and
businessmen say that the friendship between the two countries goes back decades.
King Sihanouk was always given the red carpet treatment whenever he visited
Kuala Lumpur and FUNCINPEC officials remember Malaysia's longstanding support
for them when they were on the Thai border.
Malaysian ambassador to Phnom
Penh Deva Mohd. Ridzam says that Malaysians understand Cambodia and sympathize
with the country's plight, having experienced an insurgency themselves during
the 50s and 60s. "We haven't forgotten that 30 years ago Cambodia was ahead of
us (economically) and so we have nothing to be arrogant about," he says. Ridzam
also argues that the key to Malaysian corporate success in Cambodia stems from
their entrepreneurial instinct, international competitiveness and their ability
to do things "the Asian way".
"CEOs fly in here. They discuss contract
details and don't leave it to their boys," says Ridzam. "This is the
One CEO who has already been a frequent flyer to Phnom Penh
is Ariston's owner Dr. Chen Lip Keong. His $1.3 billion deal to develop a
resort/casino complex on Naga Island off the coast from Sihanoukville requires
upgrading the airport there to international standards as well as the
development of a new power station, roads and other facilities.
Chen holding, FACB Berhad, has also been awarded a $90 million contract to build
a racetrack and sports club near Phnom Penh, which will include the construction
of a "mini-Disneyland".
By Cambodian standards, Chen is already an "old
hand" on the business scene here. Arriving in early 1992, he set up the
English-language newspaper the Cambodia Times as well as his own bank - the
Cambodia Asian Bank - one of four Malaysian-owned banks currently operating in
Chen's local patron at the time was the now-exiled - for his
alleged involvement in last July's coup attempt - Prince Norodom Chakrapong, who
in his position as Deputy Prime Minister of the State of Cambodia was dubbed by
one diplomat as the "Chairman of Economics". Chakrapong brokered numerous deals
for foreign investors before the May 1993 elections and sources say the pay-offs
he received for his services were enormous.
But Chen's recent deals and
others signed with Malaysian firms have drawn fire from disgruntled members of
the National Assembly who say the contracts are unconstitutional. On January 20
eight MPs sent a letter to Assembly chairman Chea Sim requesting the government
to explain whether recently-signed deals violate Article 58 (management of state
assets) and Article 90 (state borrowing and financial committments) of the
constitution. The Ariston deal is just one which the MPs want to examine. Says
one MP who requested anonymity: "Its just unbelievable, the (Sihanoukville)
airport is a state asset. How can the government sign it away for so many years
without approval by the National Assembly?"
Another deal which the MPs
want to scrutinize is the logging concession signed with the Sarawak-based
Samling Corporation granting a 60-year logging concession on 800,000 hectares -
about four percent of the entire country. Inked while Ranariddh was in Kuala
Lumpur last August, the deal entails a $110 million investment in sawmills and
Critics who've seen a draft copy of the contract
say it is woefully lacking in environmental controls. "No one seriously
concerned about Cambodia's environment would have put their name to a deal which
could cause such vast destruction," says one environmental expert in Phnom Penh.
"Its hard to imagine Cambodia's forests lasting another five years."
asked to comment on the Samling concession, Ambassador Ridzam was non-plussed.
"I take my hat off to them," he says. "They will do selective logging as well as
re-forestation and a-forestation." Ridzam says that Samling is one of the
logging firms cited internationally for its "sustainable forest development
Cambodian Investment Board (CIB) Secretary General Ith Vichet
believes the government is on top of the problem. He says that all
logging-related contracts will require the submission of a master plan and an
environmental impact assessment. Pointing to a half-meter pile of pending
logging proposals in his office, Vichet notes wryly that when the government
imposed a export logging ban in early January, all the requests for logging
concessions became proposals for furniture manufacturing overnight.
"Sawmills are not innocent," says Vichet as an indication that he is
concerned about how to manage what is arguably the Kingdom's most valuable
But with the Samling concession approved by the Council of
Ministers and not the CIB critics argue that key deals are not getting the
attention they deserve. "I'm not angry, I just want to see what's in the
contracts," says one MP who signed the letter to Chea Sim.
also been raised over the lack of a transparent competitive bidding process.
"Bidding is locked, it's a joke," says one Asian diplomat in Phnom
A case cited is the Ariston deal. In order to provide some cash
flow until the Naga resort/casino in Sihanoukville is up and running, Chen
signed a separate deal to bring a floating casino to Phnom Penh.
Originally, the Naga Island deal was put up for tender by the Ministry
of Tourism, with a final decision to be announced last November. But sources say
the Cambodian Development Council - the "one-stop-shopping" entity for foreign
investors - went ahead and brokered the floating casino deal before Tourism
Minister Veng Sereywath could complete the tender process. When the ship sailed
up the Mekong, Veng was reportedly outraged, complaining that Cambodia's image
would be damaged internationally. US-based Hyatt International, upon learning
about Chen's floating casino, immediately withdrew from the bidding
The larger issues of concern are whether deals signed will stick
and secondly - assuming they do - whether the investments themselves will
actually materialize. Several earlier contracts have been summarily cancelled -
most notably for Thai-owned Cambodia International Airlines which was given two
days notice to close its doors before the start-up of RAC, leaving ticket
holders stranded all over Asia. And some businessmen and diplomats in Phnom Penh
are sceptical that the larger deals signed will ever take off.
like a lot of smoke to me," said one western diplomat referring to the Ariston
But one source familiar with Malaysian investment in Cambodia
says that Mahathir has made it perfectly clear to the Cambodian government that
if deals start collapsing Malaysian firms will pull out across the board.
Even if this is not the case, experiences similar to that of Thai firms
who've had the rug pulled out from under them would send an immediate chill
through the Malaysian investment community shaking what - on the surface - has
the potential to be a profitable long-term relationship for both countries.