Logo of Phnom Penh Post newspaper Phnom Penh Post - New deal shaves $400,000 off Youth Club arrears



New deal shaves $400,000 off Youth Club arrears

New deal shaves $400,000 off Youth Club arrears

THE exclusive International Youth Club in the city center has been excused more than

$400,000 worth of rent arrears and fines by the co-Prime Ministers.

The two-hectare club, a playground of tennis, badminton and squash courts, a swimming

pool, gymnasium and restaurant that caters in pricey fashion for well-off Khmers

and expats, has also had its rent slashed from an original $23,000 a month - which

it had never paid in full for the past 21 months - to just $5,000 a month.

The Prime Ministerial amnesty granted last month had previously been opposed by Finance

Minister Keat Chhon, who wrote to Prince Norodom Ranariddh and Hun Sen arguing that

the Youth Club should be sued.

Chhon noted that under the "new" contract renegotiated between the Government

and the owners of the club, Japanese company Choiford Development, the State stood

to lose nearly $4.5 million over the original 32-year term.

A senior Cambodian People's Party official within the Phnom Penh Municipality said

that if Keat Chhon (CPP) refuses to sign the new deal, attempts would be made to

take the club to court to recover the debt.

In May 1992, Cambodian firm Tourimexco signed a deal with the then-Phnom Penh governor

Hok Lundy to run the Youth Club. The monthly rental was to be $2,600, rising to $23,000

from September 1994 for the next 32 years.

In July 1992, Choiford took over the deal - but kept on paying just $2,600 a month,

running up arrears that reached $326,400, plus $81,600 in non-payment fines, up until

the end of last year.

Under the contract, Choiford was also supposed to build a hotel within three years.

Choiford representative Kong Rithy Chup is the advisor to Chap Nalivoudh, a Funcinpec

vice-governor of Phnom Penh Municipality and Ranariddh's half-brother.

Rithy Chup told the Post that the construction of the hotel never started "because

it was not a proper situation".

"The contract was signed before the election. We never took the rise [in rent]

into account. It was too much and not profitable," he said.

"The contract was not well negotiated at the beginning. It was only in Khmer,

so maybe the Japanese did not understand it well. I would never have signed this

myself. International law does not allow rent to increase ten times," he said.

"This is a favor from the government," he said of the new $5,000 a month

deal.

"We have already invested $6 million and we have not had it back. Under this

new contract, we will make a new investment. There have been concessions on both

sides."

He said that it was not the first time the government had agreed to renegotiate a

contract as part of its policy to help firms invest more.

On the $4 million the State is going to lose, Rithy Chup said: "They have to

do their additions again. What is more profitable for the future, having a high-standard

hotel and creating new jobs? We will see in the future what was the most profitable."

Rithy Chup said he asked to the Prime Ministers to renegotiate the contract in August

1994.

The first written request to the Municipality for a reduction in rent was dated from

January 1995. The club asked that rent be retroactively cut to $5,000 for the months

September to December 1994, and that a new deal be negotiated.

In February last year, the Municipality asked the Ministry of Finance - which is

in charge of Phnom Penh's budget and reaps the the earnings of the Muncipality -

for its opinion.

In April 1995, the Ministry said that the Youth Club must respect the original deal.

From then on, the Municipality bombarded the club with payment demands.

On June 10 1995, Rithy Chup wrote to the Council of Ministers asking for the deal

to be renegotiated. He said the club had encountered difficulties because of "political

instability" since the contract was signed.

At the bottom of Rithy Chup's letter, Ranariddh, on July 3, signed his agreement

that the contract be renegotiated through the Council of Development of Cambodia

(CDC); Hun Sen signed his agreement two months later.

That same month, September 1995, the Council of Ministers agreed with the two PMs.

Throughout this time, the club was paying just $2,600 a month.

In March 1996, the Council of Ministers renegotiated the contract. The new rental

was set at $5,000 a month, backdated to January 1995 - and the PMs also agreed to

waive the club's $20,400 a month debt it had for the last four months of 1994 as

well.

At the Municipality, First Vice-Governor Chea Sophara (CPP) said about the amnesty:

"I am surprised."

He said he did not know the reason why the government agreed to renegotiate the deal,

but noted that the "International Youth Club is close to the Funcinpec party."

"The International Youth Club complained to the Municipality that the rent was

too high. We always refused to reduce it and kept on asking them to pay.

"They always promised to pay but never did. The representative of the Youth

Club thought that the best way was to write directly to the two Prime Ministers,"

he said.

"The State budget will lose a lot of money. But the new contract is not signed

yet and I am still waiting for the agreement of the Ministry of Finance. If the Ministry

of Finance disagrees I will not sign it," said Chea Sophara.

"We will file a complaint [for non payment of the rent] to the court if the

Ministry of Finance does not give the green light for the new contract," he

added.

Vice-Governor Khaou Meng Hean (Funcinpec), who is in charge of general administration,

said he did not know the reason why the International Youth Club had been so favored.

"We did not decide anything. We just followed the decision of the two Prime

Ministers, " he said adding that the Municipality cannot go against the Prime

Ministers' will.

Under the club's new deal, the monthly rent from January 1995 to the year 2004 is

set at $5,000. It will rise to $10,000 for the following five years, and it will

increase by $5,000 every 10 years after that. In the year 2031, the Youth Club will

begin paying the originally-agreed rent of $23,000 a month.

The new deal also extends the club's lease to 70 years, and requires that a 240-room

hotel be built on the site by mid-1998.

Prince Ranariddh's chief of cabinet, Ly Thuch said, said he was unaware of the matter

but stressed that the Prime Ministers would have only given their agreements in principle.

Details had to be set by the relevant ministers, he said.

Spokespersons for Hun Sen would not comment. Keat Chhon could not be contacted, and

his deputy was unaware of the situation.

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