POLITICAL storm erupted on June 28 over a controversial logging deal signed by
the country's two prime ministers that some analysts have criticized as
The agreement, signed earlier this month, transfers the
responsibility for overseeing logging deals with Thailand from the Finance
Ministry to the Defense Ministry.
The move will deprive the Finance
Ministry of key revenue-raising powers and provide a lucrative cash source for
the Defense Ministry.
Sources close to the government said the decision
contravenes Cambodia's budget law, which stipulates the Finance Ministry is the
sole recipient of state revenue prior to disbursement.
illegal ... it's really outrageous," said one diplomat, who said the deal had
been kept secret from the Finance Minister Sam Rainsy and Foreign Minister
Prince Norodom Sirivudh.
"I was not informed about this," Sirivudh
confirmed to Reuters. "It seems my ministry was not informed. Normally it must
pass through this ministry."
"First, I say to my government ... I'm quite
surprised as foreign minister. Before we had legal procedures."
decision was outlined in a June 17 letter to Thailand Prime Minister Chuan
Leekpai signed by Cambodia's First Prime Minister Prince Norodom Ranariddh and
Second Prime Minister Hun Sen.
"According to the newly established
procedures and modalities, the Ministry of National Defense of the Kingdom of
Cambodia was entrusted to deal directly with the matter of timber export," said
the letter, a copy of which was passed to Reuters.
The old laws governing
the export of timber have apparently been scrapped without any parliamentary
Timber export previously required the approval of the Ministry
of Agriculture, Forestry and Fishery, the Ministry of Commerce, the Ministry of
Finance and Economics, and the Ministry of Foreign Affairs and International
But, the letter said, these rules "were no longer
Since March 1, Cambodia has banned the export of unprocessed
timber. But the agreement allows two Thai logging companies to recover an
unconfirmed 180,000 cubic meters of cut but unprocessed timber valued at $5.5
A government official said the export license fees had already
been paid to the Defense Ministry by Chaophraya-Irrawaddy Co Ltd and the BLP
Import Export Co.
The Japanese Embassy has written a "bluntly worded"
letter to the Foreign Ministry seeking clarification of the terms of the
agreement. An Indonesian company with local logging interests is also
questioning the deal, which gives exclusive export rights to the two Thai
The unprecedented arrangement means the Ministry of Finance
will be deprived of substantial earnings from export taxes and licensing fees,
senior government officials said.
"It makes a mockery of the whole
environment question. It makes a mockery of the International Monetary Fund
(IMF) control of finances," said a senior official close to the
"The IMF has set limits on financial spending .... and it
shows they're [Defense Ministry] desperate because they're not getting arms from
anybody," he said.
When asked if the deal was viewed as a "desperate step
to obtain money for military purchases", one senior government official said,
"Yes, yes, yes. That's why the defense ministry will say they don't need a
special permit, no need to certificate our policy, no need to talk with the
Ministry of Agriculture, no need to discuss with Commerce [ministry] or Finance
[ministry] because they (Defense Ministry) need money."
He warned the IMF
would reject the logging deal.
"I think if the prime ministers do this,
it is wrong. It is very wrong, and if the IMF know this, they will not accept
it."The official said no government ministries were briefed about the decision
by the two prime ministers apart from the Defense Ministry.
Minister General Tea Banh told Reuters all the revenue from the timber deal
would be paid to the Defense Ministry. Banh justified the deal on the grounds
the timber would "rot" if it lay uncollected.