CAMBODIA'S national treasury has missed out on tens of millions of dollars in state

revenues because of mismanagement of the country's State controlled rubber industry,

according to KNP leader Sam Rainsy

The opposition chief says his party researchers have calculated that the granting

of tax free export licenses and illegal exports of rubber cost the country close

to $12.5 million in 1996.

In addition, according to Rainsy, the sale of undervalued contracts for the felling

of "old" rubber trees may have denied the state hundreds of millions of

dollars and reduced Cambodia's rubber producing capacity.

Cambodia's rubber industry - centered in Kompong Cham province, the political and

economic heartland of the Cambodian People's Party (CPP) - is potentially the country's

second biggest export earner after timber.

Before 1970, one third of State revenues came from the sale of rubber.

Official Custom's figures put the export of rubber last year at between 36,000 and

37,000 tonnes, most of which was shipped to Singapore where buyers paid a market

price of $1,200 a tonne.

An estimated 5,000 tonnes was also illegally exported to Vietnam.

"The government has awarded an export monopoly to the Mong Rithy company, but

sells rubber to the company at just $900 per tonne. It has also exempted the company

from the normal ten percent export tax," Rainsy said.

"Look at the national budget - zero dollars comes from the production of rubber

even though we exported 36,000 tonnes last year," he added.

"Mong Rithy gets these concessions because he builds schools for Hun Sen."

Agriculture Minister Tao Seng Huor said he did not know why the Mong Rithy group

had been awarded export concessions.

"I have never seen the documents regarding this...," he said. "If

you have the documents please bring them to my office."

When asked to comment on the assertion that revenue from the sale of rubber went

directly to the CPP, he laughed.

"I do not know," he said.

Finance Minister Keat Chhon remained unavailable for comment at press time, but recently

launched a blistering attack on the state's lack of "fiscal discipline".

Speaking at the National Assembly before presenting the 1997 budget, Chhon said Cambodia's

recovery was dependent on a "profound adjustment" to the way the government

managed the country's assets.

"... in drafting the 1997 Budget we... encountered a lack of seriousness and

discipline in the governance of State, both financially and administratively."

"Non-tax revenues are not collected... when they are, they are spent outside

the treasury circuit," Chhon said.

Rainsy added that contracts to log rubber trees - around 12, 000 of Cambodia's 43,000

hectares of plantation have been signed over to loggers - were severely under priced.

The contracts - awarded without competitive bidding to the Pheapimex and Shipping

Company by both Prime Ministers and signed in June 1995 - allowed for the sale of

11,700 hectares of "old" rubber trees at $1,900 per hectare. Both Prime

Ministers approved the deal on condition that proceeds would not go into the State

treasury.

However, according to Rainsy, Pheapimex later sold its logging rights to other companies

for $2,300 per hectare. These companies later resold the contracts for $2,700 per

hectare.

"These companies have started cutting and this year they will accelerate - they

are going to cut like mad," he said, adding that most of the so called "old

trees" were still capable of profitable latex production.

"The Japanese have developed a technique which vastly improves the value of

rubber tree wood which is used to make furniture," he said.

Rainsy said the market price for rubber timber is about $150 a cubic meter and that,

on average, each hectare produced about 300 cubic meters of timber worth around $45,000.

"Even if the companies paid $2,700 per hectare, that is an enormous profit margin,

and a great loss of potential revenue," Rainsy said.

Meanwhile, the French government has decided not to extend an aid program providing

technical expertise in rubber production - despite a personal request from the King

to the project's head technical advisor that he lobby for continued assistance.

The $5 million program was initiated in 1991 and finished on Dec 31 last year.

Speculation within political circles has it that the program was abandoned because

of the Royal Government's reluctance to reform the industry and collect revenues.

But a French embassy spokesman said the $5 million project had simply run its course.

When pressed as to why the program would not be extended the spokesman said: "The

project ran it's term, that's all I can tell you for the moment."

The second Prime Minister has reportedly indicated that he wanted Cambodia's existing

rubber plantations to remain under state control and has urged foreign investors

to set up new plantations.

However, investors of new plantations must wait at least 15 years for rubber trees

to produce profitable quantities of latex.