Logo of Phnom Penh Post newspaper Phnom Penh Post - The Russians Are Coming - Sort Of

The Russians Are Coming - Sort Of

The Russians Are Coming - Sort Of

Forget the Thais or the Japanese. It's the Russians who are making some of the biggest

and quietest efforts on the Cambodian business front.

Last month they were granted permission to open a joint-venture bank in Phnom Penh

to be known as the "CaRus Bank." Now they look set to broaden their trade

links with joint ventures in activities from timber to mining.

The Russian presence is nothing new. In 1980, trade between Russia and Cambodia totalled

U.S. $1 billion and included Lada cars, chemical fertilizers, and construction materials.

Most of that was paid for in credit from the Soviet Union with disbursements reaching

U.S. $920 million.

But in January 1990, following a crisis over hard currency and a yawning deficit,

an agreement was signed between the two countries stating that bilateral trade should

in the future be effected in world currency and at world prices. The result was a

massive drop in turnover, with trade for the first six months of 1992 being little

more than U.S. $2.5 million.

Now efforts are going ahead to revitalize trade links and establish growing cooperation

at economic, cultural and political levels.

"We are in discussion over several potential joint ventures," said Igor

V. Popov, an economist at the Russian Trade Representative's office in Phnom Penh,

which employs 10 full-time staff. "I believe that at the end of the transitional

period which is taking place in both countries, our trade will be considerably higher."

To date, not all efforts have been successful though. Aims to create a joint venture

between Krasnojarsk Car Tyre Plant and Takmau to export tires to Vietnam, Thailand,

and Russia fell through when Takmau signed a 20-year lease agreement with the Taiwanese.

Moves to develop a joint venture to rehabilitate rubber plantations have also hit

rocky ground since the Cambodian party entered discussions with French trade representatives.

Indeed, to date, the only joint venture under operation is a U.S. $4.2 million wood

processing enterprise which was started in l990. Casotim Company Ltd. is an intergovernmental

Cambodian-Russian joint venture whose main shareholders are the State of Cambodia

(51 percent) and the government of the Russian Federation (49 percent).

"It should be a very profitable business," says Noun Manill, assistant

senior general director, from the spartan Phnom Penh office of Casotim.

Casotim has secured a 142,000 hectare concession in Kratie province, 220 kilometers

north of Phnom Penh and it is expected that sawn timber will be exported to Western

Europe, Russia and countries in the Middle East.

So far, no sawn timber has been exported out of Cambodia. To do so, Casotim is constructing

a wood processing complex in Dei Eth, south of Phnom Penh on the Mekong River. First

stage construction is expected to be completed in March which will include a sawmill,

kiln drying plant, chemical treatment chamber and 1500-kilowatt power station.

"This year, if everything goes well, our plant will be the largest in Cambodia,"

said Sergei Naumov, Casotim's deputy general director. First stage capacity is projected

at 30,000 cubic meters of sawn timber annually. "We don't know clearly when

plant capacity will be reached. Many, many problems need to be worked out, but we

are optimistic," Naumov added.

Casotim expects to employ over 200 Cambodians initially with over 380 employed, including

loggers, when the operation reaches full capacity. Many of the plants Cambodian engineers

and technicians graduated from Russian institutes.

Naumov emphasized that Casotim's joint venture agreement includes provisions for

reforestation. "Our budget for re-planting trees is U.S. $170,000 in l993 alone

and we expect to re-plant over 2,000 hectares this year," he explained.

Nor are Russian efforts likely to stop here. Russian entrepreneur Yury Cheitvierikov,

who is chairman of the program commission at the Moscow Central Stock Exchange, as

well as a joint venture partner in the soon to be opened CaRus Bank, has even mused

about the idea, at some stage, of opening up a stock exchange.

There are also discussions underway for the establishment of a Russian-Cambodian

joint venture construction firm and it is reported that the Russian manufacturer

of Kamaz heavy trucks has been exploring the possibility of setting up a distributorship

in Phnom Penh that would also be capable of servicing the large number of Kamaz vehicles

already in the country.

Whether that means in the long term the Russians can restore their primacy in trade

and investment is a different matter. But for the foreseeable future, with many investors

awaiting the outcome of elections, it could be the Russians who make some ripples.

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