[Vietnamization] Logging’s roots deep

“[T]he revenues of this operation [were] at least $500,000 [per] day of milled timber; all removed on the company’s own private road, straight to Vietnam … or $1.5 billion in total,”

 

Tree trunks lie in a section of cleared forest in Mondulkiri’s Keo Seima district last year near an ELC owned by Binh Phuok Kratie Rubber 2 Company. Heng Chivoan

Logging’s roots deep

Phnom Penh Post | 23 June 2015

Hun Sen’s Cambodia has been shaped by the collection of illegal timber dollars, profiting a politically connected elite and in turn ensuring the ruling party’s grip on the state apparatus, a leading Australian researcher has said.

Sarah Milne, a research fellow at the Australian National University, in a study published last month in the journal Critical Asian Studies, said the Cambodian “regime” has created a “timber shadow economy” by embracing foreign investment, which is “carefully controlled and maximised by the state … in collaboration with powerful elites”.

Milne’s research, based on more than four years of field work in Cambodia, uses the examples of three local subsidiaries of state-owned Vietnam Rubber Group (VRG) in Kratie and Mondulkiri provinces, and tycoon Try Pheap’s concession to clear the China-backed Stung Atai hydropower dam reservoir, to argue that networks of powerful and connected individuals have for years siphoned off money that should have been spent on the country’s development.

“Cambodia’s regime has been likened to a shadow state, given the role illicit logging rents played during the period of post-conflict transition and modern-day state formation,” she writes.

“This enabled provincial strongmen to operate like warlords, controlling logging in order to finance their personal wealth and maintain their troops,” which in turn led to the formalisation of the system as many of these “warlords” went on to assume positions in the ruling Cambodian People’s Party, she argues.

An informal “taxation” system arose, which was intended to supplement the wages of officials, as legislation was passed that effectively allowed the state to re-privatise or capitalise on public land following the banning of logging concessions in 2001.

Last year, the Post revealed how logging tycoon Try Pheap had allegedly made upwards of $310 million from illegally felling Siamese rosewood in the Cardamom Mountains and the Phnom Samkos Wildlife Sanctuary between 2009 and 2014.

Milne, who has conducted extensive independent research in the area, said officials had told her it was “impossible to control the reservoir-clearing activities”, while NGOs reported that the “logging operation . . . cover[ed] an area of approximately 200,000 hectares”.

Military police were hired to protect the smuggling routes to Vietnam, and Pheap’s firm, MDS Import Export, confiscated any timber harvested by others and intimidated unsanctioned loggers, while Forestry Administration officials told Milne that MDS’s rights to log extended to “everything in Pursat province”.

“[B]y the time MDS had trafficked the rosewood to the Vietnamese border – using a police-protected and Forestry Administration-facilitated fleet of Lexus, Land Cruiser, and Range Rover four-wheel drive vehicles – the price per cubic meter was marked up by five times [to upwards of $25,000].”

Chheng Kimsun, director of the Forestry Administration, could not be reached yesterday.

As Pheap has allegedly become one of the major financiers of the CPP, and is also an official sponsor of at least three military battalions in the northeast [bordering Vietnam], where he also has significant business interests, Milne writes that officials report “his activities involve ‘everyone’s bowl of rice’: he is ‘untouchable’ because of his high-level connections and because no one is willing to bite the hand that feeds”.

“[A]s Try Pheap’s contribution to the state and the party expands, so must his business portfolio. Indeed, it seems as though the two are locked into a mutual ratchet effect.”

A spokesman for MDS Import Export could not be reached.

In Mondulkiri and Kratie provinces, Milne’s investigations into VRG’s three plantations produced yet more evidence of this symbiotic relationship between foreign investors, powerful tycoons and illegal logging.

The stripping of thousands of hectares of timber in the concessions was led by two businessmen who are said to be related to Hun Sen – Oknha Ol, who informants told Milne is the godson of Hun Sen’s brother, Hun Neng; and Oknha Tai, who had the rights to Kratie.

“But unlike Try Pheap, these tycoons had managed to keep extremely low profiles. 

For example, in 2013 when hundreds of villagers tried collectively to take [Oknha] Ol to court for stealing their resin trees, the provincial judge dismissed their case because no one knew the tycoon’s full name or address.”

“[T]he revenues of this operation [were] at least $500,000 [per] day of milled timber; all removed on the company’s own private road, straight to Vietnam … or $1.5 billion in total,” Milne writes. “Once the forested land is gone and legitimacy has waned, then Hun Sen’s Cambodia may well be trapped in a cage, forced to consume its very own sources of power.”

“Whereas logging revenue in the 1990s was the salve that ensured Cambodia’s transition to peace, today it is the gel that holds the regime together.”

Phay Siphan, spokesman for the Council of Ministers, yesterday dismissed the study’s findings, saying the rich were being taxed appropriately and foreign investors would have been scared off if such a “shadow economy” existed.

“We see the health of the government. GDP has increased and aid and investors are assured to be in Cambodia,” he said. “Now investors don’t need to go to personal pockets. It’s a little bit transparent now.…Opportunists always take advantage of the system. But as a whole, the nation overall is very good.”

“The middle class has grown, and all the rich are supporting the nation and we take tax from them.”