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Jul 6, 2016 9:42 PM

Watchdog: Cambodian PM's family rules business world, too

The Associated Press

BANGKOK (AP) — An extensive network of businesses controlled by the family of Cambodia's longtime leader sustains and is sustained by his authoritarian rule, making foreign investment in the country risky, says a report issued Thursday by the research and advocacy group Global Witness.

The London-based group, which focuses on exposing the corrupt exploitation of natural resources in the developing world, says the family of Prime Minister Hun Sen uses a business empire worth at least $200 million along with influential positions they hold in the military and government to keep a lock on power. Significant holdings in the media, along with close ties with other powerholders and business cronies tighten their grip.

The report, 'Hostile Takeover: The Corporate Takeover of Cambodia's Ruling Family,' describes the 30 years Hun Sen has been in power as "characterized by electoral fraud and the brutal suppression of political opposition, including through murder, torture and arbitrary imprisonment," an assessment shared by human rights groups such as Amnesty International.

It said that 40 percent of the country's 16 million people still live below or close to the poverty line.

Hun Sen, who became prime minister in 1985, vowed during the 2013 election campaign to stay in power until the 2028 polls. Now 63, he is seen as grooming one of his three sons to succeed him.

Data for the report mainly came from the Cambodian Commerce Ministry's online corporate registry, where Global Witness found that 21 of Hun Sen's closest relatives were registered as holding interests in 114 private domestic companies. It says the holdings "span many of Cambodia's most profitable sectors, including those known to be riddled with corruption such as mining, gambling and real estate." Trading, energy, real estate and construction are other sectors in which the family is active.

There was no immediate comment from the government.

Global Witness believes the actual value of the family's holding is likely to be much higher than $200 million because of incomplete information and the use of third parties to hold shares.

Some of their businesses, through direct and indirect relationships such as franchising and distribution deals, have links to international brands such as Apple, Nokia, Visa, Unilever, Proctor & Gamble and Honda, it said.

"These relationships not only raise ethical questions for the brands, they also pose significant risk," said Global Witness, saying there are worries about an opaque business environment and the risk of breaking national and international anti-corruption laws.

Besides facing a stacked deck in any business dispute — Cambodian courts are considered vulnerable to political influence — foreign companies face possible legal sanctions under their own home countries' anti-corruption laws.

"Due to a lack of transparency and pervasive corruption, all business transactions involving the Cambodian government, including public procurement, infrastructure contracts and natural resource allocation, present heightened risk for foreign investors," Global Witness said.

The report said that appointing family members to key official and semi-official posts — in politics, the military, police and the media — is another essential element of Hun Sen's control.

His two older sons hold important military posts. The youngest is a member of Parliament. The eldest daughter — who has the largest number of business holdings in the family — is one of Cambodia's only two tycoons with radio, television and newspaper outlets. Two of the children are married to offspring of deputy prime ministers.

With rapid economic growth for the past two decades along with a cheap labor force and minimal regulation, Cambodia has attracted foreign investment from the West as well as China. In 2015, Britain was the second-largest foreign investor in Cambodia after China. The United States is Cambodia's largest trading partner and export market.

Washington's efforts to offset Beijing's influence in Southeast Asia mean "Hun Sen is not being treated as a tyrant ... but as a strategically important business partner whose corrupt personal interests can align with U.S. foreign policy," the Global Witness report said.

Other critics point out that the powerless pay the price for corruption through the destruction of their environment and land grabs.

"In Cambodia, economic control and political repression are two sides of the same coin. Under Hun Sen, political power is used to obtain economic resources, which are in turn used to obtain more political power," Sebastian Strangio, author of the book "Hun Sen's Cambodia," told The Associated Press.

"The cycle never ends. This has had pernicious effect on Cambodia's development. Instead of flowing to the national budget, where it can be spent on services like health and education, a huge proportion of the national wealth circulates in a nether-economy that is opaque to outside scrutiny."


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