AN OVERVIEW OF ASIAN COMPANIES: CAMBODIA
Forests are among Cambodia's most important and developmentally significant resources, yet, emerging from a period of war and civil unrest that has weakened the rule of law and every aspect of civil society, Cambodia has few human and institutional resources to apply to the problems facing the forest sector (WB, 1996. p1&2). Further complicating the questions of forest management is the role timber revenue plays in funding opposing warring factions within the country. The Khmer Rouge's illegal export of timber to Thailand, with the assistance of the Thai military, has been well documented (see GW, 1996 & 1995) and financial aspects of this trade are currently under investigation by the IMF (PPP 24\1\97).
The Royal Cambodian Armed Forces (RCAF) are also implicated in the illegal trade of timber for the
purposes of running a parallel budget outside of recognized channels to fund offensives against the
Khmer Rouge strongholds. The RCAF therefore have good reason not to enforce forestry legislation
and may actually prevent effective policy implementation, especially so given that since 1995 forestry
revenues are no longer administered by the Ministry of Defense (GW, 1996a).
CAMBODIA'S FOREST POLICY AND PRACTICE It is against the above political backdrop that the Royal Government of Cambodia (RGC) introduced a
timber cutting ban, brought into effect on the 1st January 1995, and a log export ban effective from the
30th April 1995 (GW 1996a). It is clear however that this legislation has never been enforced, one
reason highlighted being that "the RGC cannot effectively physically control any forest area"(GW,
1996. p6) mainly due to security reasons. The recent withdrawal of Societe General de Surveillance's
(SGS) bid to monitor the timber trade because 'the company did not feel it could do the job' has done
little to change this view. SGS is one of the largest commercial monitoring organisations in the world.
Further, the International Monetary Fund (IMF) suspended a $20 million loan to Cambodia for the
Government's poor performance in reforming the forestry sector (PPP, 1997).
In addition, the log export and felling bans have to be contrasted with the fact that in the last two years
the Government has accelerated efforts to grant concession agreements. The objectives of the policy of
granting new concessions are stated as being a means of :
The first objective of this policy acknowledges that illegal logging in Cambodia is a major problem
and in recognition of that fact many of the concession agreements which have attracted so much
publicity (see attached table) will not now be approved. There are notable exceptions howeverThe
Minister of Agriculture has confirmed that the Samling Corporation, Macro-Panin, Kingwood and
Grand Atlantic will be allowed to retain their concessions (PPP, 1995).
These concession agreements are controversial for a number of reasons:
The Council for the Development of Cambodia theoretically has to approve and list all foreign
investment. Timber sector contracts are not discussed or published. (GW, 1996)
In reality it would appear that little has happened since the forest rethink. Those concessions which
have already been approved have not been re-negotiated to give more favourable terms to the
Government or local people who are now banned from cutting wood for domestic purposes. Concern
has been expressed that logging is already under way in concessions that have not yet been confirmed
by the Government.
SAMLING IN CAMBODIA SL International (Samling) has been granted a 787,810 ha concession (GW, 1996). A draft
management plan for the Samling concession has been prepared and submitted to the Forestry
Department, but has not been approved because, among other things, it does not satisfy sustainability
requirements of the 1988 Forest Management Law (WB, 1996). Samling have also been criticized by
the Forestry Department for felling undersized logs, over cutting (volume per hectare superior to legal
one of 10 cu.m./ha), and buying illegal timber from military forces and local people mostly cut in the
Snoul Wildlife Sanctuary (GW, 1997). The Department of Forestry representative in Snoul is reported
to have said that the company was exporting logs directly to Vietnam before 31 Dec. 96 but not since
(GW, 1997), in contravention to the 1995 logging and export bans.
The World Bank's financial analysis of an investment agreement and logging licence reflecting the
terms, conditions and forest areas in the Samling Corporation concession and investment agreement
would require that (given specified assumptions):
The total operable area of the concession is estimated to be 378,434 ha. To produce 603,000m3 per
year on a 30-year rotation would require logging at an intensity of 47.8m3 per ha. At a sustainable
intensity of 10m3 per ha., the annual allowable cut would be only 126,145 m3 and support a Plant
Capacity Utilization (PCU) ratio of only 20.9 percent compared to a break-even PCU of 56 percent;
If timber were priced at its real market value of US$170 per m , including a royalty charge of US$74
per m, variable costs would exceed selling prices and losses would be incurred at any level of PCU.
Also, there would be negative value-added at any level of PCU;
The project would create 3,230 jobs of which an estimated 2,230 would be in manufacturing. At a
royalty subsidy of US$60 per m3, the cost per job created in processing would be about
US$ 16,200 per year; 22.5 times the estimated average annual wage of US$ 720. (WB, 1996, p57)
MACRO-PANIN According to a report from the Rainforest Movement, the Indonesia company Macro-Panin has
acquired a 1.4 million Hectares concession in Cambodia. This is apparently a (60%) joint venture with
a young Sino-Indonesian businessman, Yopie Widjaja, who is also involved with Bamban Trihatmodjo
and an áeromovel`project with Tutut. (Business Week, Feb 10,97)
OVERALL SITUATION The current situation in Cambodia has been described as anarchic and one in which the formation of
government policies are geared to the short term gain of those in power (GW, 1995). The program
outlined above appears to have allocated nearly all of the country's commercially viable timberlands to
a small number of concessionaires, rests on a level of timber exploitation which is likely to be
unsustainable and will, in any case, provide inadequate fiscal returns. (WB, 1996)
The fact that detailed ground surveys were in no case conducted prior to the completion of negotiations
and in some cases the draft management plans did not meet legal requirements brings into serious
question the concessionaires' commitment to sustainable forest management.
The cursory nature of the pre-investment survey work is not consistent with the large investment
commitments that have been made by some companies. Furthermore, with the exception of preliminary
surveys and initial work in some areas, implementation of the proposed investments appears to be
negligible to date (WB, 1996).
BURMA One of the first Indonesia investors in Burma was PT Rante Mario, one of the numerous companies
under the Humpuss group, controlled by the Indonesian President Suharto´s youngest son, Hutomo
Madala Putra (Tommy Suharto). Through a joint venture with a Burmese state company, Myanmar
Timber Enterprise (MIT), PT Rante Mario is planning to build a wood processing industry with an
investment of U$ 75 million (Bt 1.8 billion). According to Henry Sunardi, general director of PT Rante
Mario, Burma has an excellent forestry potentials. Sunardi bases his argument on this data of Bruma´s
667 million hectares of forest, 32,4 million consisting of high-density forest. The Humpuss executives
data, however, contradicts some other sources. According to Wart Ekonomi, November 20, 1995,
based on WWF date, Burma has already lost 71% of its natural habitat, compared with 49% in the case
of Indonesia. Area wise, Indonesia still has nearly 750,000 km2 of natural habitat, while Burma only
has nearly 226,000 km2. (Paradise Lost, Article 19,94)