Virtual Silence on Regional Air Pollution at 2024 ASEAN-Australia Special Summit

March 8, 2024 Edward Dever

The ASEAN-Australia Special Summit was held in Melbourne on 4-6 March 2024.

If attendees had cast an eye over NASA's regional map before the various events, they would have seen a region consumed by agricultural burning-off and forest fires. It might have provoked the odd question of leaders attending the Summit.

Fires across South East Asia are an annual event which choke the region and affect the health of tens of millions of people. During this time, the level of fine inhalable particles is many times higher than the WHO recommended level, resulting in increased respiratory-related illnesses.

While Thailand has a new draft Clean Air Act approved by Cabinet, each year politicians make broad statements about tackling air pollution and invoke feel good but otherwise useless temporary measures such as spraying water mist into the air.

Much of the air pollution is linked to agricultural burn-off, particularly in the sugar cane sector. Burning off is a cheap solution where farmers don't have the financial resources for more environmentally friendly farming practices. Some change is occurring. Another significant air pollution source is deliberately lit forest fires.

A key issue is enforcement of existing laws. Closer regional co-operation is also needed.

There is a brief mention of regional air pollution or 'transboundary haze pollution' in Item 42 of the Melbourne Declaration.

In a somewhat woolly statement, the ASEAN leaders look forward to exploring cooperation in addressing transboundary haze pollution, including the establishment and operationalisation of the ASEAN Coordinating Centre for Transboundary Haze Pollution Control (ACCTHPC).

While ASEAN leaders kick the issue down the road and hold hands in Melbourne, people in South East Asia choke through another smog-filled day.

ASEAN Melbourne Statement

NASA Fire Information for Resource Management System

March 2024

The content of this publication is intended to provide a general overview on matters which may be of interest. It is not intended to be comprehensive. It does not constitute advice in relation to particular circumstances nor does it constitute the provision of legal services, legal advice or financial product advice.

Shadowy Chinese Firms That Own Chunks Of Cambodia

October 1, 2023 Edward Dever

Interesting BBC piece on exploitation of Cambodia's resources. The only thing that seems to have changed over the past 30 years is the nationality of those doing the exploiting.

In the mid to late 1990s, French and Malaysian investors attempted, often successfully, to take advantage of Cambodian government officials.

Almost 30 years later, it is Chinese investors although they now deal with a far more sophisticated government apparatus as indicated by the increasing wealth disparity between Cambodian government and business figures and the rest of the population.

Looking back at the land speculation deals dressed up as rice farming projects and the favourable airport concession arrangements, one ultimately unsuccessful deal stands out.

In late 1996 and early 1997, there was a grand plan to erect a sound and light show at Angkor Wat. This proposal would have seen management of the temple complex outsourced to a Malaysian conglomerate which would have had full authority over the area. Cambodians were to be excluded from their own temple other than on particular religious holidays. The Malaysian group was to have total control over the content of the sound and light show and would be entitled to make modifications to the temple complex as they erected their equipment and built fencing.

Equally concerning was the plan to build hotels right up to the front of Angkor Wat, a detrimental step that was unlikely to have ever been reversed.

The contract was a particularly one-sided affair with the Cambodians effectively ceding sovereignty over Angkor to a foreign corporation.

The deal reached an impasse and, in the second half of 1997, an economic tsunami hit Asia. A number of Asian economies fell like dominoes commencing with Thailand. Malaysia enacted currency and capital controls, effectively walling itself off from the rest of Asia.

The economic crisis severely impacted the Malaysian conglomerate and it went home to try to revive its finances. Its grand plans for Angkor Wat came to nothing. The economic crisis had saved what would arguably have been Angkor Wat's destruction.

Today, as tourists return post-Covid to gaze at the wonder of Angkor Wat, they should say a quick thank you to one of the silver linings of the Asian Economic Crisis.

The shadowy Chinese firms that own chunks of Cambodia

October 2023

Cambodia - Crypto and new-age 'pig butchering'

July 18, 2022 Edward Dever

‘A fool and his money are lucky enough to get together in the first place.’
Gordon Gekko, Wall Street

In something reminiscent of a Hollywood movie, Cambodia appears to be fast becoming the new centre for online scams.

It does not seem that long ago when the main scam in Cambodia seemed to be trademark infringement. The fake ‘Sheraton Hotel’ in Phnom Penh (subsequently changed to ‘Sharaton’). Or the ‘McSam Burger Restaurant’, complete with its own Golden Arches. Or the ability of certain businessmen to magically remove trademark applications from the Ministry of Commerce’s Trademark Register and substitute their own applications.

Fast forward to 2022 and the latest game seems to be online scams. Once centered in Nigeria, this new style ‘419’ scam involves large scale operations in Sihanoukville and other centres using the full gambit of online communication channels to scam people, including WhatsApp, Facebook and Instagram.

Sihanoukville, transformed from a sleepy town into a Macau-style gambling haven, before a Cambodian-government crackdown outlawed online gambling and decimated the related property sector, has apparently become a centre for these scams utilising former casinos as bases for their operations.

In the past, boiler room operations were sometimes staffed by backpackers. At one point in Bangkok, they were operating out of the prestigious PwC building on South Sathorn Road. The workers were easy to spot among the suited-up accountants and lawyers that inhabited the surrounding buildings. Their uniform of cheap Khao San Road purchased shirts, pants and ties stood out among the tailored suits wandering the foyers at lunchtime.

Based on the Vice article, it seems the current crop of operations are staffed by a mix of people who are either conned into the work or voluntarily offering their skills. The impact of Covid-19 on employment in South East Asia has resulted in the unemployed across the region being lured by promises of well-paid employment in Cambodia. The operations no doubt operate under an umbrella of local officials and law enforcement protection.

One scammer’s playbook apparently includes the quote - ‘There is no un-scammable person. Only scripts that don’t fit.’

That may well be the case. I remember working with a senior foreign lawyer who had flown into Bangkok for several days. The lawyer was out of my sight for only a few hours at the end of days of meetings and was scammed by the well-known ‘Grand Palace is closed today jewellry scam’ in Bangkok.

As highlighted in the Vice article, awareness is perhaps the best form of defense against the scammers. Shutting down operations in Cambodia and neighboring countries is likely to merely force them elsewhere.

From Industrial-Scale Scam Centers, Trafficking Victims Are Being Forced to Steal Billions

July 2022

Cambodia - Supercars And Lions Become Consumer Accessories

June 30, 2021 Edward Dever

The sight of supercars and pet lions shows how much things have changed in Cambodia in the past 25 or so years.

I remember my first flight into Phnom Penh's Pochentong International Airport in 1995. As we landed, I looked out across the scorched bare fields and thought Pol Pot had really done a number on the country.* Of course, it was the middle of the hot season. When I flew in later in the year, there was a rich tapestry of rice fields as we came into land. Those fields consumed a Vietnam Airlines flight (VN815) in September 1997 when it crashed short of the runway in poor weather.

When I checked in at the Cambodiana Hotel (the only acceptable hotel choice at the time), The Killing Fields was the in room movie of the day. Meetings were often held in the hotel. Several Government officials lived in the hotel in those days. You generally just ate in the hotel. By the third day, you had eaten everything on the menu. The two restaurants and room service shared the same limited menu items.

Occasionally, meetings would be held in fairly run down mansions such as the former French Ambassador's residence which apparently had then become Pol Pot's HQ and then the UN HQ before assuming the function of the offices of the Council for the Development of Cambodia (CDC). If you didn't keep the hotel car at a meeting, you would need to flag down a motorcycle to take you back to the hotel. From memory, it was USD 1.00 for the return trip.

On one of my trips, the first set of new traffic lights in Phnom Penh was installed. The first escalator in a shopping centre was some years away (2002).

Legal agreements needed to be comprehensive as the laws in many areas were deficient or non-existent. You could register a company at the Ministry of Commerce but there was no company law.

The practice of first-in-time in registering trademark applications was a fluid concept if you were a business person with sufficient influence within the government. The government would also roll out tanks to protect said business person's hotel during the 1997 coup. And he wasn't sanctioned when he shot out the front tyre of a Royal Air Cambodge Boeing 737 after disembarking. (That was an interesting discussion with the Chairman of RAC.)

Intellectual property enforcement was in its infancy. Sheraton had some success, getting a hotel using its name to change to "Sharaton" but the "McSam Restaurant" logo bore a striking resemblance to McDonald's.

The wealth disparity in Cambodia was evident back then but has only grown over the intervening years. The seeds of that growth were planted during and immediately after the UN period. The difference in 2021 is that wealth and conspicuous consumption are on constant display, particularly among the elite's offspring. One need look no further than the Supercars of Phnom Penh Instagram page.

Pet lion seized from home in Cambodia capital after appearance on TikTok

* It is estimated that the Pol Pot regime killed around 25% of Cambodia’s population between 1975 and 1979.

June 2021

Coronavirus and the Potential Decimation of Asia's Tourism Sector

February 5, 2020 Edward Dever

Some time ago, I wrote a post on business survival using a cash flow waterfall. (Cash Flow Waterfalls.)

In the past few weeks, we have seen the emergence of the Coronavirus (2019-nCoV) in China. Airline travel has led to the spread of the virus to numerous countries, including Australia. Strict air travel policies are now in force restricting travel from China and requiring self-quarantine measures by Australians returning from China.

South East Asia is in the middle of its tourism high season. Typically, this runs from November to March in places such as Thailand, Vietnam, Cambodia and Myanmar. Cash flow from the high season allows tourism operators to get through low season when less travellers visit these countries.

Travel restrictions on flights from China and Chinese travellers are likely to have a catastrophic impact on tourism operators relying on outbound tourism from China.

The 'fear factor' will impact other markets who normally visit South East Asia at this time. Traditionally, the US market is hyper-sensitive to disaster and medical-related events in Asia (think SARS, MERS, 2004 Tsunami). Expect significant cancellations.

Most tourism operators would now be throwing their 2020 sales forecasts in the bin. Thailand's tourism authority is pessimistically forecasting a drop in tourism of 80% year-on-year for January to April.

It is not clear how long it will take authorities in China and elsewhere to reach the point where new Coronavirus infections plateau and decrease.

For any tourism operator or ancillary business, it is essential to look at adopting a cash flow waterfall to manage creditor payments over the coming high season months and then over low season.

For those around during SARS, we remember the impact on tourism and companies asking employees to take leave or reduce to 3 or 4 day work weeks. There is always a light at the end of the tunnel but there will be some juggling of business cash flow between now and then.

PELEN

February 2020

Australian Companies in Asia - Getting Stuck in Asia's Corporate Quicksand

February 17, 2019 Edward Dever

The reported plight of Australian casino operator Donaco at the hands of the vendor of one of its main assets highlights the risks associated with investing in countries where the rule of law is scarce and corruption is rife.

Donaco's disclosed problems in the Cambodian border town of Poipet (See - Article) show how foreign companies can often end up in cascading legal problems when Asia ventures involving local operators turn sour.

While it may appear sensible on paper to purchase a business in a foreign country and then provide incentives to the local party to continue to operate it on your behalf, what often occurs is the local party continues to treat the business as their own - regarding the purchase price as a windfall gain. I often refer to this as the absent owner syndrome where foreign companies expect levels of governance and adherence to contract terms that they would find in their home countries.

Where the business being purchased is a significant player in an industry and country known for corrupt practices, it is likely that the local party has significant political connections. Any foreign company hoping to succeed would need equivalent or superior political connections which may fall foul of their home country's foreign corrupt practices regime. Seeking to rely on the local party's political connections increases the risk that those connections may be used against the foreign party in the event of a dispute.

Where disputes arise, foreign companies can expect several things, some of which seem evident in the Donaco example.

First, do not expect non-compete terms to be very helpful. In some parts of Asia, they are rarely enforced or are enforced in only limited respects. Often, the damage has been done before the foreign company either notices something has happened or is able to take any action.

Where, due to local laws or other reasons, the vendor retains control over the land on which the business is situated, expect unreasonable attempts to interfere with the foreign company's rights. This can include wrongful termination of any leasehold interest, cutting off all access or cutting off electricity and water. Where possible, ventures should be located on land independent of the local party where the foreigner is legally entitled to exercise control. While not feasible in all cases, anything less than freehold control increases the risk of adverse action in the event of a dispute.

Expect counter attacks. On multiple fronts. Defamation proceedings are often used as a weapon in any dispute or negotiation. Where defamation in particular countries constitutes a criminal offence, criminal proceedings may be brought against the foreign company's directors or local foreign representatives. Such action may mean foreign directors have to avoid visiting the jurisdiction until the matter is resolved. For local foreign representatives, it may mean lengthy meetings with lawyers and court proceedings which dilute the time available to deal with the main dispute. Laws such as Thailand's Computer Crime Act can be used to great effect to distract and derail a foreign company's attempts to deal with the original dispute. Even local work permit laws can be used as a weapon to harass local foreign representatives or foreign company directors visiting for negotiation purposes.

By forcing the foreign company to battle legal proceedings and harassment on multiple fronts, the local party may hope to reach a point where the foreign party will do almost anything just to resolve the dispute. It is at that point that the local party may be willing to negotiate a resolution. In some cases, this involves the foreign party virtually giving the business back to the local party and writing off the whole experience. An exception is where the local party considers a loss of face is involved. In such a case, there may be no prospect of negotiation at all.

While there is always the possibility of stellar investment returns in parts of Asia, foreign companies need to enter negotiations with their eyes open to the risks which are inherent in this region. A failure to do so can cost the company's shareholders dearly.

This article highlights the general risks to foreign investors investing in Asia. It uses the recent disclosures by Donaco Ltd to highlight those risks. Neither PELEN nor Edward Dever are involved in the matters involving Donaco Ltd.

PELEN

February 2019

Flashback - The Crisis That Saved Cambodia's Angkor Wat

March 3, 2018 Edward Dever

On a typically hot Phnom Penh morning in 1996, I was meeting with two senior Cambodian officials when one of them declared that, when people rediscovered Angkor Wat, tourism in Cambodia would boom.

He was absolutely correct. In 2017, nearly 2.5 million people visited the Angkor Archaeological Park. In just over 20 years, Angkor Wat has been rediscovered, is safe to visit and is now firmly on the world tourism map. Tourists can fly into Siem Reap from numerous international departure points such as Bangkok, Hong Kong and South Korea.

Many would argue that the increased development in Siem Reap and the sheer volume of tourists is spoiling Angkor. But it could have been much worse.

It is a little known nugget of history that, in the latter part of 1996 and early 1997, there was a grand plan to erect a sound and light show at Angkor Wat. This proposal would have seen management of the temple complex outsourced to a Malaysian conglomerate which would have had full authority over the area. Cambodians were to be excluded from their own temple other than on particular religious holidays. The Malaysian group was to have total control over the content of the sound and light show and would be entitled to make modifications to the temple complex as they erected their equipment and built fencing.

Of greater concern was the plan to build hotels right up to the front of Angkor Wat, a detrimental step that was unlikely to have ever been reversed.

The contract was a particularly one-sided affair with the Cambodians effectively ceding sovereignty over Angkor to a foreign corporation. Such was my disbelief at the contract's broad terms, I thought the easiest solution was to insert the word 'not' after every use of 'shall'. Perhaps not a practical solution but, as the midnight hour of contract reviewing approaches, strange thoughts come to mind.

Ultimately, I prepared countless pages of comments and amendments to try to rebalance the contract. If the Cambodians were going to cede control of Angkor Wat to a foreign corporation, some rights needed to be reserved. At that time, there were many examples of foreign companies trying to take advantage of the Cambodian government as it tried to encourage foreign investment. Land speculation deals were sometimes dressed up a rice farming projects. Our role as international counsel to the Cambodian government was to create a more balanced negotiating position between the parties.

The sheer weight of comments on the contract had the effect of creating a stalemate and both parties put the proposal in the too hard basket for a period of time. In the second half of 1997, an economic tsunami hit Asia. A number of Asian economies fell like dominoes commencing with Thailand. Malaysia enacted currency and capital controls, effectively walling itself off from the rest of Asia. The economic crisis severely impacted the Malaysian conglomerate and it went home to try to revive its finances. Its grand plans for Angkor Wat came to nothing. The economic crisis had saved what would arguably have been Angkor Wat's destruction.

Today, as tourists gaze at the wonder of Angkor Wat, they should say a quick thank you to one of the silver linings of the Asian Economic Crisis. Siem Reap may have too many hotels and the temples may seem overrun by tourists but it could have been so much worse.

PELEN

March 2018