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

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Australian PM's WeChat account hijack highlights risk in Asia dealings

January 27, 2022 Edward Dever

News reports indicate that Prime Minister Scott Morrison's WeChat account - more likely his China Mainland Weixin account - has been hijacked.

As is often the case in Asia, everything is not always what it seems.

The PMs account appears to be a Weixin account, registered using a China Mainland mobile number. The registrant, a Mr Ji, seems to have been operating the account for the PM, a fairly common practice to circumvent Weixin user rules.

Mr Ji is alleged to have transferred the account (with its 75,000 followers) to Fuzhou 985 Information Technology in breach of Weixin rules. Tencent Weixin doesn't seem to care.

So, it seems it was never PM Morrison's account and he relied on Mr Li operating the account in good faith in accordance with his wishes.

Restrictions on foreigners doing business in Asia often requires the use of corporate structures or nominees to deliver control of an asset - whether a company or a social media account. The use of a bare nominee sits at the riskier end of the asset control spectrum, as PM Morrison seems to have found out.

With a bare nominee arrangement, the foreigner is reliant on the nominee acting in accordance with their wishes (usually for a fee), knowing that legally, in many Asian countries, there is no recourse if the nominee suddenly decides to act as if the asset (in this case, a social media account) is their own property to use or sell.

This issue often arises with shareholdings or land purchases. When things go wrong, the foreigner is unable to bring local court proceedings as they would need to rely on an illegal arrangement to prove their ownership.

Typically, the use of corporate structures with different voting rights delivers control while not offending local foreign ownership legislation which often focuses on shareholding percentages, and not control, as the determining factor.

However, this is less useful with social media accounts where a local phone number is required for registering the account. Key in these circumstances would be control of the phone number.

Chinese businessman reveals why he bought Scott Morrison's WeChat account

January 2022

Evergrande - Not So Grand Or Too Big To Fail?

September 21, 2021 Edward Dever

That is the main question troubling markets in Asia and elsewhere at present.

And it is perhaps a question only President Xi Jinping in China can answer.

China Evergrande Group is a Fortune Global 500 China-based property conglomerate which has diversified into eight major industries, including automobile manufacturing, film and TV production, theme parks, healthcare and food production. In the property sector, it owns more than 1,300 projects in over 280 cities in China.

For students of Australia's 1980s corporate excess, think Alan Bond and Bond Corporation, just on steroids.

Evergrande has around USD 300 billion of debt to 171 domestic banks and 121 other financial firms and is facing looming interest payments on its bank loans and bonds and a collapsing share price. Protests have taken place outside its offices in China.

The level of Evergrande's debt is around three times the national debt of New Zealand.

Recently, Evergrande has been borrowing money from its employees to stay afloat (apparently telling employees to lend it cash or lose their bonus) and offering properties (including car park spaces) in satisfaction of its debts. Rumours abound that local creditors will be paid in full while foreign creditors will be required to take haircuts.

Any restructuring would be a complex affair. Bondholders are already establishing creditors committees to engage in discussions with Evergrande. Creditors may agree to defer interest payments and rollover loans although this would seem to just delay some form of inevitable restructuring.

Ultimately, despite discouraging government bailouts, the Chinese Government may step in and organise an orderly sell down of assets. This would be driven by a need to ensure market stability and may involve selling off non-core assets - Evergrande has apparently already been completing asset disposals - and hiving off other assets into a workout vehicle. A split between Evergrande and a bad asset vehicle, probably not named "Not So Grande".

With China's current crackdown on wealthy entrepreneurs and its tightening of restrictions on indebted developers, founder Hui Ka Yan will need to rely on his Party connections to determine if he has a role going forward. This assumes President Xi does not decide to use Evergrande as an example of how capitalism goes wrong. If so, the founder's prospects of remaining involved in Evergrande seem slim.

What Is China Evergrande and Why Is It In Trouble?

September 2021

Will Hong Kong Remain An Attractive Arbitration Destination?

February 10, 2021 Edward Dever

Some interesting comments on moves by companies to switch from Hong Kong as the governing law and place of arbitration in contracts in the wake of China's tightening grip on the Territory.

In contracts involving foreign companies and counterparts in South East Asia, Hong Kong and Singapore are often viewed as preferred independent arbitration locations. Any shift away from Hong Kong may be a boon for Singapore.

When acting for foreign companies, the method of dispute resolution is often crucial. In some jurisdictions, foreign arbitral awards may be enforceable upon registration whereas foreign court judgments can only be used as evidence in local civil proceedings.

It is understandable that companies may be nervous using Hong Kong as a place of arbitration when the long term implications of the changes in Hong Kong remain unknown.

Companies consider writing Hong Kong out of legal contracts

February 2021