JANE CADHLA ACADEMICS NEWS

 

 

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http://www.globalwitness.org/sites/default/files/pdfs/cambodias_family_trees_low_res.pdf

 

Below is an excerpt from this report:

 

Chapter I FORESTS AND CAMBODIA’S SHADOW STATE

 

“One does not need expertise in human rights to recognise that many policies of the government have subverted the essential principles of democracy and due process, deprived people of their economic resources and means of livelihood, and denied them their dignity.  I have come to believe that these policies are integral to the political and economic systems through which the government rules, which has manipulated democratic processes, undermined legitimate political opposition, and used the state for the accumulation of private wealth.  In short I believe that the deliberate rejection of the concept of a state governed by the rule of law has been central to the ruling party’s hold on power.” Yash Ghai, Special Representative of the United Nations (UN) Secretary General on Human Rights in Cambodia, statement to the UN Human Rights Council, 26 September 2006

 

In 1991 the international community undertook to bring democracy and development to post-conflict Cambodia.  More than fifteen years later, what a UN Special Representative has described as Cambodia’s “shaky façade of democracy” overlays a shadow state[1] built on patronage, corruption and coercion.[i]  Cambodia’s shadow state misappropriates public assets, extorts from businesses and manages an extensive illicit economy.  It is administered by senior ministers who are fluent in the jargon of good governance and sustainable development. 

 

Prime Minister Hun Sen and his inner circle have successfully pursued this two-faced approach to government since the late 1980s.  After maintaining a veneer of socialism to placate Vietnamese mentors, they now project a semblance of liberal democracy tailored to western donors.  Along the way they have progressively tightened their grip on power by both political and economic means.

 

 

1. Asset-stripping Cambodia

Cambodia’s shadow state generates much of its illicit wealth via the expropriation of public assets, particularly natural resources, as well as through institutionalised corruption.[ii]  With particular reference to the forest sector, this report looks at three of the main ways in which this works:

 

The allocation of public assets to cronies and relatives of the Cambodian leadership

 

 

This involves the allocation of concessions on forests, land, mineral deposits, fisheries and heritage sites, together with ‘land swap’ deals on state-owned buildings.  Many of these transactions are unlawful.  The beneficiaries are a relatively small group of tycoons with political, business or familial ties to senior officials.  The effect is to place valuable public assets under the private control of individuals who are themselves part of the shadow state structure. 

 

In an illustration of this overlap between politics and business, six of the most prominent tycoons have recently been appointed senators for Hun Sen’s CPP.  The six are Kok An, Kong Triv, Ly Yong Phat, Lao Meng Khin (who along with his wife Yeay Phu runs the Pheapimex company), Men Sarun[iv] and Mong Reththy16.  Figure 1 summarises their main interests.

 

Information about deals involving public assets is not made available to the Cambodian people to whom they collectively belong.  For ordinary citizens whose livelihoods depend on the resources being signed away, the first they hear of new concessions is often the sound of chainsaws cutting down their forests or bulldozers flattening their crops. 

 

The immediate human impact of this asset-stripping is to deny Cambodians access to natural resources and in some cases to evict them from their homes.  More broadly, it deprives the entire population of the revenue that could be derived from sustainable management of these public goods.  The corruption that facilitates asset-stripping concessions undermines the rule of law, while elite families’ accumulation of wealth gives them increased power and impunity.  The end result is that already poor Cambodians get poorer and find it more difficult to hold the country’s rulers to account. 

 

Corruption within government institutions that enriches senior officials

 

Corruption in Cambodia is sometimes portrayed solely as a survival mechanism by badly-paid civil servants.  In those institutions with the greatest scope for rent-seeking, however, staff generally pay for their jobs, make regular payments to keep them and expect to recoup these expenses through corruption.[v]  Money generated through corrupt practices flows upwards through a pyramidal structure, with the largest share accumulating in the pockets of those at the top of the hierarchy.[vi]  The burden of everyday corruption in Cambodia falls proportionately most heavily on those without the power and connections to resist.

 

Military management of the illicit economy

 

The Royal Cambodian Armed Forces (RCAF) have little strategic purpose and questionable operational capacity.  They are heavily involved in high-level deals involving public assets, notably via an undisclosed portfolio of ‘military development zones’ covering 700,000 hectares (ha) or almost four percent of Cambodia’s land area.[vii]  RCAF’s senior officers are major players in illegal business activities such as logging and trafficking drugs.[viii]  They also generate large sums of money through extortion.[ix] 

 

 

2. Cambodia’s Forest Sector

Cambodia’s forest sector provides a particularly vivid illustration of how the country’s elite has looted a public asset.

 

In the last years of Cambodia’s civil war, which ended in 1998, both the Khmer Rouge and the Phnom Penh government used logging to fund military campaigns and then used military campaigns as a pretext for more logging.  Cambodia’s leaders have since found it hard to kick the habit of treating the country’s forests as a slush fund for political campaigns, personal enrichment and rewarding key clients. 

 

In the mid-1990s, senior government ministers secretly awarded between 30 and 40 logging concessions to Cambodian and foreign-owned companies.  The contracts signed away over seven million hectares of forest, i.e. 39% of Cambodia’s land area, on terms that greatly favoured the interests of the concessionaires over those of Cambodia.[x]  All the concessionaires proceeded to break the law or the terms of their contracts or both.  By the end of the decade, they were responsible for most of the illegal logging in Cambodia.

 

Reform

 

Global Witness first began exposing illegal logging in Cambodia and its links with conflict, corruption and human rights abuses in 1995.  International pressure on the government to curb forest destruction mounted and at the end of 1998 Hun Sen declared that he would tackle forest crime and institute reforms.  The prime minister’s apparent epiphany coincided with a decline in the capacity of his rivals to compete for logging revenues.  This related to the CPP’s coup against its Funcinpec coalition partners in July 1997, its victory in national elections the following year and the final disintegration of the Khmer Rouge. 

 

The government duly suppressed the activities of less well-connected illegal loggers, passed new laws and in 1999 agreed to appoint Global Witness as independent monitor of its efforts to combat forest crime.  In September 2001 Cambodia signed up to the East Asia Forest Law Enforcement and Governance (FLEG) initiative under which the government committed to “take immediate action to intensify national efforts, and to strengthen bilateral, regional and multilateral collaboration to address violations of forest law and forest crime, in particular illegal logging, associated illegal trade and corruption; and their negative effects on the rule of law”.[xi]

 

For their part, the logging concessionaires failed to abide by the terms of a restructuring process that required them to produce sustainable forest management plans (SFMPs) and environmental and social impact assessments (ESIAs).  Some carried on logging illegally.  Under pressure to act, the government finally suspended the concessionaires’ operations from January 2002.

In 2003 international donors and the Cambodian government commissioned a team of international consultants to carry out an Independent Forest Sector Review (IFSR) and draw up a ‘road map’ for forest sector reform.  In 2004 these consultants recommended that the government terminate the logging concession system and devolve forest management responsibilities to elected commune councils, with the Forest Administration (FA) playing a regulatory role.   The rationale for this ‘partnership forestry’ model was the empowerment of populations living in and around the forest and greater institutional checks and balances aimed at reducing corruption.  However, the government has demonstrated limited enthusiasm for the IFSR’s proposals and the international donor community has not backed them strongly enough. 

 

The shadow state strikes back

However, even as senior ministers publicly committed to reform processes, Cambodia’s shadow state continued to generate money from the timber sector.  The same officials charged with implementing reforms actively subverted them, with the result that illegal logging has continued in a variety of forms: 

 

Permits

 

 

In the aftermath of the crackdowns and the suspension of logging concession operations, the issuing of permits and licences which were themselves illegal, or designed to provide a cover for illegal activities, increased and diversified.  These included permits to collect ‘old logs’ – a practice banned by Hun Sen in 1999 because of its widespread use as a cover for illegal logging operations.  Innovative variations on the ‘old log’ collection theme also emerged, notably licences to collect tree stumps, branches and poles, authorisations to cut timber for racing boats and permits to build wooden towers for the parachute regiment to jump off.[xii]

 

Plantations

The opportunistic issuing of permits has accompanied more ambitious schemes to facilitate logging.  The most lucrative of these is cutting in the name of plantation development, courtesy of government-led development projects or economic land concessions (ELCs).  Through these schemes, officials have allocated to pro-CPP tycoons land which contains valuable forest.  The forest is then cut down, nominally to make way for plantations, and the timber is extracted and sold.  Allocating ELCs on land that is forested contravenes Cambodia’s 2001 Land Law, which classifies forests as state public property and only allows ELCs on state private property.  Many ELCs exceed the law’s 10,000 ha limit for this type of concession.  Most, if not all, the ELC holders have failed to meet legal requirements to conduct environmental impact assessments.

 

The clear-cutting operations that characterise ‘plantation development’ result in the complete eradication of the forest.  The damage is terminal.  Chapter II describes a case of plantation development being used as a pretext for renewed industrial-scale logging in Prey Long, the largest lowland evergreen forest in mainland Southeast Asia. 

 

Military logging

 

 

While permits and plantation developments provide logging with a bureaucratic gloss, the Royal Cambodian Armed Forces have kept up an assault on the country’s forests that does not even pretend to be legitimate.  Many RCAF units are stationed in or around forests and carry out illegal logging operations geared towards enriching their commanders.

 

In November 2004, in the midst of a ‘War on Corruption’ announced by Hun Sen, Global Witness published Taking a Cut, an in-depth exposé of military logging and extortion in Mount Aural Wildlife Sanctuary that named some of the senior RCAF officers profiting.  A government spokesman criticised Global Witness for making the information public without giving it to the government first, but did not rebut the specific allegations made.[xiii]  The authorities took no serious action to halt forest crime in Aural and, as Chapter IV shows, the military remains heavily involved in illegal logging of protected areas and production forest across the country. 

 

Annual bidding coupes

Since the suspension of logging concessions, the Forest Administration has been developing so-called annual bidding coupes as an alternative. The concession system gives companies control over large forests but typically subdivides these into twenty five units, of which the concessionaire may harvest one per year.  By contrast, annual bidding coupes are smaller parcels of forest that firms log for just 12 months.  In theory the FA could now split a concession-sized forest into 25 annual bidding coupes and allocate them all for logging simultaneously, thus greatly increasing the rate of destruction.

 

There is little transparency in FA decision-making and the fact that annual bidding coupe boundaries will be redrawn each year could make an already bad situation much worse.  Members of the public will find it harder to track which companies have harvesting permits at any one time and therefore harder to hold them to account.  Standards of management planning, environmental and social impact assessments, public consultation and law enforcement, already abysmal under the concession regime, are likely to deteriorate. 

 

The new system will also involve the construction of road networks through forested areas in order for logging companies to access their annual bidding coupes.  Road building in Cambodia, as elsewhere in the Southeast Asia, has provided a cover for uncontrolled cutting and has opened up previously inaccessible forests to poaching, land encroachment and secondary illegal logging operations.   In recognition of these threats, the 2004 Independent Forest Sector Review recommended a moratorium on the construction of roads in forest areas.

 

As Box 1 shows, the first annual bidding coupe permit to be given out since the suspension of the logging concessions has provided the basis for an illegal logging operation.

 

 

Suppression of critical voices

 

Since the formation of a new CPP-led government in June 2004 there have been a number of violent attacks on villagers, junior officials and NGO workers involved in combating forest crime.  These include at least three murders and two attempted murders. 

 

At the same time, the authorities have also tried to suppress reports of illegal logging and associated corruption.  A development strategy prepared by officials for the donor-government Consultative Group (CG) meeting of December 2004 declared that “The Royal Government welcomes the work in Cambodia of Global Witness, other NGOs and civil society organizations concerned with forest law enforcement”.[xxvi]  In February 2005, however, customs officials confiscated 2,000 copies of Global Witness’ Taking a Cut report at Phnom Penh International Airport and the following month the Council of Ministers announced it was investigating Global Witness’ activities in Cambodia.  In July, soldiers and police delivered threats to several of the organisation’s Cambodian staff and the government banned five international employees from entering the country.  These developments coincided with Global Witness investigating illegal logging by relatives of Hun Sen and the elite Brigade 70 military unit. 

 

In view of the deteriorating security situation, Global Witness closed its Phnom Penh office in September 2005.  That same month, Hun Sen declared that the organisation was “finished”.[xxvii]  In 2006 Global Witness’ London-based staff completed the investigations begun by the Phnom Penh office the previous year.  The findings form the basis of this report. 

 

 

 

 

3. Cambodia’s International Donors – Aiding Cambodians or Abetting the Government?
           

"There is a frenzy now across the country by the rich and powerful in Cambodia to acquire land.  I think the donor communities and the UN agencies need to be much more outspoken.  What I find missing here is a sense of outrage that should be there.” UN Special Rapporteur on Housing Rights Milan Kothari, 2005[xxxii]

 

For over a decade, international donors have consistently provided Cambodia with aid equivalent to half its national budget.  Total international aid to Cambodia currently stands at around US$600 million per year.  Despite the leverage that this gives them, the donors’ track record in ensuring that their aid produces results for Cambodia’s citizens has been unimpressive.

 

In the late 1990s donors did, to their credit, place illegal logging and reform of forest management at the top of the agenda in their dialogue with the Cambodian government.  In 1996 the IMF froze funding to Cambodia because of massive irregularities in the government’s management of logging revenues.  This catalysed concerted donor action which saw the World Bank make disbursement of its US$15 million Structural Adjustment Credit contingent upon the implementation of forest management reforms. 

 

The momentum generated by this donor pressure and initial government crackdowns against politically dispensable loggers gradually dissipated however.  With its refusal in January 2003 to allow Global Witness to continue working as independent monitor and threats to prosecute its in-country representative, the government signalled that it had moved as far as it intended to go.  Many donors retreated from a sector increasingly perceived as being too difficult. 

 

Donors’ shortcomings are not confined to the forest sector, however and the donor track record with regards to rural poverty, infant mortality and literacy is equivocal at best.  In terms of establishing a genuine democracy, rule of law, respect for human rights and good governance it is even less convincing.  In private, ministers describe the donors as “dunces” who will continue to bankroll the government no matter how much of their taxpayers’ money is misappropriated.[xxxiii]  In public they present the aid the government receives as a sign of the international community’s approval of their actions.[xxxiv]

 

Donors frequently justify their failure to work harder for the interests of ordinary Cambodians by arguing that a more robust stance will push Hun Sen further into the arms, or rather pockets, of China.  China’s growing influence in Cambodia is undeniable.  However this argument overlooks the fact that China, despite its generosity, cannot offer the Cambodian government the international respectability it seeks.   The government’s continued pursuit of international recognition can be seen in its efforts to secure a seat on the UN Security Council, gain entry to the WTO, contribute to UN peacekeeping forces and join the US-led ‘War on Terror’.  It is similarly eager to sign up to all manner of international conventions which it generally then fails to implement.  The 2001 East Asia Forest Law Enforcement and Governance Ministerial Declaration is just one example.

A more banal but more plausible explanation for donors’ supine behaviour is simple indifference.  As an international event Cambodia has lost its novelty value and policymakers’ priorities have long since moved on.  Donor representatives and diplomats on the ground know they will not be rewarded by their head offices for rocking the boat and putting Cambodia back on a crowded foreign policy agenda.  It is easier to keep heads down and the money flowing.

It is not just NGOs that are disturbed by the donors’ reluctance to exert themselves.  In 2006, UN Secretary General’s Special Representative on Human Rights in Cambodia Yash Ghai noted that:

 

“If it is indeed true that donor agencies are not mindful of human rights or democracy, but just wish to build a cosy relationship with the government, then it seems to me that they are not only failing the people of Cambodia, but also their own domestic taxpayers as well, who approve these grants in the expectation that these countries will be the beneficiaries.”[xxxv] 

 

 

 

 

 

Chapter II – KEEPING IT IN THE FAMILY

 

1 Introducing Cambodia’s Premier Logging Syndicate

 

This chapter examines the careers of a group of timber barons who together constitute Cambodia’s most powerful logging syndicate.  Boasting familial links to Prime Minister Hun Sen, MAFF Minister Chan Sarun and FA Director General Ty Sokhun, their careers illustrate how the country’s political elite has successfully subverted forest management reforms and continued looting a valuable public asset.  There is substantial evidence that this group’s activities extend beyond illegal logging to encompass kidnapping and attempted murder.  Moreover, there are strong indications that corruption and nepotism at the highest levels explain the impunity with which its members have operated for almost a decade.

 

While this syndicate has operated under various labels, most recently ‘Seng Keang Import Export Company Ltd.’, its public profile is relatively low considering the immensely damaging impact it has had on the country’s forests. 

 

 

1.1 Dy Chouch, also known as Hun Chouch

 

Dy Chouch, better known as Hun Chouch, is a first cousin of Prime Minister Hun Sen. In the mid 1990s Dy Chouch operated a range of businesses with Hun To,[xxxvi] a nephew of the prime minister whom well-placed sources name as a major drugs trafficker. [xxxvii] Another of Dy Chouch’s early business associates was renegade RCAF commander Sat Soeun.[xxxviii]  Over the past decade, Sat Soeun has faced charges relating to three different murders, two attempted murders and one physical assault.[xxxix]  According to residents of Kompong Cham, Dy Chouch, Hun To and Sat Soeun’s early ventures centred on smuggling fish and rubber tree wood across the border to Vietnam.[xl]

 

Dy Chouch and his ex-wife Seng Keang have gone on to manage logging operations for several of the forest concessionaires, including Kingwood Industry, whose activities are described in detail later in this chapter, Cambodia Cherndar Plywood and Mieng Ly Heng.  Global Witness has documented illegal acts by all three of these concessionaires over a number of years.[xli]  Cherndar Plywood, despite its nominal Taiwanese ownership, is referred to within the timber business as “Hun Chouch’s company” or “Seng Keang’s company”.[xlii]  The exact nature of the couple’s links with Cherndar Plywood has proved difficult to establish, however.

 

Dy Chouch and Seng Keang’s relationship with Mieng Ly Heng is equally murky and Dy Chouch has appeared reluctant to advertise his association with the firm. [xliii]  During a visit to the Mieng Ly Heng logging camp at Baksna in Kompong Thom in 2001, Global Witness staff met with a man who introduced himself as ‘Li Seng’, the head of company security.  When asked how, as a security supervisor, he was able to afford the solid gold, diamond-studded Rolex Oyster Perpetual watch he was wearing, ‘Li Seng’ explained that he had been given it by his boss in recognition of his services to the firm.   Global Witness photographed ‘Li Seng’, who was subsequently identified as Dy Chouch by two people that know him.[xliv]

 

In social circles, however, Dy Chouch is less reticent and introduces himself as an oknha.  Oknha, which has a meaning similar to ‘Sir’, is an honorific title conferred on businessmen and women who have made donations of at least US$100,000 to the state.[xlv] Dy Chouch has been known to threaten with a gun those who have declined to address him by this title.[xlvi]

 

 

1.2 Seng Keang

 

While ‘Hun Chouch’ commands greater name recognition, Seng Keang’s influence within the timber industry appears to equal or exceed that of her ex-husband.  Like Dy Chouch, Seng Keang has worked as a subcontractor supplying logs to Cherndar Plywood, Mieng Ly Heng and Kingwood Industry.[xlvii]  She has also played a similar role for the Chinese state-owned Everbright CIG Wood logging concessionaire.[xlviii]  Forest Administration officials have named Seng Keang, moreover, as the principal shareholder in Mieng Ly Heng.[xlix] 

 

Seng Keang has a number of friends in high places.  She is friends with Hun Sen’s wife Bun Rany[l] and periodically appears with her at public events broadcast on national television.  She is also close to Leang Vouch Chheng,[li] the wife of the prime minister’s brother and Kompong Cham Province Governor Hun Neng.62  Global Witness has received reports from a well-placed source that Seng Keang and Leang Vouch Chheng run lucrative racketeering ventures in Kompong Cham in partnership with the wives of two other provincial officials.  These activities are said to include levying protection money from taxi operators in Kompong Cham town.62

 

Dy Chouch and Seng Keang divorced in 2005.[lii]  According to timber industry insiders, they continue to do business together, however.[liii]

 

 

1.3 Khun Thong

 

Khun Thong has the dual distinction of being the brother-in-law of Minister for Agriculture, Forestry and Fisheries Chan Sarun and the father-in-law of Director General of the FA Ty Sokhun.[liv]  Phnom Penh telephone directories previously listed one of Khun Thong’s sawmills as Ty Sokhun’s residential address.[lv] 

 

Like Seng Keang and Dy Chouch, Khun Thong is a logging sub-contractor and has worked with Kingwood Industry and Everbright CIG Wood.[lvi]  In 2001, in its capacity as official independent forest monitor, Global Witness exposed a large-scale illegal logging operation by Everbright outside its concession.  Members of the government team that subsequently investigated the case blamed Khun Thong’s relationship with Ty Sokhun for their inability to mount a successful prosecution against the company.[lvii]  

 

In addition to his work with Kingwood and Everbright, Khun Thong is known to have generated additional income by extorting money and timber from rival wood traders along the Mekong River.  According to those he targeted, Khun Thong would accompany his demands with threats to invoke ‘crackdowns’ by forestry officials answerable to his son-in-law, Ty Sokhun.[lviii]

 

A low-profile figure, Khun Thong has nonetheless been described by Dy Chouch as the “backbone” to his timber business and his name appears on a range of documents relating to the group’s activities.[lix] 

 

 

 

2 Kingwood – Rise and Demise of a Logging Concessionaire

The Cambodian government’s allocation of between 30 and 40 logging concessions in the mid 1990s set the stage for what an Asian Development Bank review described as “total system failure”.[lx]  Specifically, it placed arguably the country’s most important natural resource in the hands of the most unsuitable commercial operators, many of whom operated under the patronage of the country’s ruling families.  Typifying these new custodians of Cambodia’s forests was Kingwood Industry, a company incorporated in Cambodia by Taiwanese, Singaporean and Indonesian businessmen, which obtained a 301,200 ha concession in 1995 covering parts of Kratie, Stung Treng and Mondulkiri provinces.[lxi]  In common with all but two of the concessionaires, Kingwood had no experience of managing a forest.   Like many others, it rapidly demonstrated a willingness to break the law in pursuit of a quick profit. 

Another exemplary aspect of the Kingwood operation was its associations with a politically influential family.  Prior to obtaining its concession, Kingwood had already formed an alliance with Khun Thong’s sister Sok Keo.[lxii] Sok Keo is the wife of Chan Sarun, then Director General of the Department of Forestry and Wildlife (DFW) and currently the Minister of Agriculture, Forestry and Fisheries (MAFF).  In September 1994, she helped Kingwood acquire a 25 ha plot on the Mekong River in Kandal Province’s Muk Kampoul District, 21 km from Phnom Penh.  Within four days of acquiring title deeds for the land in her name, Sok Keo signed an agreement with Kingwood’s Taiwanese managing director Lia Chun Hua to pass control of the site to the company.  The document states that she is leasing the land to Kingwood on a rent-free basis for 70 years; while Kingwood is providing her with an interest-free loan of US$430,984.  The only condition attached to the lending is that Kingwood be allowed to build a factory on the site: [lxiii]

 

“In case of the Cambodian Government not allowing (Kingwood) to build a wood-processing factory on the said land, (Sok Keo) has to sell, transfer or dispose of the said land within one year.  The mortgage loan of US$430,984 shall be refunded to (Kingwood) without condition.”79

 

The contract does not say whether Sok Keo intended to take an active role in ensuring that Kingwood received authorisation to construct a factory; however it gave her a very strong incentive for doing so.  The agreement thereby set up a potential conflict between Chan Sarun’s responsibilities as an impartial regulator of the forest sector and his wife’s business interests.  In February 2007 Global Witness wrote to Chan Sarun to ask him whether he was aware of his wife’s dealings with Kingwood and whether he helped the company obtain its factory construction permit.  As this report went to print, Chan Sarun had not replied to this letter.

 

After receiving permission to build on the land leased from Sok Keo, Kingwood’s directors took out initial loans of at least US$9.4 million to finance the construction of a plywood factory.[lxiv]  A 2001 loan agreement between the company and the Cambodian Public Bank describes Sok Keo as the owner of both the factory premises and the machinery within it.[lxv]  In February 2007 Global Witness wrote to Sok Keo to ask her to explain her association with Kingwood.  Sok Keo has yet to reply.

 

 

2.1 Illegal Logging

 

According to industry analysts, the factory Kingwood built was capable of producing 96,000 m³ of finished product per year, with practical capacity of 84,000 m³ per year.80  To operate at full practical capacity, and therefore full efficiency, thus required an annual supply of around 164,000 m³ of round logs – almost five times the 35,000 m³ per year Kingwood was legally permitted to cut in its large but sparsely forested concession.80  Processing over-capacity has been a feature of Cambodia’s concession system as a whole.  For the concessionaires, it created a strong incentive either to log illegally or try to source timber from other concessions. Kingwood opted to do both.

 

In 1997, the company cut trees illegally in the Macro-Panin concession adjacent to its own, using the excuse that it was collecting 50,000 m³ of ‘old logs’.[lxvi]   Over the same period the firm employed a military commander to cut logs in a 100 km² area outside its concession and haul them back within Kingwood boundaries to be passed off as a product of the company’s own harvesting operations.[lxvii]  During the 1997-1998 dry season Kingwood also undertook a major harvesting operation in its own concession, despite the fact that it had no cutting permit.83  In addition, the 2000 Asian Development Bank review of logging concessionaires’ performance revealed that the company failed to honour its contractual commitments to invest US$76.5 million in Cambodia and pay the government US$300,000 royalties and deposits.[lxviii] 

 

In its efforts to supply its factory, Kingwood contracted Sok Keo’s brother Khun Thong, together with Seng Keang, to supply logs.[lxix]  The advantages to Kingwood included Seng Keang and Khun Thong’s ability to source wood from other concessions in which they operated as subcontractors; notably that of Cherndar Plywood. 

 

 

2.2 Bad Debts

 

Despite its factory’s intensive production activity, Kingwood’s operations were underwritten by an expanding array of loans.  A source close to the company claimed that it needed to borrow because its directors were laundering sales revenue through affiliated companies in Indonesia, Singapore and Taiwan.[lxx]  Global Witness wrote to the Kingwood directors in February 2007 to ask them to comment on this claim but has not yet received a reply.  Whether or not the allegation is true, there is no doubt that the company’s financial situation became increasingly precarious.

 

During its start-up phase in the mid 1990s, Kingwood obtained three loans totalling around US$9.4 million from Maybank[lxxi] of Malaysia.80   These loans took the form of a debenture because Kingwood claimed that it did not own any land that it could mortgage as collateral.  The stringent terms of the debenture agreement prohibited Kingwood from transferring control to or borrowing from any other party.[lxxii]  Despite this, the company went on to borrow from three other banks in Cambodia.86  In June 2001 for example, Chan Sarun’s wife Sok Keo took out a loan from the Cambodian Public Bank on behalf of Kingwood, mortgaging the factory site and machinery.81  The mortgage agreement was signed not only by Sok Keo and a representative of Cambodian Public Bank but also by Cambodian Bar Association President Ky Tech.81  A source close to Kingwood claims that Cambodian Public Bank lent the company a total of around US$3 million.86

 

 

By late 2001 Kingwood’s list of creditors included not only banks, but also its subcontractors.  On 3 October 2001, Kingwood Managing Director Lia Chun Hua and Seng Keang signed an agreement governing past and future purchases of logs. Khun Thong countersigned the document as a witness.85  The agreement states that Kingwood owed Seng Keang over US$1.9 million, which Lia Chun Hua committed to repay in instalments of US$100,000 per month over 20 months.  Lia Chun Hua also promised to continue buying logs from Seng Keang and ceded to her temporary control of 94 items of industrial machinery in the Kingwood factory as a guarantee.  Her possession of these items would become permanent in the event of any default on the repayments.85  The machinery ceded to Seng Keang is the same equipment mortgaged to Cambodia Public Bank by Sok Keo.  It is not clear whether either the bank or Sok Keo knew about Lia Chun Hua’s agreement with Seng Keang.

 

Kingwood’s prospects of keeping up its debt repayments were not enhanced when, under pressure from NGOs and international donors, the Cambodian government imposed a moratorium on harvesting in logging concessions with effect from January 2002.  The moratorium followed the concessionaires' failure to meet the deadline for submission of sustainable forest management plans (SFMPs) and Environmental and Social Impact Assessments (ESIAs) set for the end of November 2001.  

 

The moratorium on cutting was followed by a moratorium on the transportation of logs, which came into full effect in May 2002.  Some concessionaires, notably GAT International and Pheapimex, initially continued logging and transporting wood in violation of the moratoria.  Following Global Witness’ exposure of GAT’s activities, however, Hun Sen cancelled the firm’s two concessions in June 2002.[lxxvii]  Hereafter the logging concession system entered a state of near-total inactivity.

 

 

2.3 A Very Hostile Takeover

 

For Dy Chouch, Seng Keang and Khun Thong, concession companies such as Kingwood had provided a useful façade behind which they could exercise control over a large slice of the logging industry in Cambodia. The 2002 moratoria on harvesting and log transportation changed this completely, however. 

 

A source close to the Kingwood operation informed Global Witness that, in August 2002, Kingwood’s Managing Director Lia Chun Hua attempted to cut his mounting losses and leave Cambodia for good. According to this source, he was prevented from doing so by Seng Keang, whose entourage abducted Lia, confiscated his passport and held him hostage in the factory compound.  Global Witness has investigated these claims and gathered information from a range of sources which points to the need for a credible judicial investigation into the fate of Lia and the current ownership of Kingwood.  This information is summarised below:

 

i) Documents concerning Lia Chun Hua’s surrender of control of Kingwood

Lia Chun Hua relinquished control over Kingwood in a series of written agreements signed with Seng Keang and Khun Thong during the second half of August 2002.  On 12 August, he signed an agreement on behalf of the company acknowledging debts of US$1,871,871.56 to Seng Keang and US$1,605,000 to Khun Thong.  This document effectively superseded the agreement on log purchases of October 2001.  It reiterated that Seng Keang, and now Khun Thong also, would hold the same 94 items of factory machinery as collateral until Lia Chun Hua cleared his debts.  Lia also agreed to pay interest of 1.8% per month. The document is counter-signed by the deputy district governor and the commune chief.[lxxviii]

 

One week later, on 19 August, Lia Chun Hua signed a second agreement in which he effectively surrendered all control over Kingwood.  This second contract states that Lia has ceded the entire Kingwood operation and assets to Seng Keang and Khun Thong until the debts and interest are paid.  It adds that once the last repayments are made, Seng Keang and Khun Thong will retain a 30% share in the company.  The document also commits Lia to assist in the running of the factory. Once again it is witnessed by the deputy district governor and the commune chief.[lxxix] 

 

The next day, Seng Keang, Khun Thong and Lia Chun Hua signed a memorandum listing the same 94 items of machinery referenced in previous agreements.  This hand-written document carries the signatures of 13 different people, including local officials and police officers.  It is accompanied by a fourth contract, also signed on 20 August, which certifies that control of all the Kingwood factory machinery has passed to Seng Keang, Khun Thong and an individual named Yiem Seng.[lxxx]  The signatories to this last agreement are Lia Chun Hua and Malaysian businessman and Kingwood shareholder Lim Yok Fong.77 

 

The outcome was the de facto transfer of ownership of Kingwood’s assets and operations to Seng Keang and Khun Thong.  While the terms of the various contracts indicate that Lia Chun Hua could regain partial, if not complete, control of the company in the future, the level of debt he is committed to repay, not to mention the interest payments, are extremely high. 

 

Cambodia’s investment law requires that the government Council for the Development of Cambodia (CDC) gives its consent to any transfer of company ownership a full 30 days before the transaction takes place.[lxxxi]  To the best of Global Witness’ knowledge, neither Kingwood’s board, nor Seng Keang and Khun Thong approached the CDC for its authorisation, however.  CDC officials did subsequently learn of the takeover and contacted Seng Keang.  She informed them that she took control of Kingwood the way she did to avoid assuming responsibility for the company's existing debts.86 

 

The transfer of control leaves many questions unanswered.  The document that Lia Chun Hua signed on 12 August gave Seng Keang and Khun Thong possession of items of factory machinery until he cleared his debts.  This does at least maintain a degree of internal consistency with the agreement on debt repayment and log supply of October 2001.  Why then, only one week later, did Lia Chun Hua agree to hand over complete control of Kingwood operations?  Nothing in the document accounts for the rapid change in circumstances.  What, moreover, accounts for the drafting of four overlapping and in some cases crudely written documents?  While the paper trail is not in itself evidence of coercion, it gives the appearance of a hurried and unorthodox transfer of control.

ii) Accounts from individuals employed by or associated with the logging syndicate

 

 

In 2004 Global Witness interviewed a close associate of Seng Keang who confirmed that the logging syndicate was holding Lia a prisoner within the factory.  This person added that, although the timber barons were confident that Lia could not escape, they were concerned that he might attempt suicide.  The interviewee also reported the presence at the factory of 10 other Taiwanese nationals whom Dy Chouch and Khun Thong were employing as technicians.  These technicians were said to be prohibited from leaving the factory for fear that they might divulge information about the syndicate’s activities.[lxxxii]

 

The same year Global Witness interviewed a second individual closely associated with the Kingwood operation who also maintained regular access to the factory.  This person had not met Lia Chun Hua since his abduction but claimed to have heard from workers that he was being kept in harsh conditions that were adversely affecting his health, that his phone was no longer connected and that he had no further contact with the outside world.  The interviewee reported that guards accompanied Lia Chun Hua at all times within the factory compound.[lxxxiii]

 

In a separate interview in 2004, a business associate of Seng Keang informed Global Witness that Lia Chun Hua was living inside the Kingwood compound. This individual did not talk in terms of abduction or imprisonment and claimed that Lia was being “well looked after”.  They did not offer any explanation, however, for why Lia would have left his home to live inside an industrial processing facility or why he needed to be looked after.[lxxxiv]

In 2005 an employee of the logging syndicate informed Global Witness that Lia Chun Hua continued to live inside the factory compound and was being guarded by military police employed by Dy Chouch.[lxxxv]  

 

iii) Account from an official who has investigated the case

A prominent government official who has conducted his own investigations of Kingwood told Global Witness in 2004 that Seng Keang and Khun Thong were keeping Lia Chun Hua and other foreign workers hostage inside the factory compound and had confiscated their passports.  The official added that the authorities had been unable to free the men because the logging syndicate represents the business interests of Bun Rany, Prime Minister Hun Sen’s wife.[lxxxvi]  

iv) Evidence of the logging syndicate imposing strict security measures at the Kingwood factory

According to a security guard at the Kingwood factory, the person responsible for security since 2002 is a military police officer named Keo Sarim.[lxxxvii]  In the first half of 2005, Keo Sarim’s group consisted of three military police officers each armed with an AK-47 and a pistol, together with six additional guards each equipped with an AK-47 only.[lxxxviii]  All were being paid by Dy Chouch.  Two of these guards were detailed to accompany Lia Chun Hua at all times within the factory compound.  The guards’ other duties included screening and searching factory staff as they arrived for work each day and excluding unwanted visitors.[lxxxix]  The latter include members of the local authorities, who have been prevented from conducting mandated checks on the factory’s operations and the visa compliance of its foreign staff.86

v) Sightings of a man resembling Lia Chun Hua

During a visit to the Kingwood factory in December 2002, Global Witness investigators observed a middle-aged ethnic Chinese man, together with four ethnic Chinese women, being escorted to a waiting vehicle by two men wearing military uniform and carrying guns.  While not possible to confirm the man’s identity, his physical appearance and his armed escort match descriptions of Lia Chun Hua and the conditions of his alleged detention.[xc]

In April 2005 Global Witness staff observed four guards with AK-47s escorting a man into the Kingwood compound. An employee of the logging syndicate accompanying Global Witness identified the man as Lia Chun Hua.  This employee added that Lia was not allowed to leave Cambodia and had to be escorted at all times by armed guards. [xci]

vi)  Reports that Lia Chun Hua has failed to respond to summons from the courts in Phnom Penh

Since the time of the Kingwood takeover, Maybank of Malaysia has pursued a legal action to reclaim unpaid debts from the company.  Lia Chun Hua has failed to answer summons to appear before the court in Phnom Penh on at least three occasions.  His place has been taken by lawyers hired by Seng Keang who have failed to explain his repeated non-appearance.88  Court documents record Lia Chun Hua as having a permanent residence in Phnom Penh but “presently living in Kingwood sawmill, Prek Anhchanh Commune, Muk Kampoul District, Kandal Province”.[xcii]

In October 2006 a public official informed Global Witness that they had received letters recently signed by Lia Chun Hua on Kingwood’s behalf.[xciii]  While this information gives little insight in Lia’s current circumstances, it does suggest that he is still in Cambodia and remains associated with the company’s operations.

 

In February 2007 Global Witness wrote letters to Lia Chun Hua as well as Seng Keang, Dy Chouch and Khun Thong and other Kingwood shareholders to ask about Lia’s current whereabouts. At the time of publishing, Global Witness had not received any responses to these letters.

 

In summary, there are grounds for believing that the reports of Lia Chun Hua’s abduction are correct and that his personal safety may be seriously at risk.  It is evident that the authorities are aware of the situation but are either unwilling or unable to act.  Given the close connections between the logging syndicate and senior officials, this situation seems unlikely to change in the absence of outside pressure on the Cambodian government. 

 

2.4 Competing Claims

 

After taking over the Kingwood factory, Dy Chouch, Seng Keang and Khun Thong serviced selected debts owed to other Kingwood creditors.  They may also have borrowed money themselves: a source close to Hun Sen’s family told Global Witness that Bun Rany had been making loans to Seng Keang for the Kingwood operation.[xciv]  Global Witness wrote to Bun Rany in February 2007 to ask for her comment on this claim.  As this report went to print she had not replied.

 

One Kingwood creditor that the timber barons refused to pay, however, was Maybank, which received little or no repayment on the approximately US$9.4 million it lent Kingwood in the mid 1990s.88  The magnitude of this potential loss spurred the bank to embark on legal proceedings in 2003.

 

Maybank targeted its legal action at Kingwood directors Lia Chun Hua and Lee Kwan Siang.[xcv]  This posed a serious challenge to the position of the logging syndicate.  In the first instance it threatened their hold over Lia, who faced summons to appear before court, not to mention the possibility of a prison sentence if found guilty.  A win for Maybank, moreover, would pave the way for the bank to enforce its claim on the same Kingwood assets that the Seng Keang and Khun Thong seized in August 2002. 

The timber barons vigorously contested the case, with Seng Keang appointing her lawyer, Chet Boravuth[xcvi] to ‘represent’ Lia Chun Hua.  In pre-trial hearings Chet Boravuth argued that Maybank’s action was invalid because Kingwood now belonged to Seng Keang.  He was unable to supply any documentary proof to substantiate this claim however, and the trial went ahead.86

 

Sources within Cambodia’s judiciary informed Global Witness that Seng Keang’s representatives subsequently tried to bribe the judge and, when this failed, to intimidate him.  These sources claim these threats were delivered separately by Chet Boravuth and Ky Tech, the lawyer who helped Sok Keo and Kingwood secure a loan from Cambodia Public Bank in 2001.  Both sources allege that Chet Boravuth and Ky Tech told the judge that Hun Sen’s wife Bun Rany would have him sacked if he found in favour of Maybank.89 Global Witness wrote to Chet Boravuth and to Ky Tech in February 2007 to ask them to comment on this allegation.   As this report went to print, neither had replied to these letters.

 

In April 2004, the court found in favour of Maybank, convicting Lia Chun Hua and Kingwood Chairman Lee Kwan Siang for breach of trust.  Lia Chun Hua and Lee Kwan Siang received sentences in absentia of six months imprisonment, suspended pending their repayment of the loan, plus interest and a US$250,000 fine.  Following an unsuccessful appeal by Seng Keang’s lawyers, the courts confirmed the conviction and sentences in August 2005.108  This paved the way for Maybank to seize control of the factory to reclaim Kingwood’s debts.  To date, however, the authorities have taken no action to enforce the court’s verdict.

 

 

 

 

3. Tumring Rubber Plantation – the New Face of Industrial-scale Logging in Cambodia

 

“If the logging companies still don’t listen, take away their licences.  This morning I read the Cambodia Daily.  It said that many companies won’t obey the order of the Ministry of Agriculture.  Just you try, if you aren’t going to obey, just you try.  If I don’t take away your concessions and close down your factory I will cut my throat!” Prime Minister Hun Sen, December 2001

 

Following the imposition of the cutting and log transportation moratoria, forest concessions no longer provided a vehicle for elite logging interests.  However, with the connivance of those senior officials responsible for enforcing the timber industry’s suspension, the more powerful timber traders continued their activities under a range of new guises. The most lucrative and destructive of these has been the use of plantation developments – whether government-mandated development projects or so-called economic land concessions (ELCs) – as a pretext for clear-cutting forest. 

 

Few timber barons are as well placed to take advantage of such schemes as Dy Chouch, Seng Keang and Khun Thong.  By the time the government suspended forest concession operations, the group was already positioning itself for the next logging bonanza, courtesy of Tumring Rubber Plantation.  Tumring is a flagship development initiative of the Cambodian government.  It is also a classic example of how corrupt misallocation of public assets benefits the country’s political elite at the expense of the rural poor.

 

 

3.1 A Family-Scale Enterprise

 

In August 2000, Prime Minister Hun Sen issued a communiqué calling for the establishment of “family-scale rubber plantations”, as a component of the government’s rural development policy.[c]  The following year officials announced the creation of a new rubber plantation.  The designated site comprised 6,200 ha excised from three logging concessions – Colexim Enterprise[ci] (3,577 ha), GAT International (2,181 ha) and Mieng Ly Heng (442 ha) – at their point of convergence in Tumring Commune in Sandan District, Kompong Thom Province.  The area is in the heart of Prey Long – mainland Southeast Asia’s largest lowland evergreen forest and an important part of Cambodia’s natural heritage.[cii] 

 

This process was expedited via a survey by the Kompong Thom Department of Agriculture, Forestry and Fisheries in November 2000.  This survey team classified the Tumring site as land containing only small amounts of valuable timber, when in reality much of the 6,200 ha was forested.[cxiii] 

 

The government established the plantation not as an economic land concession allocated to a private company, but as a state-led development project mandated by a sub-decree.  A sub-decree is a binding legal instrument signed by the prime minister but not subject to the approval of Cambodia’s National Assembly.  Sub-decrees on the usage of particular areas of state land are unusual although not unprecedented.  Issuing one specifically devoted to Tumring reflected the importance the prime minister and other senior officials attached to the project.

  

 

 

Having signed the sub-decree establishing Tumring Rubber Plantation in August 2001, Hun Sen personally inaugurated the project the same month.118  Addressing local residents, he expounded his vision of a new Tumring:

 

“If you tap resin, the logging concessions aren’t happy.   And you don’t know when they’ll cut down your trees… The first recommendation is that we need to change people here, from slash and burn farmers and resin tappers… Make this a place… Change from collecting resin, tapping resin… from tapping resin to tapping rubber.”

 

Hun Sen concluded with a personal assurance:

 

“If Hun Sen says something, he will do it.  I have not come to cheat you, I have not come to cheat you.  And I don’t know how to cheat people.   I don’t know how to cheat people, Hun Sen doesn’t know how to cheat people.  Hun Sen means honest.  That’s it.”[cxxi]

 

The government turned over control of the 6,200 ha site to Chup Rubber Company,[cxxii] a parastatal firm which runs large rubber plantations in Tboung Khmum District, Kompong Cham Province.  According to the UN Office of the High Commissioner for Human Rights, “Chup Rubber Plantation has a poor record in human rights and labour rights compliance”.[cxxiii]  In Tumring, the company received a mandate to implement industrial-scale rubber production on 4,359 ha, with 1,841 ha available for local families in three hectare parcels.  Officials encouraged families to cultivate rubber, and the sub-decree signed by Hun Sen stated that Chup would provide them with technical assistance over the six to ten years that the trees would take to mature.118

 

 

3.2 The “Benefit of Conversion”

 

“If this area [Tumring], can contribute to the national economy, and the forest is going to be lost anyway, why should we keep it?  We should immediately convert it to this use [rubber] that has high economic effectiveness.  This is the benefit of conversion.” Minister of Agriculture, Forestry and Fisheries Chan Sarun addressing the National Assembly, 2002

 

To date Tumring has not yet produced any rubber; however it has yielded a huge timber haul through the clear-cutting of thousands of hectares of forest.  The initial wave of logging in the months following the plantation’s inauguration was carried out by the GAT, Colexim and Mieng Ly Heng concessionaires.  As already noted, Seng Keang and Dy Chouch have close links with Mieng Ly Heng which may extend to actual ownership.  Operating in a regulatory vacuum, the three companies illegally felled thousands of resin trees belonging to local families.[cxxiv] 

 

In May 2002 the government re-instated a log transportation moratorium.  The following month it cancelled the two timber concessions held by GAT International.  From this point Dy Chouch, Seng Keang and Khun Thong took sole charge of the logging in Tumring.  At around the same time they began working under the name Seng Keang Import Export Company.[cxxv] 

 

In October 2002 Chan Sarun’s Ministry of Agriculture, Forestry and Fisheries issued a letter conferring “permission, in principle, to collect wood of all classes within the rubber plantation at Tumring, Kompong Thom Province” to Seng Keang Import Export Co. Ltd.[cxxvi]  To the best of Global Witness’ knowledge, the Ministry’s decision did not follow an open tendering process and was never publicly announced.  This lack of transparency offers little reassurance to a Cambodian public that already perceives MAFF as being very corrupt.[cxxvii]  In a letter to Deputy Prime Minister Sok An in March 2006, Chan Sarun explained his decision in the following terms:

“Cambodia’s tropical forest always contains different types of trees: luxury trees, first-grade trees, second grade trees, third grade trees, and other kinds of tree. Whenever there is clearing of the forest, it is vital to collect these trees for measurement, taxation and use of the timber resources other than burning, which causes a loss to the national budget and affects the natural environment.”

Chan Sarun’s concern to avoid wasting Tumring’s timber is commendable but appears at odds with the argument he makes elsewhere in the same letter that “before issuing the sub-decree to create Tumring Rubber Plantation, we had already set up a committee to conduct prior research, the results of which showed only small amounts of valuable timber in this area.”[cxxviii]

 

The Minister’s statements on Tumring are at best contradictory and at worst deliberately misleading.  By October 2002, Dy Chouch, Seng Keang and Khun Thong had a track record of violations going back several years.  Chan Sarun’s decision to give the trio a permit offering a cover for continuing their illegal logging appears to place him in breach of Article 100 of Cambodia’s Forest Law, which states that “Any activities carried out by local authority officials, the police officers, Royal Armed Forces or other authorities that directly or indirectly allow forest exploitation or other activities contrary to the provisions of this law… shall be subject to one to five years in prison and fines of ten million to one hundred million riel [US$2,500 to US$25,000].”  The Minister’s actions also amount to complicity, as defined by UNTAC (United Nations Transitional Authority in Cambodia) Penal Code.  To date, Cambodia’s judicial authorities have not investigated the minister’s actions with respect to Tumring; however Global Witness believes there are compelling grounds for doing so.

 

In summary, as Cambodia’s logging concessionaires faced up to a period of enforced hibernation that has now lasted more than five years, Dy Chouch, Seng Keang and Khun Thong secured, in rapid succession, one of the country’s largest timber processing facilities and a new resource with which to supply it. 

 

 

3.3 Log Laundering

 

Seng Keang, Dy Chouch and Khun Thong appointed as their representative in Tumring Seng Keang’s brother Seng Kok Heang, an officer in the elite Royal Cambodian Armed Forces Brigade 70.[cxxix]  Seng Kok Heang is known as ‘Ta Kao Pram’ or Mr 95 – 95 being his number in the numerical sequence of radio call signs used by his entourage.  Seng Kok Heang had previously worked for Mieng Ly Heng and made a seamless transition from logging as forest concession management to logging as plantation development.[cxxx] 

 

Tasked with supplying the Kingwood factory, Seng Kok Heang quickly showed himself uninhibited by the perimeters of the poorly demarcated Tumring site.[cxxxi]  During field investigations in September and October 2003, Global Witness found his loggers cutting over half a kilometre outside the plantation boundaries.  Commenting on this illegal expansion of the plantation operation, Chup Rubber Company’s on-site representative stated “I don’t know… On the other hand I’m not supposed to know too many things.”[cxxxii]

 

Seng Kok Heang’s cutting within the plantation boundaries involved the removal of all tree cover.  Logging beyond the perimeter however, focused on the most suitable through-puts for the Kingwood plywood mill: chhoeuteal (resin tree), phdiek and other commercial grade species.  Having felled the trees, Seng Kok Heang’s crews then moved the logs inside the plantation boundaries where they could be presented as a by-product of the authorised land conversion process.147 The Tumring formula – officially-sanctioned clear-felling within a valuable forest – provides almost unlimited scope for laundering illegally-logged timber. 

 

3.4 Firewood Collection

 

With the rubber plantation project enjoying political support from the highest level, the logging syndicate was able to poach villagers' resin trees and log outside the plantation boundaries with impunity.  In the context of a national log transportation moratorium, however, the group adopted a more circumspect approach to moving the timber to the Kingwood factory.  Surveillance by Global Witness staff in January 2003 revealed that the factory’s log supplies arrived from Tumring only after dark, at an average of 6-7 trucks per night.147  Thanks to fraudulent permits supplied by the FA meanwhile, the trucks’ 60 m³ loads of two metre log sections assumed the guise of ‘firewood’.  In the words of the UN Office of the High Commissioner for Human Rights:

 

“The Special Representative [UN Secretary General’s Special Representative on Human Rights in Cambodia Peter Leuprecht] visited Tumring Commune in July 2003… When meeting with local forestry officials, he personally witnessed the transport of five truckloads of large tree trunks, including those of resin trees.  When he queried this, he was shown permits for firewood.”139

 

The firewood permits offered not only a documentary pretext for the log transports, but also scope for tax evasion.  While the royalty rate for the grade II chhoeuteal and phdiek logs transported from Tumring is US$54 per cubic metre, the corresponding rate for firewood is only US$1.  Based on accounts from FA staff in Kompong Thom and Global Witness surveillance of trucks arriving at the Kingwood factory in 2003, it appears that Seng Keang Company transported a minimum of 20,000 m³ grade II wood out of Tumring in that year alone.[cxxxiii]  This suggests that in 2003 the company should have returned at least US$1,000,000 in royalties to the Cambodian treasury.  In 2006, however, Chan Sarun stated that in over three years Seng Keang Company had paid the government total timber royalties of less than US$600,000.  The question of how much tax the logging syndicate should have paid is examined in more detail in section 4.6.144

Commenting on the logging around Tumring in September 2003, an official in the Kompong Thom provincial forestry department stated that “The Ministry of Agriculture has licensed Mrs Seng Keang to collect cut trees for firewood since late 2002”.[cxxxiv]  Meanwhile, Khun Thong’s son-in-law, FA Director General Ty Sokhun declared that “There is no log transportation.  Some people use wood as firewood.  If there are trees cut outside the plantation, we will crack down on it.  There is no log exploitation business.  There could be some clearing for farms.” He denied ever having heard of Seng Keang or Dy Chouch.150 

 

Writing in a letter to the international donor Working Group on Natural Resource Management in the same month, Khun Thong’s brother-in-law Chan Sarun asserted that “Up to date, as per the timber transport, MAFF continues implementing moratorium of the exploitation ban and effective logs transport.”[cxxxv]  Seng Keang’s staff informed associates in 2004 that the group was continuing to receive firewood permits from the Forest Administration.98

 

 

3.5 Further Benefits

 

In September 2004, a few weeks after the formation of a new CPP-led government and his reappointment as Minister of MAFF, Chan Sarun issued a prakas authorising Seng Keang Company to establish a factory in Khaos village in Tumring for milling wood and processing veneer.[cxxxvi]  This prakas contravenes the 1999 Sub-decree on Measures Restricting Certain Investment Sectors, which prohibits further investment in the processing of round logs.[cxxxvii]  It also violates the 2002 Forest Law, article 30 of which states that no processing facility may be established within five kilometres of the permanent forest reserve.  The Forest Law adds that “The Ministry of Agriculture, Forestry and Fisheries may grant an exemption to (these) prohibitions if a study by the Forest Administration can demonstrate that the benefit of such an exception would not cause harm or have only minor social and environmental impacts”.  Chan Sarun’s prakas makes no reference to any such study and FA officials based in Tumring informed Global Witness in 2005 that none had been conducted.[cxxxviii] 

 

A credible ESIA would certainly have highlighted destructive and illegal logging by the Seng Keang Company.  In any case, by mid 2004 Tumring had already attracted considerable attention for the environmental damage, loss of household income, destruction of spirit forests and intimidation being visited upon its population.  Global Witness, other NGOs and journalists, not to mention local inhabitants themselves, had presented the authorities with ample evidence of what was occurring.[cxxxix]  Assuming that Chan Sarun was exercising his ministerial duties competently, he would have been fully aware of this information.  In all likelihood, he simply chose to ignore it.

 

In 2006, the Minister defended his decision to issue the prakas in the following terms:

“Our authorisation of the Seng Keang Company to create a sawmill in Tumring is in accordance with the Forest Law as it [the sawmill] is not within the forest boundaries but in the middle of the development zone of Tumring Rubber Plantation.”144 

 

This argument is unconvincing, as the plantation site is bounded on all sides by Prey Long and the Seng Keang Company sawmill site is less than a kilometre from the forest that forms the plantation’s eastern perimeter.

 

Chan Sarun’s authorisation raises further questions as to how he reconciles his conflicting arguments on Tumring and who is receiving the “benefit of conversion”.    The minister has claimed that there was little valuable timber in Tumring, yet he chose to authorise construction of a sawn wood and veneer factory operating no less than four production lines.  Where did he expect that the Seng Keang Company would source its timber from?  

 

Chan Sarun again appears to have breached Article 100 of the Forest Law.  Yet, while almost certainly illegal, the minister’s actions are entirely in keeping with a political culture in which public office is perceived as a licence to circumvent the law rather than a responsibility to enforce it. 

 

In the final quarter of 2004, Seng Keang Company proceeded with the construction of a milling and veneer manufacturing plant equipped with new machinery imported from China.[cxl]  Its opening ceremony was graced by high-ranking officials from Phnom Penh.[cxli]  Seng Kok Heang took charge of managing the factory and by the end of 2004 it was processing large numbers of villagers’ resin trees cut outside the plantation boundaries.[cxlii]

 

 

3.6 Old logs and Donor Amnesia

 

In late 2004 Dy Chouch, Seng Keang and Khun Thong’s operations received an additional boost when the temporary lifting of the log transportation moratorium allowed them to use logs left in Tumring Rubber Plantation by the logging concessionaire Colexim Enterprise.  Colexim Enterprise had taken a leading role in the early months of the clearing operation in Tumring and, according to its own records, “collected” 3,355 logs.[cxliii]  Following the introduction of the moratorium, 2,812 of these logs remained stranded beside the road running through the plantation. Global Witness inspections of these logs revealed that at least 50% had resin-tapping holes, suggesting that the company had cut them illegally.[cxliv]  

 

Collection of old logs is well-established as a cover for illegal logging operations in Cambodia and Hun Sen banned the practice in 1999.  Unperturbed, Colexim lobbied persistently for permission to transport the logs from Tumring to its factory on National Route 5.[cxlv]  In 2003 the company submitted a formal proposal to the government with the tacit encouragement of the World Bank.[cxlvi]  Meanwhile, Chan Sarun solicited support from the international donor Working Group on Natural Resource Management (WGNRM) for lifting the log transportation moratorium.  The WGNRM responded with two letters to the minister which noted that:

“The proposed log transport cannot be separated from the origin of the logs.  Our understanding of the development of the Tumring Rubber Plantation is very troubling… communities have been displaced and lost their established livelihoods… Our critical concern is that any authorized log movement should not create an opportunity for transport of new illegal logging [sic] or transport of illegally felled timber.  It was for this reason that the Working Group urged in 2002…the present suspension of log transport.”[cxlvii]

 

“We also see the environmental aspects (erosion) as well as the social issues of the Tumring project as closely linked with the wisdom of advancing on the controlled transport and sale of logs from the project site.  Even with the clarifications you provide, we still can not endorse the movement of these logs.”[cxlviii]

 

However, when Chan Sarun pushed for a resumption of log transportation at the December 2004 Consultative Group meeting, the donors decided to give the proposal their support.  In the interim nothing had changed, beyond a deterioration of the situation in Tumring as Seng Keang Company’s operations expanded and more resin-tappers lost their trees.  In January 2005 concessionaires began moving stockpiles of logs; many of them illegally-felled resin trees.  Donor endorsement became Chan Sarun’s main justification for ending the log transportation moratorium.144

 

Along with Colexim, one of the main beneficiaries was Seng Keang Company which, by the time timber transports resumed in January 2005, had bought more than a thousand of the logs in Tumring for US$216,397.[cxlix]  The syndicate proceeded to take these logs to the Kingwood factory by truck before re-loading them onto barges and selling them to sawmills further down the Mekong River.[cl] 

 

Donor representatives who had previously expressed concern about proposed log transportation from Tumring raised no further questions about the origin of the logs or the wisdom of allowing dubious companies to profit from illegal activities.  Neither did Swiss firm SGS, which had taken over as the official monitor of government efforts to tackle forest crime following the removal of Global Witness.  SGS informed Global Witness in February 2007 that “SGS was not asked to investigate or provide any opinion regarding the origin of these logs which were harvested well before the start of the SGS contract.  SGS was advised by the donor group that they had approved the transportation exercise on condition that it was supervised to try and ensure that no fresh or additional logs could enter the supply chain.” [cli]

 

 

4. Anatomy of an Illegal Logging Operation

 

Thanks to the rubber plantation project and the permits provided by Chan Sarun, Dy Chouch, Seng Keang and Khun Thong managed to establish themselves in the heart of Prey Long, Cambodia’s most valuable forest resource.  It is unlikely that they could have selected a more suitable location for their activities and Tumring duly became the centre of the largest illegal logging operation in Cambodia.  This section summarises the findings of Global Witness investigations into this operation’s main components.

 

 

4.1 Processing Capacity

 

From the time of the new factory’s establishment in Khaos village in Tumring in late 2004, the logging syndicate reduced its transportation of logs to the Kingwood factory in Kandal Province.  Instead, it began processing logs into veneer sheets at a range of sites, before transporting them to the factory for assembly into plywood.156  This may have reflected a preference for a less conspicuous alternative to the illegal log transports repeatedly exposed by Global Witness, the UN and others.  At the same time the syndicate began placing a greater emphasis on processing and trading sawn timber. 

 

While the new factory in Khaos became the centre for these processing activities, the syndicate also made use of additional sites in Kompong Thom and Kompong Cham provinces.  In Kompong Thom these included a sawmill near Kompong Thmor which local inhabitants claim Dy Chouch bought for around US$10,000 in early 2005.[clii] 

 

The logging syndicate may also have acquired ownership of the El Dara factory nearby.  People interviewed at the El Dara site in May 2005 stated that Dy Chouch had taken it over in March that year.  El Dara workers informed Global Witness that they were producing veneer for use at the Kingwood plant.[cliii]  Aerial surveys of the site in November 2005 and September 2006 revealed that the factory was continuing to process logs into veneer sheet.

 

In Kompong Cham, the syndicate commissioned the processing of logs into veneer at a mill in Chamkar Andoung District known as Factory Number II.  Workers at Factory Number II informed Global Witness in May 2004 that they were processing timber from natural forests into veneer sheet for plywood manufacture at Kingwood.169 

 

Close to the Kingwood factory itself, Global Witness found the group using an additional two sites for aspects of the plywood production process.[cliv]

 

Khun Thong’s own sawmill on Route 2, meanwhile, remained fully active.  Investigators visiting the site in April 2005 found it processing approximately 100 m³ of beng (luxury grade, protected species), chhoeuteal (resin tree wood) and phdiek.  All this timber had been transferred from the Kingwood factory via the Mekong and Bassac rivers. The following month investigators observed a Forest Administration official arriving at the sawmill with a large military style truck loaded with luxury and grade I timber.  The wood had been illegally logged in Pursat Province.[clv]

 

 

4.2 Feeding the Factories

Satellite imagery shows that by January 2005 the forest resource within Tumring Rubber Plantation was all but exhausted.  Interviews with loggers, officials and local inhabitants, together with surveillance of cutting sites and truck movements, indicate that from late 2004, if not before, logging by the Seng Keang Company focused primarily on forests outside the plantation boundaries.[clvi]  Throughout 2005, Global Witness investigators found evidence of Seng Kok Heang’s loggers operating across Sandan and Santuk districts; in other words areas of Prey Long falling within the Colexim, GAT, Mieng Ly Heng and Pheapimex-Fuchan concessions.  (Colexim, its track record and its links with the Seng Keang Company are profiled in Box 7.) 

 

As with the Kingwood plant, the Seng Keang Company factory in Khaos processed primarily chhoeuteal (resin trees), phdiek and other commercial grade species suitable for veneer and construction timber.[clvii]  It also functioned as a depot for timber that loggers had already cut into planks or may tap (square logs) in the forest using chainsaws.  This sawn wood included not only commercial grade timber, but also luxury species such as beng, neang nuon and thnong.  In early 2005 much of this luxury wood was coming from the forest around Phnom Chi in the Pheapimex-Fuchan concession east of Tumring.168

 

 

Global Witness also uncovered evidence of the logging syndicate casting its net beyond Kompong Thom Province in its efforts to maintain supply to its processing facilities.  In May 2004 investigators discovered a large-scale logging operation inside the Timas Resources forest concession at the southern edge of Prey Long in Kompong Cham Province.  The loggers said that they were working for Military Region II officers Sath Chantha[clxxii] and Uy Kear[clxxiii] and that they were cutting to order for the Kingwood factory.[clxxiv] More than two years into a moratorium on cutting in logging concessions, these activities were clearly illegal.

 

 

4.3 The Suppliers

“In response to the claim of large-scale illegal logging 5-10 kilometres outside the rubber plantation area: in this case, according to the local Forest Administration, which fights forest crime, small-scale violations (secret cutting, wood-sawing and transportation by ox cart or horse cart) may sometimes arise in the forest area.  These violations are carried out by the people living in and adjacent to the forest to support their livelihoods, especially during drought and in order to use timber products for necessary local public construction.  Meanwhile, competent officials from the local Forest Administration have strengthened law enforcement to prevent and continuously combat forest crimes.”  MAFF Minister Chan Sarun, 2006.

 

The suppliers of timber to the Seng Keang Company operation in Tumring comprised three main groups:

 

1. A small group of salaried employees working for Seng Kok Heang who supervised logging operations.  Each of these staff received basic pay of up to US$220 per month.[clxxv]
2. Full-time logging crews paid US$15-US$25 for each cubic metre cut.  Seng Kok Heang provided these workers with equipment and protection and sent his own vehicles to collect the logs from the cutting sites. In 2005 he was using around five bush trucks for this purpose.191 
3. Timber traders supplying the factory on a freelance basis.  These traders took responsibility for finding their own equipment and paying off corrupt officials.  They could not necessarily count on Seng Kok Heang’s support if they encountered difficulties.  On the other hand, Seng Keang Company paid them more per cubic metre of processed timber delivered to the factory.  In 2005 Seng Kok Heang paid such suppliers around US$150 per cubic metre of grade I timber and US$75-US$100 for grade II.   These timber traders typically used either small Korean trucks or hired ox carts (each able to carry 1-1.25 m³) to transport wood to the factory.191

 

Labourers working for the timber traders sat at the bottom of this pecking order.  Most came as migrant workers from other areas, sometimes living in the forest for weeks at a time during logging operations.  Loggers interviewed by Global Witness in November 2005 stated that their employer, a military policeman supplying Seng Kok Heang, paid them US$30-US$50 each per month depending on the volume of wood they had cut and processed.[clxxvi] 

The exact number of people and machines involved is hard to estimate; however in mid 2005 a resident of Tumring with close connections to the Seng Keang Company informed Global Witness that there were 52 chainsaws in Tumring Commune alone.[clxxvii]  In the same year community forestry activists recorded 131 chainsaws and 12 mobile sawmills across all communes of Sandan District.[clxxviii]

 

4.4 Transportation

 

A Seng Keang Company employee describing himself as the firm’s transportation manager informed Global Witness in November 2005 that the company was using a fleet of five trucks and transporting 3-4 truckloads of timber out of Tumring each day.[clxxix]  This statement tallies with Global Witness’ own observations of activity around the Seng Keang sawmill in Tumring. 

 

Many of the trucks used by Seng Keang Company belonged to Brigade 70, the elite military unit in which Seng Kok Heang is an officer.[clxxx]  Brigade 70’s timber transportation service is a nationwide operation which is described in detail in Chapter IV.  Its 10-wheeled military green trucks typically bear Royal Cambodian Armed Forces licence plates and some display a ‘70’ plaque against the windscreen.  Global Witness investigators have tracked these trucks from Prey Long to the Kingwood factory and have gathered accounts of the unit’s collaboration with Seng Keang Company from Brigade 70 soldiers, timber traders and local people.[clxxxi] 

 

4.5 The Markets

Seng Keang Company supplies some of the commercial and luxury grade wood that it illegally logs in Prey Long to Cambodia’s domestic market.  Global Witness has gathered information from various sources suggesting that a significant proportion may be consumed outside the country however:

 

• Supplies of logs from Prey Long have enabled continued industrial-scale production of plywood at the Kingwood factory.  As outlined in Box 8, there are strong indications that much of this product is being exported to China. 
• As detailed in Chapter IV, Brigade 70 is heavily implicated in the trafficking of timber to Vietnam.[clxxxii]  The unit may well have been transporting wood logged by Seng Keang Company in Prey Long across Cambodia’s eastern border. 
• Well-placed sources have informed Global Witness that Dy Chouch is involved in the illegal export of luxury grade timber in shipping containers via ports on Cambodia’s south coast.[clxxxiii]  Global Witness wrote to Dy Chouch in February 2007 to ask for his comment on this allegation but has not received a reply.

 

 

4.6 Outputs and Financial Returns

 

Because of the illegal nature of Seng Keang Company’s activities, there are no credible official statistics on the amount of timber the firm has cut in Prey Long.  Global Witness has, however, compiled data on the group’s operation that permit estimates of output covering the period since it established its factory in Khaos village at the end of 2004.

 

What volumes of timber has the Seng Keang Company processed at its factory in Tumring?

People living beside the road leading out of Tumring whom Global Witness interviewed in 2005 and 2006, stated that over a 24 hour period they usually saw or heard two to three of the logging syndicate’s loaded trucks leaving the plantation.184 Seng Keang Company’s transportation manager informed Global Witness in November 2005 that it was transporting on average three to four truckloads of sawn timber each day.195  Each of the Seng Keang Company vehicles carried at least 60 m³ of processed wood.156

 

These estimates of between two and four truckloads of timber per day correspond with Global Witness’ observations of truck movements over the same period.  Assuming that the company was using an average of three trucks per day, this would suggest output of 180 m³ of sawn timber per day, 4680 m³ per month and over 56,000 m³ per year.[2] 

 

What does this equate to in terms of volumes of logs consumed?

 

A standard international conversion rate for round wood (logs) processed into sawn timber is 1.8; in other words it takes 1.8 m³ of logs to produce one cubic metre of sawn timber. [cxc]   In reality, significant amounts of the Seng Keang Company’s timber were processed in the forest using chainsaws and therefore converted much less efficiently.  Using the 1.8 conversion rate, however, one can conservatively estimate the syndicate’s consumption of logs as approximately 324 m³ of round wood per day; 8424 m³ per month and over 100,000 m³ per year.vi 

 

It is worth noting that such volumes are far in excess of what logging concessionaires were permitted to cut.  Dy Chouch, Seng Keang and Khun Thong’s erstwhile employers Kingwood, for example, were entitled to harvest a maximum of 35,000 m³ per year.80

 

In March 2006 Chan Sarun offered MAFF’s assessment of Seng Keang Company’s logging activities in the area:

 

“Up to late 2005, Seng Keang Company collected forest and by-products from the cleared Tumring Rubber Plantation to a total amount of 12,204.696 m³ of round and mixed types of logs and 2,023 stere[3] of saplings and firewood.”144 

 

While admirably precise, these figures are extremely low, bearing in mind that Seng Keang Company officially commenced operations in Tumring in October 2002.  Chan Sarun’s calculation of the total log volume the company extracted in over three years is equivalent to the amount of logs that its factory in Tumring was processing every 38 working days. 

 

What were the financial returns to Seng Keang Company and the state?

 

Global Witness has gathered a range of data about the costs to the Seng Keang Company of logging, transporting timber, paying workers and bribing officials, but has no figure for the syndicate’s overall outgoings and profit margin.  Nonetheless it is clear that the returns on its logging and timber processing operation have been considerable.  Calculated at the 2006 Phnom Penh price for sawn grade II wood of US$235 per cubic metre, Seng Keang Company’s yearly output of processed timber from Tumring would be worth over US$13 million.[cxci]

 

This figure does not account for the substantial quantities of logs the Seng Keang Company was converting into veneer and plywood, which is worth more than sawn wood.  It also ignores the more valuable grade I and luxury woods the syndicate cut and sold, as well as the higher returns it would have received on any timber products it exported. 

 

According to Chan Sarun, between the point at which it officially commenced operations in Tumring and the end of 2005, “the [Seng Keang] Company also paid US$594,987.92 and 8,496,600 riel in taxes to the state”; in other words just short of US$600,000.144  In a sense questions regarding the amount Seng Keang Company paid in taxes are academic, given that the vast numbers of trees it cut illegally should not have been felled in the first place.  Nevertheless, it is indicative of the overall loss to Cambodia, if only in financial terms, when one considers that taxing the syndicate’s 100,000 m³ annual round log consumption at the royalty levels applied to grade II wood – US$54 per cubic metre – would have netted the treasury US$5.4 million per year.

 

 

 

5. A Rural Gangland

 

The Seng Keang Company’s representative in Tumring, Seng Kok Heang, used a combination of familial connections, bribery, threats and acts of violence to establish a personal fiefdom in the area.  Local people interviewed by Global Witness invariably knew him as “Hun Sen’s relative” and saw this connection with the prime minister as a source of great power.184  Military police and police provided accounts of him buying influence through monthly payments to officials.[cxcii]  In addition, Seng Kok Heang employed a group of twenty to thirty armed men, several of them drawn from RCAF ranks.[cxciii]  This private militia helped him to keep tabs on local opponents and outsiders visiting Tumring.[cxciv]

 

 

5.1 Resin Tree Theft

 

Interviews with loggers and visits to cutting sites in Prey Long suggest that resin-producing chhoeuteal trees accounted for at least 50% of the wood processed in the Seng Keang Company factory in Khaos village.[cxcv]

Having exhausted the supply of resin trees and other timber within the plantation, Seng Kok Heang focused on the surrounding forests.  At the end of 2005, Global Witness found teams of his loggers cutting up to eight kilometres from the plantation perimeter.  As a result, resin tappers continued to lose their trees and the income these provided.[cxcvi]  Resin tappers in Tum Ar village on the edge of the plantation, told Global Witness in 2006 that in the past all of the 100 families living there had owned 200-300 resin trees each.  Now only 5-6 families had any trees left at all.[cxcvii]  In Rumchek village in Sokchet Commune villagers reported losing 800 resin trees to Seng Kok Heang’s loggers in mid 2005 alone.168

 

According to resin tappers, Seng Keang Company would sometimes pay them compensation for cutting their trees.  The sums involved were derisory however – US$1.25-US$12.5 for a tree whose timber might sell for as much as US$1,000 in Phnom Penh.[cxcviii]  Seng Kok Heang and those working for him offered these payments on a ‘take it or leave it’ basis.  As one villager put it: “Mr 95 [Seng Kok Heang] is the most powerful because he threatens the resin tappers, saying to them ‘I will cut your trees, whether you sell them to me or not’… only Mr 95 would dare to say this.” [cxcix]

 

 

5.2 Dealing with Dissent

From the early stages of the Tumring plantation project, local people trying to protect the forest met with threats from the loggers.  A report on plantations published in November 2004 by the UN Office of the High Commissioner for Human Rights made a clear link between this intimidation and the presence in Tumring of Seng Kok Heang, alias Mr 95.

 

“A man who goes by the name of ‘Kae Pram’ [meaning 95 in Khmer] (his radio call sign is 95) heads the security guards of Mieng Ly Heng Company, and has a particularly brutal reputation.  He is the brother of Seng Keang, the director of Seng Keang Company, the main subcontractor of Mieng Ly Heng.  In Roniem village, people reported that they have been frequently threatened with death for their attempts to block illegal logging and illegal transport.”139

 

Persistent intimidation of this sort gave way to outright violence on 10 July 2005, when Seng Kok Heang is reported to have tried to kill two local men who had played a leading role in protecting villagers’ resin trees.

 

Global Witness interviewed eyewitnesses to the attacks on the two men the day after they occurred and conducted follow-up investigations in Tumring in September and November 2005.  The UN Office of the High Commissioner for Human Rights investigated the case from July to October 2005.  Two other NGOs also went to Tumring to gather information about what happened.  The description of events in Box 9 is based on the findings of the investigations by Global Witness, the UN Office of the High Commissioner for Human Rights (UNOHCHR) and the two NGOs.

 

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