Site icon Conservation news

New report exposes “network of secret deal-making and corruption” that has kept Cambodia’s ruling family in power for decades

  • In a report titled “Hostile Takeover,” the group lays out evidence that Cambodian Prime Minister Hun Sen — who has been in power for 30 years — and his family manipulate the country’s economy in order to accrue vast personal fortunes while using arbitrary imprisonment, murder, and torture to silence political opponents.
  • Cambodia has dwelled at the bottom of Transparency International’s Corruption Perceptions Index for years, ranking 150th out of 168 countries in 2015 — the lowest of all Southeast Asian countries.
  • Global Witness said in a statement that the report should serve as a warning for investors in the United States in particular. As Cambodia’s biggest trading partner, the U.S. imports a third of all Cambodian exports, worth almost $3 billion a year.

An investigation by London-based NGO Global Witness has uncovered the corruption and secretive business network that has kept the ruling family of Cambodia in power for three decades despite numerous well-documented human rights and environmental violations.

Global Witness said in a statement that the report should serve as a warning for investors in the United States in particular. As Cambodia’s biggest trading partner, the U.S. imports a third of all Cambodian exports, worth almost $3 billion a year.

In a report titled “Hostile Takeover,” the group lays out evidence that Cambodian Prime Minister Hun Sen — who has been in power for 30 years — and his family manipulate the country’s economy in order to accrue vast personal fortunes while using arbitrary imprisonment, murder, and torture to silence political opponents.

Cambodia has dwelled at the bottom of Transparency International’s Corruption Perceptions Index for years, ranking 150th out of 168 countries in 2015 — the lowest of all Southeast Asian countries. But Global Witness was able to access company registration data via the Cambodian Ministry of Commerce’s corporate registry prior to the government restricting its access, and used the information to create a publicly accessible, searchable database called Cambodia Corporates, launched alongside the report.

Hun Sen (in the foreground) is the world’s sixth longest-serving premier, in power for 30 years that have been characterized by electoral fraud and the brutal suppression of political opposition, including through murder, torture and arbitrary imprisonment, according to Global Witness. The group’s Hostile Takeover report reveals the economic dimensions of his regime. It provides the evidence base to prove what most Cambodians suspect – that Hun Sen has abused his position as prime minister to allow his relatives control of, or major stakes in, most of Cambodia’s major industries. The vast fortunes family members are consolidating in the private sector are furthering the gap between rich and poor, and leaving a trail of land grabbing and human rights abuses that no one has been held to account for. Photo by The Phnom Penh Post.

The investigative organization mapped the company data it uncovered onto the Hun family tree, and found that the prime minister’s immediate family has registered business holdings linking members to 114 private domestic companies with listed capital in excess of $200 million. These businesses, in turn, are linked to international brands such as Apple, Honda, Nokia, Proctor & Gamble, Unilever, and Visa, Global Witness said. Hun family members serve as chairpersons, directors, or have a shareholding of more than 25 percent, meaning they exercise total or substantial control, over 103 of those companies.

“Their business holdings span many of Cambodia’s most profitable sectors, including those known to be riddled with corruption such as mining, gambling and real estate,” according to the report.

But this is “undoubtedly just a fraction of the true value of the family’s holdings,” the report notes, as the government data Global Witness accessed was limited in scope, and the Hun family is widely believed to obscure its links to companies it controls by listing the names of friends and associates as nominee owners, or hiding their ownership through the use of shell companies.

Companies linked to the Hun family have not been subject to the country’s anti-corruption laws or the anti-corruption unit created in 2011, according to the report, even as they have been granted lucrative public contracts and concession licenses.

Police beating a young man during a 2012 state crackdown on striking workers from SL Garments, a Phnom Penh factory that at the time produced clothing for Gap and H&M among other international retailers. The violence saw one woman killed and at least six others shot. Hun Sen’s younger sister, Hun Seng Ny, reportedly has links to the SL Garment factory – workers there claimed she was its Director General. Photo by The Phnom Penh Post.

“These are not victimless crimes,” the report adds, “some of their companies’ operations have driven devastating impacts for Cambodian citizens and the environment, including land grabs that have caused mass displacements and destitution among Cambodia’s rural poor.”

The natural resources sector, in particular, is a favored target for Hun family investments. Global Witness found Hun family holdings in a number of agricultural companies, most notably in the rubber sector, Cambodia’s second-largest crop after rice. The family also has links to six mining companies that hold licenses for largely untapped projects in at least five provinces.

“With extraction of Cambodia’s oil and minerals set to begin soon, it is a pivotal time for the country’s burgeoning mining industry and those involved stand to make huge profits,” per the report. “Global Witness exposés over the last twenty years have also revealed the corruption, human rights abuses and environmental destruction at the heart of this sector, showing how the country’s ruling elite has been able to plunder the country’s natural wealth with total impunity — first forests, then oil, gas and mineral reserves, and most recently land for agri-business.”

Cambodia’s ruling elite have led a wave of illegal logging and land grabbing for agribusiness that resulted in the country losing its forests at a faster rate than any other between 2001 and 2014, Global Witness said. By 2015, an area of land the size of El Salvador (2.1 million hectares, or about 5.2 million acres) had reportedly been granted to commercial investors for agribusiness, affecting some 830,000 Cambodians.

As the report documents, the Cambodian government’s own 2013 statistics show that five Cambodian Peoples’ Party senators held 20 percent of total land allocated through concessions, amounting to more than half a million hectares.

Local residents walk through what was once forest, recently cleared to make way for a rubber plantation in Ratanakiri Province, March 2013. Photo by Global Witness.

Hun family members have also been implicated in other criminal offenses without facing prosecution — some family members are allegedly involved in a $1-billion heroin smuggling operation, for instance.

“These revelations point to a cruel irony of Hun Sen’s model of dictatorship — his family has Cambodia’s economy so sewn up that Phnom Penh residents are likely to struggle to avoid lining the pockets of their oppressors multiple times a day,” Patrick Alley, a co-founder of Global Witness, said in a statement. “Foreign investors, on the other hand, can and should opt out of bankrolling a regime that kills, intimidates or locks up its critics.”

Cronyism is rampant in Prime Minister Hun Sen’s administration, as well, and his relatives are instrumental in securing his political power through means other than their domination of the corporate sector, as the report details.

“They hold key posts across the state apparatus, including in politics, the military, police, media, and charities — sectors that prop up Hun Sen’s Cambodian People’s Party through propaganda, political donations or brute force,” the report states. Hun Sen’s own son, Hun Manet, holds no less than four powerful positions: deputy commander of the prime minister’s bodyguard unit, deputy chairman of the Royal Cambodian Armed Forces Joint Staff, deputy commander of the Army, and commander of the country’s counter-terrorism special forces.

“The results of the stranglehold that the Hun family and other elites have over almost every aspect of society are plain to see in today’s Cambodia,” the report notes. Even while the country has experienced overall economic growth, six million Cambodians — about 40 percent of the total population — lives below or close to the poverty line, and economic inequality is growing, with rich urban elites leading far different lives than the 80 percent of Cambodians who still live in rural areas. Experts have estimated that the Hun family has combined wealth totaling between five hundred million and a billion dollars.

A child collecting rubbish at a dump in Siem Reap in 2011. Many children work in the landfill, in search of recyclable materials such as glass, paper and metal that they can earn money from. Cambodia is one of the world’s fastest growing economies, on course to forge the leap from a low- to a middle-income country. But six million Cambodians (40% of the population) still live below or close to the poverty line. The Hun family meanwhile have a combined wealth estimated by experts to total between five hundred million and a billion dollars. Photo by The Phnom Penh Post.

The report makes several recommendations for investors who want to ensure their money is not being used to prop up Hun Sen’s regime. Foreign governments should warn their home country investors about the risks of investing in Cambodia, and advise them to conduct stringent due diligence to ensure they aren’t entering into business relationships with Hun family members and other elites who have a history of corruption, the report suggests. And companies or investors with investments in Cambodia should exit the business relationship as soon as links to corruption are discovered, while reporting those findings to the relevant authorities.

“Global Witness paints a vivid picture of the winners and losers of foreign investment in Cambodia,” Stephen Peel, a former senior partner at private equity firm TPG Capital and a member of the Global Witness board, said in a statement.

“Doing business with companies that are owned or controlled by the country’s ruling family not only raises ethical questions, it also carries significant legal, financial and reputational risk. It is in everyone’s best interests for investors in Cambodia to carry out careful checks to ensure that their money isn’t being funneled into Hun Sen’s campaign of oppression.”