Chinese company involved in Boeung Kak Lake with CPP Lao Meng Khin's Shukaku Inc.

A young barefooted boy looks pensive while behind him workers employed by Shukaku Inc pump a mixture of sand and water into the northeastern edge of Boeung Kak lake. (Photo by: Will Baxter)

China firm in lake deal

Tuesday, 28 December 2010
Vanessa Ko
The Phnom Penh Post

A Chinese company has invested tens of millions of dollars in the controversial development of the Boeung Kak lakeside, in connection with firms linked to a powerful ruling party senator Lao Meng Khin, according to Chinese-language news reports.

The reports from September say that the involvement of the state-owned Inner Mongolia Erdos Hung Jun Investment Co dates back to July, when it signed an agreement with two local companies to develop the lake.

According to the reports, the Boeung Kak development – known in Chinese as wanguhu, or “10,000 Valley Lake” – was included in a US$3 billion package of investment deals that also included a 750-megawatt power station in Sihanoukville and the exploration of bauxite in Mondulkiri.

The announcement of the deals followed a September 8 meeting between Wang Linxiang, the company’s chairman, and Prime Minister Hun Sen. At the time, Eang Sophalleth, a personal adviser to Hun Sen, told The Post that the meeting was to discuss the power station project and real estate developments, but did not identify Boeung Kak lake as one of the projects.

The Chinese reports reveal that Hung Jun’s lake development agreement involved both Shukaku Inc – which is owned by Lao Meng Khin – and the Cambodia International Investment Development Group.

The latter firm also appears to be linked to the senator. According to an undated government investment publication available online, the firm runs a special economic zone in Sihanoukville, with Lao Meng Khin listed as the “zone developer”.

Also present at the September 8 meeting between Hun Sen and the Hung Jun representatives, Eang Sophalleth said at the time, was Lao Meng Khin’s wife Choeung Sopheap, the head of local conglomerate Pheapimex.

The reports confirm longstanding suspicions of Chinese involvement in the 133-hectare housing and commercial development.

In January, The Post revealed a long history of Chinese links to the project, following the signing of a US$79 million lease agreement between City Hall and local developer Shukaku Inc in February 2007.

It remained unclear, however, whether Chinese firms were still linked to the project after one Kunming-based company withdrew from the project after undergoing restructuring.

Chinese news reports state that Inner Mongolia Erdos Hung Jun Investment Co was registered in Inner Mongolia in June and has two parent companies, each holding a 50 percent stake.

One of the companies is Erdos Holding Group, based in Inner Mongolia, whose primary businesses are cashmere and energy investment. The other is the Qingdao-based Dezheng Resources Holdings Co Ltd, an aluminium and energy development firm.

The Chinese articles also reveal that the joint venture between Hung Jun and Cambodia International Investment Development Group, which was not named, had registered capital totalling $72 million.

Hong Jun owns 51 percent of the company, contributing cash and equipment, while the Cambodian company owns 49 percent and provides the land and resources.

It is unclear what role Shukaku plays in the deal, though it has been in charge of the Boeung Kak project since work began in 2008.

Since then, the project has come under fire from housing rights groups, who claim as many as 4,000 families will be forced to make way. Protests by lakeside residents have become a weekly occurrence in Phnom Penh, fuelled by complaints of inadequate compensation, the lack of transparency and the flooding of homes due to the filling of the lake.

“It has been difficult for the residents to figure out who they should appeal to,” said Sia Phearum, secretariat director of the Housing Rights Task Force. “The government tells them to go to Shukaku, Shukaku tells them to go to the government. They just throw them back and forth.”

Sia Phearum said the Chinese involvement will likely have a negative impact on the residents’ plight. “[The Chinese] care about business more than human rights,” he said.

Sam Rainsy Party spokesman Yim Sovann said there should be tough laws on loans from abroad. “We have to be very careful of those who only look at their own benefit and exploit Cambodian natural resources,” he said. “I don’t know if the Chinese investors have considered the reputation of their company name ... or if they just want to invest in a poor country.”

Chinese Embassy spokesman Qian Hai had not responded to queries as of press time. A Shukaku official declined to comment.