BHP's 'tea money' missing in Cambodia [-Hun Xen was lying about social fund?]

May 15, 2010
BEN DOHERTY
The Sydney Morning Herald

Corruption in Cambodia's mining boom
Mining has the potential to drag the people of Cambodia out of poverty, but corruption means millions of dollars are going into the pockets of a powerful few.

PHNOM PENH: BHP-Billiton knowingly bribed the Cambodian government in 2006, anti-corruption campaigners say, paying $US2.5 million ($2.8 million) in ''tea money'' which never appeared on government books, and which never built a single school or irrigation channel as promised.

In September 2006, BHP-Billiton paid $US1 million to the Cambodian government for a mining concession to conduct exploratory drilling for bauxite on 100,000 hectares in Mondolkiri province, in Cambodia's far east. The world's biggest mining company also gave the government an additional $US2.5 million to go towards a ''social fund'' for development projects for local communities.

Despite promises from the government the social fund would be administered by the finance ministry, budget documents obtained by the Herald show none of BHP's money ever appeared on the government's books.

And while the money was variously promised, by both BHP and the Cambodian government, to start irrigation projects, and to build dams, schools and hospitals in the province, none was ever seen in Mondolkiri.

Anti-corruption campaigners and members of the Cambodian parliament say BHP knew the money it paid in September 2006 was a bribe and would never reach the communities displaced by its mining activities.

"No doubt BHP knew from the beginning this money is [sic] bribe, is bribery, they know from the beginning. They cannot ignore this reality by saying that the company believe that the money was just paid properly, legally, to the government," said Son Chhay, a 15-year member of the Cambodian National Assembly and outspoken anti-corruption campaigner. ''There is no excuse for BHP.''

BHP left Cambodia in 2009, after finding insufficient bauxite reserves to mine commercially, but the US Security and Exchange Commission is understood to be investigating the irregular payment.

And the company, while refusing to confirm its Cambodian payment is under suspicion, conceded in its latest quarterly statement that an internal investigation had uncovered evidence "regarding possible violations of applicable anti-corruption laws involving interactions with government officials".

The original deal between BHP and the Cambodian government was signed in 2006, during a visit by the Cambodian Prime Minister, Hun Sen, to Australia.

BHP's $US3.5 million, which government officials said would be received by the finance ministry, was paid into a Cambodian bank account in September 2006. It has not been seen, or accounted for, since. It appears nowhere on the government's books.

The Herald has obtained the Cambodian government's budget statement for 2006, which is not released publicly.

It shows revenue from mining concessions for that year of just $US443,000. The $US1 million for the mining licence, and the $US2.5 million for the social fund, do not appear anywhere else in the budget papers.

Quizzed on the deal in 2007, the Cambodian Water Resources Minister, Lim Kean Hor, told the national parliament the money was "tea money", a colloquial term for an undeclared bribe.


"The royal government got tea money, $US2.5 million, from the bauxite investment with Australia," he told parliament.

Mr Hor was backed up by another senior member of the ruling Cambodian People's Party, Cheam Yeap, who said "the money is just for friendship".

Both ministers refused interviews with the Herald.

There is continuing confusion over what the money was promised.

Defending the payment's legitimacy this month, Mr Hun Sen said: "I ordered to use this money to build the Charoek Dam in Pursat province, but later this company requested a part of the fund to build schools and hospitals in Mondolkiri province."

For its part, BHP-Billiton says it retained control of the money, which was to be administered by a committee over which it had veto. However, the company concedes it lost control of the money, with some allocated to a "social infrastructure project not approved by BHP-Billiton".

Former BHP employees say the money has never been seen in Mondolkiri province.

The miner's community official in Mondolkiri, Nok Ven, said no community projects were ever funded by BHP-Billiton's money.

"There's no such thing happen in Mondolkiri province. There's no school, there's no irrigation. There's nothing at all happened," he said.

Separately from the $US2.5 million social fund payment, BHP-Billiton did donate nearly $US470,000 to six non-government organisations working in Mondolkiri province.

Mr Chhay said it was common practice for tea money payments to be made over and above mining licence fees, and for the money to disappear.

"The tea money paid by BHP to the government … is just the same thing. We could not find where this money [went] … there is no doubt that this money was somehow paid to someone, but there's no evidence that they will be part of the government budget."

He said Cambodia was institutionally corrupt, with government officials bleeding the country's natural resources for their own profit, while international donors contribute fully half the country's budget to keep the state afloat.

UN figures show 68 per cent of Cambodians survive on less than $US2 a day.

"But there are so many rich people in Cambodia. You can look on the streets, there are a lot of LandCruisers, Lexuses and Mercedes … Cambodia receives more than half [its] budget from donor countries, but the officials are so rich and live in castles.''