Hun Sen backs BHP in speech

28 April 2010
by May Kunmakara and James O’toole
Phnom Penh Post

IN a speech lasting more than five hours, Prime Minister Hun Sen on Tuesday rejected reports that a corruption probe at international mining giant BHP Billiton is related to the company’s dealings in Cambodia.

The marathon address was delivered at the 15th Government-Private Sector Forum in Phnom Penh. In addition to addressing topics ranging from silk yarn imports to the price of airfare to Bangkok, the premier weighed in on the controversy that has ensued since BHP announced last week that it had begun an internal investigation of possible corruption in response to an inquiry from the United States securities and exchange commission.

“They say that the company that explored for bauxite in Mondulkiri province gave money illegally to Cambodia,” Hun Sen said, referring to the
Australia-based BHP. “We should ask … how can they bribe? It cannot be possible.”

BHP has thus far declined to identify the project at the centre of its inquiry, other than to say it is not in China. Speculation has focused on the firm’s operations in Cambodia in part because of comments made in 2007 by Minister of Water Resources Lim Kean Hor, who told the National Assembly that BHP had secured rights to a mining concession in Mondulkiri by paying US$2.5 million in unofficial fees, known as “tea money”.

Hun Sen said Tuesday, however, that when he signed the formal concession agreement with BHP in 2006, it was established that the $2.5 million would support development projects in the Kingdom.

“I proposed taking the money to develop hydroelectricity in Pursat, and later on the company asked to use the money to develop schools and hospitals in Mondulkiri,” Hun Sen said. “This is in the contract – it is not money under the table.”

It is standard practice for foreign companies operating in Cambodia to offer support for social projects, the premier said. French oil company Total, for example, has paid $8 million into a social development fund as part of its agreement to explore for oil offshore, Hun Sen said, in addition to an $20 million fee paid to the government.

In a 2008 letter to the watchdog group Global Witness, BHP, too, said the $2.5 million that Lim Kean Hor called “tea money” had gone to a social development fund overseen by the government and BHP personnel for projects in Mondulkiri.

Wildlife Conservation Society country director Mark Gately said Sunday that his organisation had received $24,000 from BHP in 2008 for a project in Mondulkiri. Heng Ratana, deputy director-general of the Cambodian Mine Action Centre, said his group had received roughly US$1.1 million from BHP for projects in Mondulkiri since 2007.

In addition to the social fund, BHP told Global Witness that it paid the government $1 million as part of the formal concession agreement in 2006.

That $1 million, Global Witness subsequently found, was not accounted for in the government’s official revenue figures for that year.

Prior troubles

A BHP spokesman in London declined to comment on Hun Sen’s remarks. The firm has said little on the issue beyond last week’s statement that disclosed the discovery of “possible violations of applicable anti-corruption laws involving interactions with government officials”. This evidence, the statement said, arose after “requests for information from the US Securities and Exchange Commission as a part of an investigation relating primarily to certain terminated minerals exploration projects”.

Australian and British media have reported that the current BHP probe is focused on Cambodia. BHP pulled out of the Kingdom last year, saying that a feasibility study at the Mondulkiri site had determined that large-scale mining operations there would not be profitable. A Philippine nickel-mining project that the firm pulled out of last year has also been mentioned. That project was fraught with controversy through much of BHP’s involvement.

In 2008, the Catholic Agency for Overseas Development (CAFOD) alleged that officials from BHP’s partner in the project, the Philippines’ AMCOR, had paid bribes to members of the Mindanao island community where the project was located in exchange for their support.

CAFOD extractives policy analyst Sonya Maldar said Tuesday that when confronted by her organisation on this issue, BHP “refuted our allegations”.

“Their response was that they had carried out their own kind of internal audit processes around the [community] consent process and they uncovered no irregularities,” Maldar said. She added that BHP had refused to make the results of this audit public.

In 2007, AMCOR filed fraud charges against BHP in a Philippine court, according to a CAFOD report. An injunction that prevented BHP from accessing the mining site was granted on AMCOR’s behalf in 2008 before being overturned last year, the Philippine Star reported.

Maldar said that while BHP has never been proven to have broken corruption laws in the Philippines, the company’s experience there and its current troubles show the difficulties facing the extractive industry in emerging markets.

“It really demonstrates that companies need to be really thorough when choosing who they work with, who they go into partnership with, in countries that have records of governance and corruption issues,” she said.