French Premier Signals Investor Frustrations

French Prime Minister Francois Fillon arrived here Saturday bearing a stern message for the government as he and French officials said France’s investments in Cambodia were subject to frustration and uncertainty, with agreements often failing to materialize at the last minute.

During a two-day official visit, Mr Fillon and a delegation of business representatives and senior officials met with Cambodian officials including Prime Minister Hun Sen and said investment projects had recently encountered setbacks for unspecified reasons.

One French official said negotiations with some of France’s largest firms had fallen through in recent months as deals were trumped by firms from other countries, such as China and Vietnam.

Speaking at the meeting on Saturday, Pierre Lellouche, secretary of state for foreign trade, said investment projects proposed by French firms during his visit to Cambodia last year had since stalled.

“Over the last eight months since my last visit, I cannot say that I have made or that France has made progress. I personally take responsibility,” said Mr Lellouche. “I came here eight months ago with a series of projects and none of them have advanced and some have even gone backwards.”

Mr Lellouche last visited Cambodia in December when he had talks about a partnership between Cambodia’s Mong Reththy Group and Sucden, a French sugar trader. Talks were also held on France Telecom’s bid for a stake in MobiTel, Cambodia’s largest mobile telephone operator.

“I am sorry. I have to tell you that I wish that we would change…so that all conditions were aligned so that Cambodia can be a success,” he said.

He noted that companies big and small “should be able to find their place in the rules of the game, in a climate that is a climate that secures businesses and investments.”

Listening to Mr Lellouche’s words were representatives from Vinci, one of the world’s largest construction firms and the owner of Cambodia’s airports operator, the oil and gas giant Total, and the European Aeronautic Defense and Space Co, which manufacturers Airbus aircraft.

Sok Chenda, secretary-general of the Counsel for the Development of Cambodia, acknowledged Mr Lellouche’s remarks, though he did not go into details on the specifics of the French investment projects.

“For there to be more business and investment, there must be a good climate,” he said before elaborating on Cambodia’s government-private sector forum, which meets regularly to discuss matters affecting commerce.

Philippe Mangeard, vice president at Ubifrance, a French trade promotion agency, said the problem encountered by French business in Cambodia was “the strong presence of Chinese, Vietnamese or other powers that harm the clarity of business.”

“There is too much business here where we advance, we advance, we advance through negotiations, diplomacy and infrastructure, and at the last minute it fails to work because there is something incomprehensible that happens,” he said. “In fact, its not clear.”

Experts say that while smaller firms are largely able prosper in Cambodia, larger enterprises which come into the country with more at stake face more difficulties in securing their businesses.

“Personally, I have a rather good impression particularly for the small and medium businesses,” said Pily Wong, president of the French-Cambodian Chamber of Commerce. “After, for the very big businesses, each one has their own challenges.”

A senior diplomat at the French Embassy, who spoke on the condition of anonymity as he was not authorized to speak to the media, said one of the deals to have fallen through was with France Telecom, which until recently had said it was in negotiations with the Cambodian conglomerate Royal Group to buy a stake in the mobile operator MobiTel.

Royal Group chairman Kith Meng said yesterday, however, he welcomed the idea of France Telecom investing in MobiTel.

“If the French would be able to be here it’s very good for Cambodia and France,” he said. “With MobiTel, it would be a good thing because it’s the first step.”

He declined to comment on the state of negotiations with France Telecom.

The difficulties that appear to have been experienced by France Telecom are not isolated.

Last year, the government awarded a billion dollar contract to the South Korean firm Lees Aviation & Airport Co to build an airport in Siem Reap where Societe Concessionnaire des Aeroports, which is owned by Vinci, has already been operating the airport for 15 years.

In July 2009, Cambodia announced it had awarded exploration rights to the French oil giant Total for 2,430 square km within the disputed 27,000-square-km “overlapping claims area” in the Gulf of Thailand as well as 22,000 square km of land around the Mekong River bordering Vietnam.

Total, however, revealed a month later that the government has pulled out of what the company believed was a done deal and had asked for numerous changes within the contract even though the Council of Ministers had already approved the exploration rights.

And in 2004, the Finance Ministry abruptly shut down Indochine Insurance, which was being financed by the insurance giant Macif and the French development agency, after a decision was made to privatize the state-run Caminco insurance.

In a speech on Saturday to the French community in Cambodia, French Prime Minister Francois Fillon said he would bring up the matter of an improved business climate when he met Prime Minister Hun Sen.

“I know that the context for the businesses that want to set up here is not that simple. And I will finally be able to talk with Prime Minister Hun Sen about the efforts that should be made by Cambodia to provide a business climate for French businesses that has more incentives, is more transparent and more protective.”

Despite the worries expressed by France, Mr Fillon and his delegation were in Cambodia to make one thing clear: France wants more of its businesses to invest in Cambodia.

On Saturday a deal valued at 500,000 euros, or about $726,000, was signed between Systra, an engineering firm, and City Hall for public transport in Phnom Penh. Mr Fillon also told Prime Minister Hun Sen on Saturday that France would invest 20 million euros, or $29 million next year in a rice-milling factory, said Ouch Borith, secretary of state at the Foreign Ministry.

France his invested less in Cambodia than regional powers like Vietnam and China. But French foreign direct investment here nearly tripled in 2009 to $143 million from $49 million in 2004.

(Additional reporting by Phok Dorn)

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