How Cambodia’s Secretive Timber Auctions are Fueling the Illegal Logging Trade

In the predawn hours of May 6, a flatbed truck packed with lengths of illegally logged timber sped past a checkpoint in Ratanakkiri province, knocking aside a police car and racing off.

Police later tracked down the truck to a house in Banlung City. In the raid that followed, two men jumped a fence and got away. But they had left behind their illicit haul—5 cubic meters of luxury-grade timber, including more than a ton of especially rare rosewood, coveted for its hard, blood-red grain.

Soldiers surrender luxury rosewood they were attempting to smuggle through Siem Reap province in 2011. (Lay Vesna)
Soldiers surrender luxury rosewood they were attempting to smuggle through Siem Reap province in 2011. (Lay Vesna)

By law, the government will have to put the wood up for public auction, just as it must with all the timber it seizes from illegal loggers across the country, and deposit the proceeds with the state treasury. But there is scant evidence that any real auctions ever happen, and there is nothing public about them.

Government officials charged with running the auctions and signing off on the winning bids refuse to provide a full explanation of the process. Based on what they will say, the government has continued to sell tens of millions of dollars worth of timber at bargain rates to a businessman who recently served as an adviser to Prime Minister Hun Sen. The man heading the committee approving the secretive sales is the prime minister’s personal assistant.

NGOs trying to monitor Cambodia’s thriving illegal logging trade say they have never seen or heard any trace of an actual auction and have been kept completely out of the loop. Environmental protection groups say the practice is prone to abuse, actually helps fuel illegal logging, and should stop. Some suggest sending the wood up in flames.

“When there is more illegal logging, there is more corruption, and [it is] easy for the government to make money,” Pen Bonnar, a senior investigator for rights group Adhoc, said of the auctions. “This means the illegal logging cannot stop.”

The businessman winning the bids lately is timber magnate Try Pheap, a man with land holdings and timber purchase deals across the country—and the frequent subject of illegal logging allegations himself.

Nothing to Hide

In March 2013, when the government auctioned off nearly 5,000 cubic meters of wood seized from illegal loggers and stored up across the country, Mr. Pheap won the lot for $3.4 million.

Government officials and staff for Mr. Pheap say his buying spree has continued.

When the government put up for auction another 6,000 cubic meters of wood in January, Mr. Pheap won the lot again, this time for $1.5 million, said Hout Ponloer, head of planning and finance at the Ministry of Agriculture’s Forestry Administration.

Mr. Ponloer, who showed reporters a record of the sale last month, said the 6,000 cubic meters was all the wood the government had seized from illegal loggers—or those hauling more wood than their transport permits allowed—the previous year.

However, Chey Sith, the head of a freight company who has worked with Mr. Pheap to ship his wares overseas, said Mr. Pheap also won a bid for seized wood in Preah Vihear and Pursat provinces in April at $4 million, and another for seized wood in Ratanakkiri and Stung Treng provinces in May for more than $2 million. They were just waiting for the paperwork to haul it away.

“The national Forestry Administration made us pay more than $2 million after winning the bidding and we have, but we haven’t taken the wood away yet,” he said in May.

Mr. Sith would not say how much wood the money had bought. The Forestry Administration’s Mr. Ponloer said he knew nothing about a timber auction in April or May, and that as far as he knew there had not been an auction since January. Forestry Administration officials in three of the provinces Mr. Sith named declined to comment on anything to do with auctions.

In Stung Treng, Forestry Administration cantonment deputy chief Chean Yudong said his office gathered up and stored whatever illegally shipped or logged wood was seized in the area. But the auctions, he said, were run out of Phnom Penh.

“We collect the wood from illegal transport and loggers and keep it,” he said. “We send a report on how much wood we have when the upper levels need to hold a bid…. The company [that buys the wood] just shows us a permit issued at the national level and we let them take it.”

He declined to say which companies had been issued the permits, whether any of these permits had been issued for Mr. Pheap, or who approved the sales.

Mr. Ponloer, who spoke with reporters at his Phnom Penh office last month, said the winning bids were all approved by a committee set up just for the purpose, the Committee for Evaluating and Bidding for Wood. He showed the reporters a list of committee members. At the top of the list, as chairman, was Eang Sophalleth.

When asked if the committee’s chairman was the same Eang Sophalleth who served as Prime Minister Hun Sen’s personal assistant, Mr. Ponloer snatched the list back from across his desk. He said the other 10 members of the committee were from the ministries of Agriculture and Finance, but declined to name them.

After last year’s national elections, Mr. Sophalleth was made an undersecretary of state at the Ministry of Agriculture and cabinet chief to the minister, Ouk Rabun. But his business card still lists his other job first—“Assistant to Samdech Techo Prime Minister HUN SEN.”

In his office at the ministry, Mr. Sophalleth said his days were occupied with making sure the country managed to export a million tons of rice by the end of next year, an ambitious target the prime minister has made a personal priority.

Asked about his position on the auction committee, Mr. Sophalleth said he did not know he was on it or that it even existed. He said it was often the deputies on these committees who did the real work.

“Sometimes they put your name on a committee and you do not know,” he said.

Mondolkiri provincial police and forestry officials measure pieces of luxury wood seized from a local logging company in March. (Tep Sareth)
Mondolkiri provincial police and forestry officials measure pieces of luxury wood seized from a local logging company in March. (Tep Sareth)

Officials at the ministries of Agriculture and Finance, however, not only confirmed that Mr. Sophalleth was on the committee but said they have seen him chairing the meetings.

“He always joins the meetings,” said Chann Heng, the Agriculture Ministry’s head of administration. “I’ve seen him at the meetings.”

Mr. Heng, whose desk sits in a cramped corner two floors down from Mr. Sophalleth’s office, said meetings of the auction committee were usually held at the Ministry of Agriculture. He said members and chairmen were all handpicked by the ministers of agriculture and finance whenever it came time for an auction.

“The minister chooses the committee for each bidding, and usually it [the chairman] is Eang Sophalleth,” he said.

Mr. Heng said he did not have records of the committee’s work at hand, because the documentation was all stored upstairs in the office of the cabinet chief, Mr. Sophalleth.

Soun Pinkanika, the head of natural resources revenue at the Finance Ministry’s state property department, also sits on the auction committee and says she has also seen Mr. Sophalleth chairing the group’s meetings.

“He is the chairman of the committee for bidding and for discussing the price of forest yield for auction,” she said. “He is the chairman, so he attends the meetings.”

Ms. Pinkanika refused to say who was bidding in or winning the auctions. She said the events were usually advertised a few weeks in advance in the pages of Rasmei Kampuchea, but did not know who would have records (The paper’s advertising director said he could not remember the placement of any such ads). And after four years on the committee, Ms. Pinkanika said she did not know the ground rules for the auctions or whether the rules even existed in writing.

She said the records of all timber auctions were with the Forestry Administration.

Until last year, the auction committee was headed for many years by Ung Sam Ath, a deputy director general at the Forestry Administration. Mr. Sam Ath declined to comment on the auctions and referred all questions to his boss, Forestry Administration director general Chheng Kim Sun.

Mr. Kim Sun said he had “no idea” how much wood the Forestry Administration was auctioning off or how much money the government was making off of the sales.

“I have nothing to hide,” he said by phone, after having just canceled a scheduled meeting with a reporter and refusing to release any records of the auctions or a list of committee members.

“I have a mandate to report to parliament. I have no mandate to talk to you,” he said, and ended the conversation.

Only the Powerful

NGOs that monitor the country’s forest sector say they have all encountered the same secrecy. More than half a dozen NGOs said they have seen no effort by the government to sell off the seized timber openly and competitively.

“They never allow the NGO to attend the auction. [We] want to try, but they never allow,” said Adhoc’s Mr. Bonnar, who now works out of Phnom Penh but spent more than a dozen years in Ratanakkiri, one of the country’s hotbeds of illegal logging.

“Only the powerful people can bid. They take very [good] care about who comes to the bid. It [is] not free,” he said. “Not only me, all the NGOs that work closely with the government, they don’t get the information. They [are] only called when they [authorities] go to catch the illegal loggers…. They want to [show] that they do work.”

Toby Eastoe has been working side by side with the Forestry Administration to stem the illegal logging trade for more than six years, first for Flora and Fauna International and now for Conservation International. He hasn’t once seen any trace or accounting of the auctions, either.

“They just happen, and the wood disappears…. They’re always done pretty quietly,” he said.

“Auctions are part of the timber trade and it’d be nice if it could be monitored,” he added. “We just don’t know about them; we never know when it’s going to happen.”

One man involved in the local timber trade for the past two decades says that’s just the way the government wants it.

The businessman, who spoke on condition of anonymity for fear of retaliation, buys up logs from plantation owners across the country to feed his timber-processing factory.

A businessman like him should be in a prime position to bid in the auctions. But even with a sizable operation and 20 years in the trade, he said he did not dare to participate. He said he dealt with the Forestry Administration on a regular basis and that the auctions were clearly roped off for a select few.

“This one only the special person can do it, not like me,” he said. “This one I cannot do. Once I do, I die. I don’t touch.”

A thnong tree, felled and sawed in Virachey National Park in Ratanakkiri province late last year, is marked by loggers and ready to be hauled out to the Sesan River. (Zsombor Peter/The Cambodia Daily)
A thnong tree, felled and sawed in Virachey National Park in Ratanakkiri province late last year, is marked by loggers and ready to be hauled out to the Sesan River. (Zsombor Peter/The Cambodia Daily)

He liked the thought of buying up lots of luxury-grade timber, selling them off, and making a tidy profit. But he will not even risk asking officials how he might get involved.

“This information I don’t need to gather, because I know it’s danger,” he said. “Luxury wood I don’t involve. If I involve, my reputation gets in trouble.”

For those who do get to take part, tens of millions of dollars stand to be made.

When Mr. Pheap won the auction in January for $1.5 million, he paid an average of $250 per cubic meter.

Mr. Pheap’s staff won’t say how much they sell the wood for, or to whom. But the Chinese retail website Alibaba is full of traders hawking luxury wood from Cambodia. Some offer a cubic meter of rosewood for anywhere from $7,500 to $35,000.

But with rosewood stocks dwindling fast, most of the illegally logged wood authorities are seizing lately is the less valuable—but still luxury grade—thnong.

Alibaba has a cubic meter of thnong from Cambodia going for $3,850. At that rate, 6,000 cubic meters of thnong alone could fetch Mr. Pheap $23.1 million, more than 15 times what he paid for the haul he won in January.

Mr. Bonnar, at Adhoc, said even those prices may be modest. He has spoken with loggers who say a cubic meter of thnong in Vietnam can go for $10,000 or more.

With Mr. Pheap paying only a few hundred dollars per cubic meter, he said, “I think it’s very low, much lower than the market price.”

The timber auctions have been good to Mr. Pheap. But Mr. Pheap —who served as an adviser to Prime Minister Hun Sen from 2009 to 2010—has also been good to the ruling CPP.

In May 2013, Mr. Pheap donated $100,000 to the Cambodian Red Cross, an organization headed by Mr. Hun Sen’s wife, Bun Rany, who has used Red Cross events to stump for the CPP and slam the opposition. The donation came just two months before last year’s national elections.

In 2011, Mr. Pheap footed the $30,000 bill for a CPP party office in Preah Vihear province. He donated another $100,000 for a new head office for the Boeng Per Wildlife Sanctuary, also in Preah Vihear, a pristine wilderness inside of which the Environment Ministry had just granted him 10,000 hectares for a rubber plantation.

Mr. Pheap owns at least two other plantations, both in the remote eastern reaches of Virachey National Park in Ratanakkiri. In February 2013, the Agriculture Ministry wrote to Mr. Kim Sun at the Forestry Administration to let him know that Mr. Pheap had just been granted exclusive rights to buy up all the wood on plantations like his across the province. As with the auctions, there was no sign that Mr. Pheap had any competition for the deal.

Let It Burn

NGOs blame most of the deforestation in the country on these plantations, whose owners clear-cut thousands of hectares of healthy forest at a time. Using satellite data and regular reports from farmers who live around the plantation, the groups say the owners are logging well outside of bounds as well. Both are forbidden by law. Staff for Mr. Pheap admit they have no way of telling whether the timber the company is buying off the plantations in Ratanakkiri is being logged legally, fueling speculation among environmental protection groups that the arrangement is covering up a massive laundering operation.

But NGOs say the timber auctions are driving forest loss, too, letting buyers essentially launder illegally logged timber through the system, at the same time giving the government a multimillion-dollar reason not to take stronger action against the loggers who make the auctions possible.

Global Witness, a U.K.-based environmental transparency group that has done extensive work investigating government involvement in Cambodia’s illegal logging rings, says the auctions should stop.

“In almost every country in which Global Witness works on forest issues, most recently Liberia, we have come across seized timber being auctioned off,” said Josie Cohen, a land campaigner for the group. “This is usually just a scam to launder illegal timber into the market with the original illegal logger, who is usually in league with the authorities, profiting from the auction. This system in effect legalizes illegal timber and therefore further fuels logging.

“In Cameroon and DRC [Democratic Republic of Congo], for example, the money raised from auctions goes to the Forest Ministry plus the seizing officer gets to keep 10 percent of the funds, hence the system provides huge incentive to provide timber for auctioning.”

Better to burn the wood and take the incentives away, she said.

“In order to create an effective deterrent against illegal logging, the ‘loot’ has to be removed from the system and the market. Burning timber has therefore proved to be an effective deterrent against illegal logging.”

In Cambodia, some villagers are doing just that. Besieged by illegal loggers and rogue plantations, and having lost faith in the local rangers and police who should be protecting their forests, more and more of them are mounting community patrols of their forests and setting fire to caches of illegally logged timber where they find them.

Villagers around central Cambodia’s Prey Long Forest have been burning timber for the past few years. Others in Mondolkiri announced last month that they would start doing the same.

The Environmental Investigation Agency (EIA), another U.K.-based environmental rights group, says the auctions are letting Cambodia and its neighbors sidestep their own legal protections for some of the rarest and priciest of their tree species.

Cambodia’s 2002 Forestry Law prohibits the harvesting of rare tree species like rosewood. Last year, the country joined 176 others in giving Siamese rosewood in particular Appendix II protection under the Convention on International Trade in Endangered Species of Wild Fauna and Flora. The government now has to issue a special export license anytime someone wants to trade the timber abroad.

But even then, any semi-processed rosewood gets an exemption from the rules under the convention’s Annotation 5. EIA says this exemption, along with government auctions, leaves the supply of illegally logged rosewood alive and well.

In a recent report, EIA blames an unhealthy appetite in China for high-end wood furniture—and countries like Cambodia that are happy to feed it—for driving rosewood to the brink of extinction across the Mekong region.

In the forests of northern Cambodia, rosewood trees are now so rare—and valuable—that impoverished villagers paid by local middlemen risk their lives to sneak into Thailand for even a few leftover stumps. Every year, dozens of them are shot dead by Thai soldiers.

Any of the wood they bring back that gets seized and booked ends up in the auctions. EIA says this situation, and now the exemption for semi-processed rosewood in the Endangered Species Convention, helps keep the illegal loggers going.

A team of undercover investigators EIA sent to Laos earlier this year found traders misusing the paperwork from government auctions to export up to five times the amount of illegally logged wood they officially bought, mixing the auctioned timber with their own hidden stores. In March, another trader in Shenzhen, China, showed the investigators a re-export permit issued by Vietnam for rosewood coming from Cambodia, rosewood the Cambodian government claims it never let out of the country.

“Despite domestic laws prohibiting harvest and trade, Annotation 5 provides a perverse veneer of legitimacy to ongoing trade in semi-processed rosewood products made with illegal timber,” the group says.

“The Annotation also allows countries that seize illegal timber and auction it in local markets to continue doing so. Laos, Vietnam and Cambodia regularly conduct such auctions. This timber is then exported to global markets as finished products outside the scope of [the convention]. EIA’s investigations have shown that such auctions are clearly corrupted and paperwork generated by them is then used to launder far larger volumes of equally illegal timber into international markets.”

Despite its harvesting bans and convention restrictions, Cambodia has been exporting ever more high-grade wood to China, according to U.N. trade data analyzed by the EIA. Of the 60,000 cubic meters Cambodia officially exported to China from 2000 to 2013, a third was shipped out last year alone.

EIA says the exemption for semi-processed wood should be lifted and the auctions in Cambodia and its neighbors stopped.

What little praise EIA offers the Mekong countries for trying to stem illegal logging it gives to Thailand, which it says has for the most part put a stop to timber auctions.

A Legal Business?

Mr. Sith, who coordinated Mr. Pheap’s international freight shipments until last month, insisted that Mr. Pheap was strictly abiding by all the relevant rules and regulations.

Last year, researchers at the University of Maryland looking at the latest satellite data ranked the countries with the fastest rates of deforestation. Cambodia ranked fifth in the world.

Across the country’s northeast, teams of men caught logging illegally have told villagers, rights workers, and even reporters that they work for Mr. Pheap. On a visit to Virachey National Park in December last year, reporters saw illegal loggers hard at work—sawing down the rarest trees, hauling them out of the forest, floating them across the river, loading them onto waiting trucks and driving them to a local depot. The man paying for it all, the loggers said, was Mr. Pheap.

But Mr. Sith argued that most of the world’s “chopping” was happening elsewhere.

“Who chops? The Try Pheap Company never chops, but we have to clear the land,” he said. “Who is the big chopper? Canada, Papua New Guinea, USA. Why don’t you ask them?”

Mr. Sith rejected claims that the company was colluding with illegal loggers, that its deal with the Agriculture Ministry in Ratanakkiri was letting plantations launder wood, or that the auctions were doing the forests any harm.

“Try Pheap does not motivate the people to chop. We just go to the auction,” he said.

Asked for details and figures on the company’s bids and exports, Mr. Sith said he was out of time. He said he could not meet again because the rainy season had arrived and he would be tied up with work on his private farm.

He suggested calling Sam Phany, the company’s chief of administration. Mr. Phany declined to comment. Pheang Chetra, Mr. Pheap’s head of public relations, also declined to comment, and refused to put reporters in touch with the company’s spokesman.

“I think nothing is secret, but we have our own regulations,” Mr. Sith said. “So please eliminate your doubt. We have to be a legal business.”

(Additional reporting by Phann Ana)

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