After months of negotiations, the government and Malaysia’s Ariston company agreed on Friday to abandon a 1995 deal worth $1.8 billion, in which Ariston had committed to invest in 11 major infrastructure and tourism projects in Cambodia.
All state land and properties signed over to Ariston as part of the 10-year-old agreement, with the exception of Ariston’s NagaCorp Casino in Phnom Penh, have now officially reverted back to government control.
Friday’s agreement-annulling ceremony concluded months of negotiations between the private firm and the government, with bouts of criticism by senior government officials, including National Assembly President Prince Norodom Ranariddh, that Ariston’s so-called “Mega Projects” investment outlined in the 1995 agreement had not come to fruition.
Under the original agreement with the government, Ariston had committed to renovating Sihanoukville’s airport; developing resorts on Koh Pos and Koh Takeav (islands); developing a 9-hole golf course at Ochateal beach; building port jetties and facilities for catamaran sail boats; building a power plant; upgrading Sihanoukville’s water supply and telecommunications links; and investing in an industrial area and residential apartments in the municipality.
All of the projects will now be open to public bidding, Commerce Minister Cham Prasidh said.
Friday’s agreement was signed by Ariston Chairman Chen Lip Keong and Cham Prasidh, who described the agreement emerging from the failed investment plan as a positive development for the company and Cambodia.
“This is a win-win strategy,” Cham Prasidh said at the signing ceremony at the Council for Development of Cambodia.
“There are no losses and no profit-making. We get [our property] back because the plans were not successfully implemented because both parties [the government and Ariston] made mistakes,” he said.
Cham Prasidh said that the government failed to consider the difficulties Ariston would have in Sihanoukville where land disputes have plagued land management efforts.
“They can’t invest anything there while sometimes AK guns are pointed at the heads of investors,” he said.
In the last few weeks, Ariston and the government have negotiated over whether Ariston may keep the rights to its Ochateal beachfront property. However, Ministry of Tourism Secretary of State Thong Khon said Sunday that the valuable coastal land is now safely in his ministry’s hands.
Thong Khon also said the land would now be open to public bidding from private investors.
After an earlier signing ceremony to annul the agreement was scrapped in July, some finance ministry officials said that the government balked at releasing Ariston of its investment commitments for fear of losing the leverage needed to obtain back taxes from the Malaysian company. The deal signed Friday, however, involved writing off future Ariston taxes in return for the company dropping any claim for reimbursement for money it had already invested in the 11 projects, said Chea Peng Chheang, secretary of state for the Ministry of Economy and Finance.
The government agreed to give Ariston’s NagaCorp Casino a three-month tax holiday through the end of October as compensation for lost investment money, Chea Peng Chheang said Sunday.
Naga would have owed the government about $3 million in taxes over the next few months—an amount equal to the money the company had invested to construct five out of nine holes for a golf course in Ochateal beach and for the partial renovation of Sihanoukville airport, Chea Peng Chheang said.
“[Ariston] does not owe anything—both sides are happy,” he said, adding any back taxes are taken care of.
The government may nominate the Societe Concessionaire des Aeroports, which runs Phnom Penh International Airport and Siem Reap International Airport, to assume the Sihanoukville airport renovation, but all other projects will be publicly bid, Chea Peng Chheang said.
SCA had said recently that negotiations were underway between the societe and the government over the future of Sihanoukville airport.
At the signing ceremony Friday, Chen Lip Keong said Ariston is still committed to working with the government to find new investment projects in Cambodia.
Earlier this month, NagaCorp spokesman Michael Nen denied reports that Ariston’s failed bid to obtain a listing for the NagaCorp casino on the Singapore stock exchange had left the company without the required capital to complete the 11 Mega Projects. Nen said that Ariston had the capital, but did not find the deals made business sense.
He also said that a powerful individual wanted his company’s Ochateal beach golf course project, but did not elaborate further.
On Sunday, Nen said that neither one side nor the other is to blame for the failure of the projects.
“The speeches at the signing ceremony said that the reason was a lack of resources on the part of the government and lack of resources on our side to make the projects happen, and that was the case,” he said.
“We are very happy with the deal…we are not considering anything at the moment but we look forward to working with the government to find new investments in the future,” Nen said.