T3 Deal of 1998: A Land Swap or Land Swindle?

Two blocks west of Sisowath Quay, at the heart of Phnom Penh’s busy Daun Penh district, there sits an empty dirt lot.                                     Encircled in makeshift metal fencing and crumbling brick walls still painted with murals for old snooker parlors—the site is the picture of urban decay.

Today this oddly undeveloped, per­fectly positioned parcel—across Street 13 from bustling Kandal Market and Wat Ou­na­lom—serves as an unnamed park­ing lot. The sign in front reads simply “night parking.” It holds cars and bikes and motorcycles for about  2,000 riel each.

It also holds secrets.

In fact, few places in Cambodia have a more no­torious past or a more mysterious future.

Until Jan 26, 2000, it was the site of Phnom Penh’s notorious T3 prison. Built in the 19th-century by the French protectorate, the jail was a reviled symbol of colonial oppression. In more recent times it became a dilapidated, squalid compound housing thousands of prisoners in the heart of the capital.

The land is remarkable for another reason: In 1998 it became the government’s first “land swap” with a private company.

Evaluating the outcome of the transaction, now seven years la­t­er, some might say that it was a short-sighted business deal that promoted the pursuit of profit over societal good.

Tim Sokuntha manages the parking lot. She sits each day at a desk beneath the awning of a dilapidated building at the center of the yard. Her companions are a caged black bird and a color TV. Idly, she assigns tickets to customers who park there.

“I work for Oknha Sok Kong. This land belongs to him,” said Tim So­kuntha who has managed the car lot for three years. “If you want any information, talk to the company.”

The company in question is Soki­mex—the petroleum giant that oper­ates as one of Cam­bo­dia’s most diverse and far-reaching enterprises. Among its holdings are the ticketing contract for the Angkor temple complex, ex­tensive development on the Si­ha­nouk­ville coast and a recently inked $20-million ho­tel project on Chroy Changva Pe­nin­sula.

That T3 prison needed to be re­placed is indisputable. Writer Chris­topher Moore, who bribed his way inside in 1993, wrote that  “the heat, the flies and the disease are how I imagine the hell of a 14th-century feudal lord’s dungeon.”

“At the time, building a new pri­son was a necessity,” said Lao Mong Hay, of the Center for So­cial Development.

“There had been quite a number of criticisms of the living conditions. It was a crowded, old prison right at the center of the capital. Then the government was short on money. It is a tradition for our government to sell or swap properties. It has be­come a practice.”

Residents in the area were also concerned at their proximity to the prison.

“I was always afraid that the Khmer Rouge would attack T3,” said Thong Phirun, 57, who has lived next to the land since 1980. “I was also afraid that prisoners might escape. It was a very old, broken building.”

By the mid-1990s T3 had be­come a security concern, an un­sightly scar on a business district and a public relations embarrassment for the government. It was also sitting on a prime piece of  real estate.

In 1996, former Secretary-Gen­eral of the Council of Ministers, Nady Than, described the development of a new prison on the outskirts of the capital as “a top priority for the government.”

It was reported at the time that the government was interested in striking a deal with a company, or group of companies, to fund and build a new prison in exchange for rights to develop the central Phnom Penh plot occupied by T3.

Officials stressed that the bidding process would be public and that studies would be made into the financial backgrounds of all interested parties.

But officials were dismayed at the lack of interest from the private sector and blamed an “unofficial” government policy restricting the height of buildings near the Royal Palace.

Enter Sokimex.

In 1998 the petroleum company traded the Cambodian government the T3 property for a new $2-million penitentiary to be constructed 20 km southwest of Phnom Penh in Dangkao district’s Prey Sar commune.

The T3 land swap was billed by the government as a commitment to urban development and the emergence of a sustainable prison system.

“[The prison deal] was the idea of the government. I didn’t know anything,” Sokimex President Oknha Sok Kong said.

“It happened when they couldn’t find any Malaysian or Singaporean company. So [His] Excellency Sar Kheng told me to help. It was signed by the co-prime ministers.”

But not everyone affected by the move was convinced the process was so transparent. Many ob­servers believe that the trade was the result of a long-standing, behind-the-scenes arrangement between Sokimex exe­cutives and the government.

“Sokimex is close to our prime minister,” Lao Mong Hay said.

“Normally, big business has to be in well with our leaders, especially our prime minister. The government could have held onto the pro­perty then arranged a bidding to get the most out of the land, but this has not been a practice in our country yet.”

At the time of the trade, the T3 property was valued between $2.5 million and $3.5 million. Today in­dustry experts estimate that the land is now worth at least $4.5 million.

Vannsophy Kong, marketing manager for Asia Real Property Co, Ltd, described the land as “the best location in Phnom Penh.”

“It is at the center of the capital, at the middle of the site map,” Vann­sophy Kong said. “It is a good one for investors who could make apartments, hotel or a business hall. Or the investor could keep it the same, waiting for the price to go up [and] get more valuable.”

Though plans for building a hospital were discussed, and discarded, last year, the land remains a sleepy parking garage—albeit a valuable one.

“I am still waiting for the approval to build a 12-story business center,” Sok Kong said. “I am still waiting be­cause the government had al­lowed me only a 3-story building.”

As the T3 land continues to ap­preciate in value, Sokimex is content to wait; its end of the land swap be­coming increasingly beneficial.                         The Cambodian government has no such luxury.

The government’s operational costs for Prey Sar prison are ap­proximately $15,000 per month, ac­cording to Kim Sarin, director of Prey Sar’s CC1 complex, and Kim Choun, director of CC2 prison.

This cost, applied to the length of the government’s ownership of the new Sokimex-built prison, is roughly $750,000.

Designed to house 1,200 inmates in 1999, Prey Sar now detains more than 1,600. The number of inmates has increased by roughly 30 percent each year since 1996, according to a report by rights group Li­cadho.

But because of its remote location, Prey Sar prison does not have a fixed water supply and is not connected to the national power grid.

“Water and corruption are the big problems at Prey Sar,” said Ham Sun Rith, acting coordinator of Licadho’s human rights monitoring office. “Inmates must buy clean water, and those who have no money must use unhealthy water.”

Prison officials, however, maintain that conditions are not so poor.

“There is no problem at the pri­son and the conditions are getting im­proved,” said Samkol Sokhan, deputy director of the Interior Ministry’s Pri­son Department.

“Our water is not so clean be­cause it is from the river, but at least we have a filter. We are contacting with the municipality to connect the wa­ter supply system, but we just don’t know when we will get it,” he said.

Notwithstanding the allegations surrounding the conditions at Prey Sar, the financial results of the 1998 land swap are clear. Sokimex re­ceived extremely valuable land in ex­change for a prison that, though ne­cessary, will require maintenance and monitoring throughout its existence.

Referring to a nearly identical prison land swap between Sokimex and the government that was ap­proved in Siem Reap in 1999, Naly Pilorge, director of Licadho, said it was surprising that a company with no experience in constructing detention cen­ters could obtain two lucrative con­tracts without going through a com­petitive process.

In this case Siem Reap province’s colonial-era prison, which was located next to a famous downtown hotel, was exchanged for the building of a penitentiary on the outskirts of town.

Despite the questionable financial logic of the first land trade in Phnom Penh, the government has subsequently approved many similar exchanges since.

In January the government traded its Phnom Penh Municipal Police headquarters to Phanimex Co Ltd for the building of a new police office far away from its central Phnom Penh location.

Also this year, the Interior Min­istry began talks with the Royal Group, owners of the Cambodian Television Net­work and MobiTel telephone, about an exchange of state-run Preah Monivong Hospital in Phnom Penh for a hospital to be constructed elsewhere.

Since the landmark T3 deal, land swapping has emerged as a commonplace government practice, done in the name of progress and development.

According to opposition lawmaker Son Chhay, however: “In reality, if the government sold state property on the open market it would get 10 times what they were paid.”

“It makes people lose hope and feel very angry with the government,” he said. “It’s a shame we are selling our soul to a private company.”

What analysts and NGO officials wonder is why a government would allow this process of depreciating returns to continue.

“To my knowledge, those [officials] engaged in these deals benefit from the deal,” Lao Mong Hay said. “They would have to have a personal interest.”

Back at the car lot, Tim Sokuntha patiently explains that she will continue to manage the lot for as long as she can.

“I heard that a hospital or something would be built on this land,” she said.

“But I am not sure.”

 

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