Turning a Blind Eye to Smuggling on Vietnamese Border

Koh Thom district, Kandal province – As a customs official on the Vietnam border, Yim Pheang is not a popular man. About a year ago, he tried to confiscate several barrels of smuggled gasoline and was chased for 2 km by a mob of villagers brandishing sticks and knives. He recalled how teachers and schoolchildren poured out of class to aid in the pursuit.

“They hate customs so much,” he explained resignedly. “People here at the border aren’t afraid of us at all.”

Yim Pheang is well aware that fuel is being smuggled on his watch. He estimated that, every day, thousands of liters are brought through the area for which he is responsible. He also knows where the fuel is coming from, where it’s going and how it gets there.

The problem, Yim Pheang says, is that he is powerless to stop it.

About two hours south of Phnom Penh at the Chrey Thom border checkpoint, where Yim Pheang is chief of customs, a complex network of fuel smuggling has been established. The system relies on the complicity of government authorities and entire village populations, all of whom reap the benefits.

Would-be entrepreneurs take advantage of low gas and diesel prices in Vietnam to turn a profit in Cambodian markets. Border police charge unofficial tolls and look the other way. And even those who do not directly participate gain from the system, paying less for fuel to power their generators and motorbikes.

The illicit trade has been recently targeted by Prime Minister Hun Sen because it cuts deeply into government revenues. Additionally, petroleum companies who pay import taxes feel they are indirectly penalized for working through legitimate channels.

Despite the attention, though, real change seems to be slow in coming.

For several kilometers at the Chrey Thom Checkpoint, the Tonle Bassac river turns from its southerly course and runs east, forming a natural border between Cambodia and Vietnam.

On the Cambodian side, neat rows of crops stretch down to the water and rickety boats litter the riverbank. Small bunches of people sit beneath stilt houses and the shade of trees well back from the water.

Across the river in Vietnam, only 200 meters from Cambodian territory, are the floating fuel stations.

In the space of about a kilometer, there are more than 10 filling stations selling gasoline and diesel at prices that by Cambodian standards are cut-rate.

In December, gasoline at the Vietnam border cost 2,200 riel per liter, compared with 3,000 riel per liter in Phnom Penh. Diesel at the border cost 1,200 riel per liter, compared with 2,800 riel per liter in the capital.

Groups of men and motorbikes loiter on the Cambodian bank, waiting for a moment when the river is free of traffic.

When the time is right, a small boat is sent across the river to any one of the floating filling stations, where Vietnamese attendants have pre-filled fuel containers waiting. Once laden with the 30-liter containers, the boat travels the short distance back to the Cambodian side, the fuel is transferred to motorbikes and the evidence disappears into the countryside.

The whole process takes only a few minutes, and if customs officials are not on the water, there’s nothing they can do to stop it, Yim Pheang explained.

Once they are across the river and away from the shore, the only real obstacle between smugglers and a lucrative market in Phnom Penh are the military and border police, the customs officer said.

“I’d like to stress that, if border police were willing to stop smugglers, not one barrel [of fuel] would be seen,” he emphasized.

But instead, police set up illegal checkpoints and charge impromptu tolls of 500 riel per can of fuel, Yim Pheang said. Fuel couriers may pay fees at 10 to 20 of these checkpoints on a single trip. In return, authorities make sure that the flow of illicit fuel continues unabated, the customs official explained.

“We have found it very difficult to crack down on smugglers because they are protected by border police,” Yim Pheang alleged.

Although the “taxes” cut deeply into the couriers’ profits, they still stand to earn anywhere between $5 to $50 a day if they carry enough fuel, customs officials and couriers said.

According to those in the trade, once the motorbikes reach their destinations, generally in Kandal’s Sa’ang district or somewhere else midway to Phnom Penh, the fuel is unloaded and stored in secret warehouses, waiting only to be packed into cars or pick-up trucks for the last leg of the journey to the capital.

The smugglers’ trail is narrow and pitted. Traffic is not heavy but there is a constant stream of bicycles and motorbikes.

In the space of an hour last month, about 20 over-loaded motorbikes roared northward up the track, while another 20, stacked high with empty fuel containers, bumped south on their way to the border.

The couriers perform an absurd balancing act, stacking containers of fuel high above their heads. Fifteen containers seems to be the norm, but some cram as many as 20 the equivalent of 600 liters of fuel onto aging motorbikes designed for only two people. The trail is marked with tell-tale signs of accidents; swaths of vegetation are stained with spilled gasoline.

Traphang Chrey village is about 20 minutes from the border and couriers slowed there in December as they waited to cross a decaying wooden bridge. Villagers gathered to help guide the motorbikes over the rickety slats. Village Chief Hun Sokha said that though smuggling had become a daily fixture, most of his villagers still made their livings from agriculture.

“I told them not to forget their farms,” he said, explaining that while it may provide large windfalls of cash, smuggling is not a sustainable pastime, and he was often being asked for loans.

But others said the booming black market for fuel had only raised their standard of living. Residents pointed to boats propelled by engines, not oars, and gas-powered pumps in the fields.

Thang Hoeurng, Cheu-Khmao commune chief, tried to explain the dilemma authorities face as they attempt to strike a balance between the law and what seems to benefit the community’s welfare.

“We do not encourage people to smuggle petroleum, but we won’t crack down either,” he said. “We have one eye closed and one eye open.”

A coffee vendor at the village’s ferry dock summed up a common sentiment. “We know it’s illegal, but it’s our only choice,” he said. “There’s no other way to make money.”

Over the past year the market for smugglers has been given a boost by Cambodia’s high fuel prices, which have risen steadily in the tow of global trends. The Finance Ministry has explained that although it would like to subsidize fuel, it does not have the funds.

In addition, the government levies a heavy fuel tax. Customs officials in Kandal province said that, by law, they collect $340 per ton of imported gasoline, and $140 per ton of diesel. In Vietnam, however, fuel is government-subsidized to ensure it remains affordable for Vietnamese citizens. A side effect, of course, is the vibrant cross-border market.

But while smuggling may offer an outlet for cheap gas to certain parts of the country, it takes its toll elsewhere. Companies that import fuel through legitimate channels must sell their gas and diesel at high prices if they want to stay profitable.

Sok Kong, president of Sokimex, Cambodia’s largest petroleum company, said last month that rampant smuggling has forced several Sokimex filling stations in Kompong Cham province to close over the past few years. If the problem continues unabated, more stations will inevitably be undercut and shut down, he said.

The unregulated flow of fuel across the border also robs dollars from the government’s coffers.

Last month, Prime Minister Hun Sen identified smuggling as one of the primary obstacles to increasing the nation’s paltry tax revenues and vowed to step up the battle against illicit imports.

He offered provincial authorities monetary incentives to curb smuggling and said he would personally take a larger part in solving the problem, even if it meant mobilizing the country’s armed forces.
But as of now, fuel smuggling remains a common occurrence.

Em Sitha, deputy director of investigations and smuggling at the custom and excise department, said that there was a brief pause in border activities after the prime minister’s announcement, but the lull did not last long.

“When our team starts to crack down, the activities decline,” he explained. “But when we are busy with other places, the smuggling just starts up again.”

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