Bad boys, bad boys, whatcha gonna do when the cops catch you?

Rith (name changed), an elderly 65-year-old gentleman, was afflicted by a syndrome that no longer allowed him to drive a car himself. It had gotten so bad that at one point he had an attack of dizziness while driving and had to stop in the middle of the street. He was completely oblivious to the fact that just at that very moment the PM’s motorcade was coming down that street. The bodyguard details immediately suspected some sinister plot and approached the stopped car with drawn guns. Finding no plot to kill the PM, they swiftly moved the car to the curb and the motorcade proceeded. This happened a little over two years ago.

Since his condition didn’t improve, he decided to hire a driver. He owned one of those Mercedes S320ies at the time. The driver seemingly was a professional who had worked for an Okhna as driver/bodyguard. All these two years everything went well. There were no problems with the man, and obviously he thought that when Rith changed his car to a Lexus LX470 that improved his stature as well. (The Mercedes was too prone to breakdowns what with road conditions in Cambodia.)

A month or so ago, Rith decided to sell his Lexus as he just didn’t see why he would have to spend more than $25 a day on gas alone, and that was for driving in the city only. I occasionally used that Lexus with driver myself to drive into the countryside with business associates and easily spent $200 on gas. He decided to go for a smaller more reasonable car and got a 2007, you guessed it, Camry. Mind you, this car is not bad at all and it is the car of choice in Cambodia. At $27,000 it was a bit on the expensive side, but what can you do as long as the Cambodian government thinks high import duties and luxury taxes of a cumulative 115.325% are appropriate.

The driver, though, seemed to think that was beneath him and quit his job claiming he was busy with his family’s farm in the countryside. Rith hired a new driver but being a suspicious person didn’t quite trust him. In the end, he called the original driver and asked him back. After all, he had been reliable and trustworthy the past two years.

So one day recently he sent him to one of those Cambodian car washes. When the driver didn’t come back after some 40 minutes, he tried to call him but couldn’t get through. The phone was turned off. Now being the suspicious man that he is he had had GPS tracking system installed in all his cars; so the Camry had one too. He quickly checked it on his laptop and to his surprise found that the car was nowhere near on its way to him but was going in the direction of the Ministry of the Interior. The next thought was, ‘That guy is stealing my car.’ He called someone of his family who picked him up, followed the car, and drove him there immediately. He arrived just at the moment when a police officer was about to hand over money for the purchase of the car.

‘What are you doing with my car here?’ To which the police officer replied that the driver was selling it to him for $12,000. ‘Hey, this is my car.’ He produced his registration and ID-card. They promptly arrested the driver.

Now here is where the whole story gets a little murky. The police obviously wanted to pay in Khmer currency. So $12,000 is about KHR 48,000,000 and that’s quite a bundle. On top of it, it was fake money.

Rith was wondering whether the police had entrapped the guy by posing as potential buyers. Because there must be something wrong if somebody wants to sell a 2007 Camry for a paltry $12,000 in Cambodia. On the other hand, the police might sure have a way of producing a new set of ownership documents with which they could re-sell the car either here or ship it to Vietnam. From what I hear smuggling cars into Vietnam is still going on as unabated as in the 1990ies. There is no way of knowing what was behind it, or how the driver just happened to contact or know this police officer.

What now followed was the typical Cambodian dance. The police said if you want to bring charges, we need to keep the car. However, if you want to take it home right now, you need to compensate us for time and effort with $3,000. Whaaat???

Rith has family members working at the Ministry of Interior. Infuriated, he told them the story but they said, ‘Uncle Rith, calm down, bargain it down to $1,000, and be done with it. Because if you don’t they will keep the car as evidence, as they have every right, file formal charges against the driver, and it might take weeks before you see that car again.’ At his age, he had seen a lot and knew, of course, that was the way things operate in Cambodia. So he reluctantly started negotiating and they arrived at $1,500 in fees. He declined to file charges against the driver because that would exactly have entailed that interminable legal process.

So, bad boys, even when the police catch you that doesn’t mean you go to jail (although the driver spent one night in police custody). By good fortune or lucky circumstances, you just might go free despite the (attempted) crime.

The next day, when Rith picked up his car and the driver was released, the driver, his wife, and his child prostrated themselves before him and asked for forgiveness. Will he have learned a lesson?

When I heard this story I was flabbergasted. The driver knew the car had a GPS system installed. Although he probably thought that Rith was a frail old man now who wasn’t really agile both mentally and physically any more, he also knew that Rith was not without connections in the higher government hierarchy. Nevertheless, he tried to steal that car. Perhaps he was desperate for money, or in his mind the opportunity was too good to pass up. We won’t know. As for the police, if you aren’t a really big wheel this is how they work. And a big wheel’s driver probably won’t dare steal his car anyway, now will he?

The Proposed Budget Boycott

After some rather quiet time, the SRP is back in the news. I have been wondering about this, the more so as Sam Rainsy made an announcement in Paris a while back, in which he accused Bun Rany and Hun Sen of murder. Back in 1999, a very popular singer/actress was gunned down in broad daylight. Hun Sen was reputedly having an affair with her and, according to L’Express - a French newsmagazine, his jealous wife hired killers to put an end to the affair. Hun Sen was supposedly complicit in this. It should be noted, however, that there was never any concrete evidence. L’Express published allegations and assumptions, but could not provide any hard proof besides a diary. This latest accusation by Sam Rainsy did not make the headlines in Cambodia. Let sleeping dogs lie?

But now Sam Rainsy made another announcement that drew the PM’s ire. The SRP would boycott the budget deliberations and not even vote on it. It certainly is their right to boycott or not vote on it, but perhaps they should take another lesson in civics. They claim to be the only democratic party in Cambodia but seem to be rather ignorant of the role of an opposition party.

Last time I looked in other truly democratic countries, an opposition party’s function is to make opposite views heard in the forum of a parliament and in the media, put forth alternative solutions and resolutions, introduce laws they think are appropriate, and then vote on it. If they can’t get a majority to pass it, that’s too bad, but those are the rules by which parliaments work. Of course, if you only have 24 seats out of 120 there is practically no chance that you will ever get a majority for any proposal you introduce. But this is also a democratic principle. I can understand that they are pretty frustrated with all this, though.

Again, I grew up and lived in democratic countries, and had intensive civics lessons in school. If a party doesn’t like what’s going to be introduced as a law or in this case the budget, you vote against it. You do not show your displeasure by boycotting it in parliament. This is not a fundamentally democratic action. Either you are an MP or you should just not run or resign. SR wants to make the European parliament aware of the situation in Cambodia, reiterating the government’s mismanagement of funds, the prevailing corruption, and the generally dismal state of affairs in Cambodia. But at the same time, this party has not formulated one viable alternative plan or concept to bring about change in Cambodia. Time and again, they point at corruption at all levels of government as the greatest woe afflicting this country. No doubt it is prevalent, widespread, and probably unabated, never mind the office of the Anti Corruption Unit. Their work is the proverbial drop in the bucket. But boycotting parliament will not stamp out corruption, and trust me, the Europeans along with the U. S. definitely have different worries than looking at Cambodia to see whether the opposition party plays its democratic role or just flails its arms to make wind.

What I don’t understand is that this would provoke a constitutional crisis. Seven SRP MPs have resigned or will resign their seat under a party rotation policy. Parties in other countries have tried that too only to find out that it is not really workable. Given the SRP’s role in Cambodia, it is probably negligent in the great scheme of things. But those seats will be filled with party members from a list. Even if there were to resign at the time of the passage of the national budget, they CPP would still have their majority to pass it. The Assembly still has 120 seats, even if some seats are vacant. At the constituting session of this legislature, it had 120 elected members. If a party does not fill the seat it won at the election, it will just remain vacant.

It also appears somewhat nebulous how Sam Rainsy interprets the constitution. I believe he needs to take a few more civics lessons or at least consult with a competent constitutional attorney before making such, in essence, ridiculous announcements. Of course, thin-skinned Hun Sen as so oftern lost it and lashed out against him before analyzing the situation. It would not have been worth mentioning at all, just like the accusations he leveled at Hun Sen and his wife in Paris. These accusations sealed SR’s political fate in Cambodia once and for all. He is out of it, whether he realizes it or not. He seems to keep his head in the clouds not seeing that besides irritating Hun Sen from time to time, he is no longer a factor in Cambodian politics. Maybe that is why he comes forward with those half-baked pronouncements. Hasn’t he read the U. S. embassy cables dealing with him? You don’t have to be pro-CPP to be against Sam Rainsy and some of his party stalwarts. It is time that the good members leave the party and form their own new party that will have appeal to a broader base, similar to the SRP in its early days. It is time for Md. Mu Sochua to seriously think about this. Her talents are pretty much lost in that party. I am sure there are other intellectuals, emphasis on intellectual not business interests, that would find a home in that new party.

The Euro crisis and Rubber Prices

Anybody reading world news, especially on the economy, hasn’t seen one day go by without new disturbing headlines about the fate of the Euro, the Euro zone, and the consequences for the world economy.

This has been dubbed the second financial crisis; the first being the bursting of the real estate bubble in the U. S. (As it happens I was a victim of that bust as real estate prices plummeted to a level below the actual value, which came at a time when I was selling my house in Florida. Instead of pocketing a nice profit, I had to make do with just a fraction of that.) Anyway, the second financial crisis, although in part directly connected to the real estate bubble in the U. S., has been brought on by governments in the Euro zone overspending, which led to some countries having more debt than their GDP, e. g. Ireland, Portugal, Spain, Italy, and the most notorious of them all – Greece. Ireland’s banks were heavily involved in U. S. real estate. Some of them had to be bailed out by the government. Portugal and Spain had their own real estate bubble that could only burst as well, as all bubbles eventually will. Italy doesn’t know how to manage money to begin with – how can a country that has had 50 governments in 50 years ever properly administer itself? Greece, with no notable industry besides tourism, an overblown bureaucracy, a non-existent tax collection system, no administration to speak of, and where the public sector comprises 80% of the economy, submitted to the seduction of easy money and loaned money left and right to maintain an opulent life-style, as it would be termed for private individuals.

All countries have in common that their governments issued bonds to finance the big holes that had opened up in their economies - Ireland, Portugal, and Spain for bailing out their banks and Italy, which so far has not needed any help yet, for overspending in the public sector. I don’t want to go into any more detail here. If interested you can always find more in the big international newspapers – both off and online.

Now what does all that have to do with rubber prices? Well, what you read in the papers is that the ‘market’, in other words the ‘speculators’, immediately reacts to any news. Over many years, I have been following this with dismay. It had come to such a point that when there was even the slightest hint of a problem in the Middle East oil prices would jump up within a minute. One could even think that the news when some Middle Eastern potentate so much as broke wind the markets would react. It could be the Middle East, it could be China’s impending cooling of its economy; the reasons are as manifold as there are imaginative financial instruments.

Now for the past 18 months it has been the crisis of the Euro zone. Economists fear that when the rich European nations, mainly Germany and France, bail out their ‘poorer’ co-members, they would overextend themselves and cause the failure of their banks with catastrophic consequences not only for their economies but also for the world economy altogether. Adding fuel to the fire are those private, for profit rating agencies that feel called upon to judge the value of bonds, countries, companies, practically everything. They even downgraded the U. S. debt. The U. S., despite its economic woes, still is the world’s largest economy and without doubt will eventually pull out of its recession and its deep debts, however long it takes. Anybody who thinks that they won’t be able to redeem their treasury bills must live on another planet. So what is that downgrading supposed to mean and to achieve – perhaps maximizing profits for short-sellers? Promptly, the announcement had an instantaneous effect on the markets. The Dow Jones plunged 635 points. Ironically, treasury bills rose the next day – now who can understand that? One shouldn’t forget that those same rating agencies had given toxic real estate derivatives an AAA rating until the whole thing went bust.

Similarly, any news that comes out of Europe regarding the bailout of Greece has an instantaneous effect on the markets. Reading the news about this is like a roller-coaster ride. One day it’s more or less positive, one day is negative, with the negative outweighing the good news. It seems as though journalists thrive on painting bleak pictures.

Initially, all this had virtually no effect on rubber prices but when the Greek problem came up, they eventually took their hit too. In 2010, the strong Chinese economy overshadowed the Euro crisis. China is the largest buyer of natural rubber. Rubber prices remained at an all-time, and somewhat uncomfortable, high. This lasted until April/May of 2011 when Greece’s debt was finally reduced to junk status by the rating agencies. Paired with the fear of a weakening of European and U. S. economies, which would lead to a lowering of Chinese industrial output and reduced purchases of raw materials, this news started the slow but steady decline of rubber prices. This graph aptly illustrates this fact. These prices are for processed crepe rubber on the Malaysian Rubber Exchange; the Cambodian prices follow the exchange.

Month Price/100kg CSK5L

Jan 503.13
Feb 559.70
Mar 539.82
Apr 557.86
May 519.51
Jun 505.83
Jul 485.49
Aug 474.17
Sep 452.31
Oct 427.09

Prices for latex sold in Cambodia to processing plants follow a similar pattern as this graph shows, although there was a short recovery period in June when Euro zone ministers committed to a bailout package for Greece. Prices are $/kg.

Let’s see what this does in dollars and cents for the operators of rubber plantations in Cambodia. 40% of all plantations are smallholders, that is, they range from 5 to 50 ha. Let’s use a 30 ha plantation and an average production of 150 kg of dry latex per ha per month, or 450 kg for 30 ha.

Since February is the so-called wintering period on a plantation, we will start with April of 2011. The owner could record gross revenues for each month until October of this year.

April $ 17,313
May $ 15,255
June $ 17,454
July $ 16,098
August $ 15,606
September $ 15,686
October $ 13,185.

Compared to April the owner had approximately $4,300 less in his pocket in October; this translates into 25%, and that’s a lot of money in anybody’s book. Reason: the news had become extremely volatile in October; some even feared the collapse of the Euro zone. In previous months, the average price levels were helped by intermittent better news, which caused upticks in prices. A major positive decision was reached this week and so far, rubber prices hover a little above their lowest level in 2011. Of course, commodity prices are very high to begin with and an adjustment might be called for, but then markets don’t always react logically.

To those who think this is still a good income in a country like Cambodia I can say they are right but should not forget that those are gross revenues; operating expenses are considerable what with expensive fertilizers, fungicides, manpower, machinery, etc. Additionally, in order to get to this revenue level the owner needs to invest first in land, land preparation, then in seedlings, management, etc. Until trees produce good amounts of latex, the owner has to wait roughly 10 years. Although production usually starts after 6 years, yields are not in the higher range until year 10. So it’s not just sitting back and collecting money.

If you follow a certain reasoning you could say that Greece and the markets not only hold the European governments hostage but the smallholders in Cambodia too, not to mention the huge investment plantations. Greece with its unconscionable policies, and the speculators with their insatiable greed make their actions felt throughout the world. The rubber plantations are but a small part in the overall picture.

It is ironic that a country with a population of roughly 10 million people could get the large European economies (Germany with a population of about 82 million, France with 56 million) into a severe recession, not to mention the reverberations in the rest of the world. It is equally incomprehensible that the markets, say speculators, can determine a government’s policies. Mind you, this is a sector of the economy that does nothing but shuffle papers or hit keys on a computer keyboard and with that produce profits (or losses) for investors. It’s called investment banking. Most of the large banks are engaged in investment banking. They accept huge risks and but when they incur huge losses they all of a sudden become too big to fail and need to be bailed out by the government, in other words, taxpayers’ money. It is an old axiom that only money makes money, consequently if you have no money you cannot invest, but if you have money and you can invest and make a tidy profit, you should also be ready take a loss.

When I went to business school, I learned how to assess the value of a company based on its assets, liabilities, productivity, market position, long-term viability, earnings and earnings potential, etc. Those things have all gone out the window. The dot com bubble showed it, the real estate bubble showed it, and any subsequent bubble will show it as well. There is nothing wrong with trading in stocks, bonds, and such, but when it comes to buying and selling stocks, you don’t even have with borrowed money, a line must be drawn. Just look up the term ‘hedge funds’ and you will get an idea who dominates the financial world and who can ruin many an existence.

If you are interested in following the timeline of the Euro crisis, go to http://www.bbc.co.uk/news/business-13856580

Get out of Here

The SRP expelled two of their parliamentarians, one MP and one Senator, from their ranks for disloyalty. The affected politicians claimed they were kicked out to make room for some relatives of SRP higher-ups, otherwise known as nepotism. Critics of the party have accused the SRP of nepotism before, leveled even at their revered leader Sam Rainsy.

Claims and counter-claims, accusations and denials; these are the hallmarks of political life everywhere. So this incident is not really noteworthy for its happening; but I believe what is noteworthy is the fact that the SRP has no qualms about expelling members that it feels are no longer of value to the party. Also noteworthy is that, according to press reports, the party leadership made the decision. I am not sure what kind of inner-party procedures are set down in their by-laws but it reeks of an arbitrary decision – and this from a party that always portrays itself as the truly democratic political party in Cambodia.

The expelled ex-members indicated they would bring a lawsuit against the party. The party spokesman stated in response that the courts do not have jurisdiction over intra-party affairs. This spokesman is an MP himself and one must scratch one’s head and possibly raise an eyebrow or two at such pronouncements. An MP who is not cognizant of the fact that courts always have jurisdiction over disputes, no matter whom or what it involves, should probably seek employment elsewhere. You can bring a lawsuit against anybody if it is based on existing law. Of course, the outcome of that lawsuit is another question altogether.

A sort of funny story….

.....or maybe not. Petty crime is just as widespread in Cambodia as everywhere else. It starts with people stealing the make and type emblems off cars – the hybrid emblems are especially popular these days - and goes all the way to burglaries.

I live in a gated neighborhood in Phnom Penh with guards at three gates. They patrol the neighborhood at irregular intervals, both day and night. The community is walled in; barbed wire is mounted all around. Sometimes I wonder whether these guards would really be any help if you needed them. They don’t let just anybody in and ask motodups and tuk-tuks their business. But if you drive a car nobody will stop you. If the car is big enough they will give you a snappy salute.

Security is supposed to be good in those neighborhoods; at least my wife used to believe so. One recent night I was awoken by some loud noise. Being half asleep I couldn’t really make out what this was – a party, an argument, or what?

The next day we learned that a burglar had broken into a house nearby. On making his exit he encountered the 14-year-old daughter who returned to her room from a bathroom downstairs. She screamed her lungs out, grabbed the thief by his sleeve and tried to keep him from escaping. But she was no match. The burglar wrestled free and escaped over the balcony.

The people in the house are an American family. Now here is the baffling thing. They had been burglarized 4 times before. Each time the burglar entered the house through an open balcony door on the third (or some say second) floor. Nimble people can easily climb up to those balconies. Most Cambodian houses feature iron bars in the windows. They are an ugly sight but an absolute must as any builder will tell you. But all those bars won’t help if the door is left open.

The parents realized they had been burlarized after each incident – obviously money was missing - but failed to tell their kids so as not to frighten them - not altogether a smart thought. Consequently the kids didn’t feel they needed to observe the simplest form of safety precaution by keeping their doors closed, never mind the floor. Their house is located on the outer perimeter. The wall runs about one meter behind their house. The two adjoining houses are empty. On the outside of wall there is dirt trail – very convenient for any would-be burglars; equally convenient is that there is a gap in the barbed wire between the properties. They can just stroll along that dirt path and look who left the door open. I can only presume this is exactly what the thief in this case did. Having gotten lucky one time he just thought, ‘Well maybe I’ll get lucky with some other careless people.” He may have been surprised himself that he could break into the same house 5 times, assuming it was the same man. How naïve or stupid can that American family be?

The take each time: between $500 and $1,000.

After that incident, we heard that burglaries are not that uncommon in this community. People told about several of them; in one case the booty was a cool $100,000. Ah, these Cambodian people. They just love to keep their money at home, like there aren’t any banks in the country.

If I have more than $100 in my pocket, that is a lot. Who keeps money at home? Even if you want to do a large transaction, you can always go to the bank first thing in the morning. Unfortunately, checks are still a rarity in Cambodia’s business circles.

A house like this; easy to scale, right?