05BANGKOK3144 THAILAND: ARF MISSILE DEFENSE CONFERENCE; EAS

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 BANGKOK 003144

 

SIPDIS

 

DEPARTMENT FOR EAP, EAP/RSP, EAP/BCLTV, AC

PACOM FOR FPA (HUSO)

OSD/ISA (POWERS)

 

E.O. 12958: N/A

TAGS: PARM PREL TH ASEAN

SUBJECT: THAILAND: ARF MISSILE DEFENSE CONFERENCE; EAS

 

REF: BANGKOK 2600

 

¶1. (SBU) SUMMARY: Poloffs met with Thai Foreign Ministry

(MFA) officials to discuss planning details and next steps

for the Missile Defense Conference which the Royal Thai

Government (RTG) has agreed to co-host with the U.S. October

6-7 in Bangkok. The Thais expect to achieve consensus within

ASEAN on the proposed conference prior to the ASEAN Regional

Forum (ARF) Senior Officials Meeting (SOM) in Vientiane. The

Thai requested close coordination with the U.S. Delegation to

the ARF SOM prior to any U.S. presentation on the Missile

Defense Conference. In preparation for the Missile Defense

Conference, the RTG request that the U.S. send a team of

experts to Bangkok to brief their intra-agency team on

technical aspects of what will be discussed. They also want

close coordination with the U.S. on developing a

“deliverable” from the conference. On the separate issue of

the East Asia Summit (EAS), the MFA officials indicated that

they expect India, Australia, and New Zealand to be invited

to the December summit as part of an “inclusive” EAS. END

SUMMARY

 

YES TO BANGKOK MISSILE DEFENSE CONFERENCE: OCTOBER 6-7

 

¶2. (SBU) On May 10, Poloffs met with several Thai MFA

officers from the ASEAN Affairs Division to discuss the

proposed U.S./Thai ARF Missile Defense Conference, and other

regional issues. ASEAN Division Counselor Dr. Suriya

Chindawongse led the Thai side. Suriya agreed that October 6

and 7 would be the best dates for the proposed co-hosted

conference. The RTG has checked the ASEAN calendar, and

those dates do not interfere with other ASEAN events. He

reiterated that Bangkok would be the preferred venue.

 

PRESENTING THE CONFERENCE AT THE ARF SOM: “PLEASE COORDINATE”

 

¶3. (SBU) Suriya said that he expected to have ASEAN

endorsement for the Missile Defense Conference prior to the

ARF SOM in Vientiane on May 20. Suriya said that Thai MFA

Permanent Secretary Krit Garnjana-Goonchorn — who will lead

the Thai delegation to the SOM — will give a

“pre-presentation” on the proposed Missile Defense Conference

to ASEAN members on May 18. To date, Suriya has not heard

any complaints or concerns from other ASEAN members about the

Missile Defense Conference. While he is optimistic that

ASEAN members will not have any serious late-breaking

reservations about the conference, he noted that “one or two”

countries at the ARF SOM (which he would not name) might

raise some concerns. He advised that the U.S. delegation

should be prepared to answer questions in Vientiane.

 

¶4. (SBU) Suriya asked how the U.S. delegation would raise

the issue of the Missile Defense Conference at the SOM.

Would the U.S. would present an updated version of the

concept paper presented in Potsdam? Suriya recommended that

the U.S. give a broad presentation, outlining the agenda as

well as basic logistical information (dates, location).

Following the U.S. presentation, the Thai delegation will

immediately offer support for the U.S. proposals. Suriya

requested that the U.S. delegation coordinate its

presentation with the Thai ahead of time.

 

PREPARING FOR THE CONFERENCE: U.S. EXPERTS BRIEF IN BANGKOK

 

¶5. (SBU) Following the ARF SOM, the RTG will have an

intra-agency meeting to discuss the Missile Defense

Conference and determine responsibilities within the Thai

government. As of now, it has not been established whether

MFA or MOD will have the lead within the Thai bureaucracy.

Suriya said that the RTG will request a technical briefing on

the draft agenda from U.S. arms-control experts. The RTG

prefers to have the briefing in Bangkok in order to be able

to include the widest audience possible from within the Thai

government. In an aside, Suriya said the briefing would be

an important factor in bringing the Thai military on board,

and that MOD’s participation will be a crucial factor in the

Conference’s success.

 

¶6. (SBU) The Thais said they appreciated that Assistant

Secretary of State for Arms Control Rademaker would lead the

 

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U.S. delegation, and said they would designate an appropriate

senior official to work with him as co-chair. They expressed

appreciation for the U.S. offer to cover the costs of the

conference, but said that, as “co-hosts” the RTG would host a

reception during the event.

 

¶7. (SBU) Suriya asked that the U.S. think about what kind

of “deliverable” should be expected from the Missile Defense

Conference. The Thai expressed concern that an overly

ambitious outcome document might bog the meeting down. They

suggested that an ARF Statement, issued at the ministerial,

as a possibility; at a minimum, they expect the U.S. and

Thailand to issue a summary report as co-chairs.

 

EAS: THAILAND WANTS, EXPECTS, “INCLUSIVE” SUMMIT

 

¶8. (SBU) Turning to the East Asia Summit, Suriya commented

that the RTG is following the consensus established at the

Cebu ministerial. Suriya stressed that from the beginning,

Thailand had favored an “inclusive” EAS (reftel), and is

confident that Australia, India, and New Zealand will be able

to participate at the December EAS in Kuala Lumpur. Suriya

noted that New Zealand is particularly close to receiving an

invitation, and confided that Prime Minister Clark’s visit to

Bangkok had gone “very well.”

BOYCE

05BANGKOK3045 BLUE LATERN LEVEL 3: PRE-LICENSE END-USE CHECK ON APPLICATION 05-955010

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS BANGKOK 003045

 

SIPDIS

 

DEPARTMENT FOR PM/DTCC (JSTITZIEL)

 

E.O. 12958: N/A

TAGS: ETTC KOMC TH BLUE LANTERN

SUBJECT: BLUE LATERN LEVEL 3: PRE-LICENSE END-USE CHECK ON

APPLICATION 05-955010

 

REF: STATE 68288

 

¶1. Pol FSN made inquiries to establish the bona fides of

Olympic Arm & Ammunition Co. as requested in reftel.

According to the Department of Business Development of the

Thai Commerce Ministry, Olympic Arm and Ammunition (Thailand)

Co., Ltd. has a three person executive committee made up of

Mr. Charan Chawala, Mr. Witsanu Chamala and Mr. Anuchit

Kanphakdi, all Thai nationals. The company changed its name

from “the Golden Arm Co., Ltd” on August 17, 1999. It is

capitalized at 32 million baht (aprox. 820,000 USD).

 

¶2. An inquiry with Col Chanachit Charoen-nuang of the

Defense Permanent Secretary Office, Ministry of Defense,

confirmed that the company is recognized under Thai law and

has valid permits to operate factories to manufacture

ammunition in Thailand. The company also is permitted to

manufacture Austrian Glock and Italian Beretta automatic

pistols under license. Thai clients of the company include

the Royal Thai Army, National Police, and state-owned firing

ranges nation-wide. The Ministry of Defense has two military

officials (one officer and one NCO) posted at the factory

around the clock to monitor production.

 

¶3. According to Colonel Phunsi Ratsami, Director of the

Industry Control Division of the Royal Thai Defense Industry

Department — the Thai government agency tasked with

overseeing defense contractors — Olympic is certified under

Thai law to manufacture 9 mm, .38 cal., and .45 cal

ammunition.

 

¶4. Pol FSN visited Olympic’s manufacturing facility in

Nakhon Sawan, approximately 240 kilometers north of Bangkok,

on May 3. He noted it was in a controlled access location

and had unarmed civilian guards checking all vehicles and

persons trying to enter the compound. While there, he met

with Mr. Charan Chawla, Managing Director of the Company, who

explained his company’s former relationship with the Greek

firm, Olympic Arms and Ammunition, Co., Ltd (same name as the

Thai firm).

 

¶5. According to Mr. Charan, in 1999, he approached Mr.Vasili

Papadupolos, the Greek National Owner of Greece’s Olympic

Arms and Ammunition Co., Ltd, through Charon’s company

“Golden Arm Co., Ltd,” and invited Papadupolos to buy shares

in his Thai company in exchange for Papadupolos’s technology

and ammunition manufacturing know-how. Papadupolos agreed,

and promised to buy 615,000 out of 1,250,000 shares in

Charan’s company. Charan agreed to change the name of the

Thai company to Olympic Arm and Ammunition (Thailand) Co.,

Ltd. Charan said this agreement was oral only. After Charan

changed his company’s name, Papadupolos changed his mind and

decided not to pay for his shares in the new venture. Charan

had already changed his company’s name and decided to remain

in business as Olympic. Charan claims that Papadupolos still

technically holds one token share in his company. He

suggested that it would be too cumbersome under Thai law to

remove Papadupolos’s small stake in Olympic Thailand. Since

Papadupolos’s withdrawal from the venture, Charon claimed to

have never been in contact with the Greek again. Charan

recently learned of Papadupolos’s arrest in Italy. Plans to

change the name of the company are underway and are expected

to be completed by June this year.

 

¶6. Pol FSN learned that Olympic Thailand has no foreign

subsidiaries and that all of its 50 plus employees are Thai

nationals. Employees must undergo fingerprint checks each

day to verify their identity. The production line operates

from 0800-1700 on weekdays. In addition to the contracts

mentioned in para 2 above, the Thai Department of Special

Investigation of the Ministry of Justice and the Narcotics

Control Board of the Prime Minister’s office have recently

approached Olympic about possible contracts. The company is

not allowed to sell its products in the private sector except

at one facility in Pattaya Thailand. Bullets produced by the

company are marketed to firing ranges under the “Hunter”

brand name and to state agencies under the “Olympic” label.

Charan told our FSN that he has been a weapons dealer for 30

years and is also Managing Director of the Royal Defence Co.,

Ltd. He stated that he has had previous business relations

with Lockheed Martin and US ATK Corporations. The compound

where Olympic is located also has a factory making Glock

pistols under license, owned by Kamonrat Commercial Co., Ltd,

of which Charan is President.

 

¶7. Sales records are maintained electronically and in hard

copy. Pol FSN took digital photos of the facility. Those

photos can be sent to the Department upon request. Please

send requests to Embassy PolMil Officer Mark Lambert.

BOYCE

05BANGKOK2048 Thailand: Coordination and Outreach on Maritime Security

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS BANGKOK 002048

 

SIPDIS

 

SENSITIVE

 

State for EAP/BCLTV and EB/TRA/OTP: DHaywood and CDiamond

 

E.O. 12958: N/A

TAGS: ASEC ECON ETRD EWWT KSTC TH

SUBJECT: Thailand: Coordination and Outreach on Maritime

Security

 

REF: SECSTATE 38877

 

— (U) THE FOLLOWING IS SENSITIVE BUT UNCLASSIFIED, PLEASE

PROTECT ACCORDINGLY, NOT FOR INTERNET DISTRIBUTION —

 

¶1. (U) In response to reftel, various agencies at Post have

portfolio responsibility and/or interest in maritime

security. The Economic section has portfolio responsibility

for maritime security from an economic policy standpoint. The

Political section has responsibility for engaging and

coordinating with the Royal Thai Government (RTG) on a broad

range of non-proliferation policy initiatives related to

Maritime Security. These issues include the Proliferation

Security Initiative (PSI) which has a large maritime

component focused on ship boarding to stop WMD proliferation;

the Regional Maritime Security Initiative (RMSI) which

focuses on maritime security in south-east Asia, particularly

in the Straights of Malacca; and the Export and Border

Security Program (EXBS) which includes programs to develop

export control standards, technology and the legal framework

to stop exports of WMD related materials. Immigration and

Customs Enforcement (ICE) also has responsibility,

coordinating with TSA, and liaising with Team Thailand, an

RTG coordination mechanism comprising 12 stakeholders,

including the Maritime Department Port Authority, Thai

Customs, Thai National Security Council, Royal Thai Navy,

Thai Police, local government, and the private sector. DAO

has an interest in Thailand’s port security for ship visits,

and the Joint US Military Advisory Group Thailand

(JUSMAGTHAI) is charged by DOD with oversight of force

protection issues for DOD personnel in or transiting

Thailand, in coordination with the Force Protection

Detachment, a DOD entity located within RSO. Other agencies

which have interest are FCS, from a commercial facilitation

and trade advocacy standpoint, USTDA, which has funded

projects related to maritime security and US technology, and

FAS, as port security relates to FDA matters and its

responsibilities under the 2002 Bioterrorism Act. While the

broad issue of having Thailand support Regional Maritime

Security Initiative (RMSI) goals is referenced in the MPP,

maritime security coordination is not specifically addressed.

 

¶2. (SBU) Although there is no dedicated maritime security

coordination mechanism at Post, with agencies holding

coordination meetings on an ad hoc basis, agencies agree that

coordination within the Embassy, and with the RTG and private

sector, has been excellent. However, these agencies also

agree that coordination with USG agencies based in Washington

is sometimes problematic. Washington agencies have been

known to send port assessment teams one after another,

sometimes with little coordination with post, to do identical

assessments. After multiple USG assessments within a short

period, RTG contacts have complained about the added burden

these assessments present, contending this would be easily

remedied by better USG coordination and sharing of

information. Post agencies believe this has caused undue

strain on their relations with RTG contacts in the past, and

can be easily avoided by Washington agencies’ better

coordination amongst themselves, and with agencies at Post.

 

BOYCE

05BANGKOK1635 NOTIFYING BANGKOK ABOUT APCSS SEMINARS AND TRAINING COURSES

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS BANGKOK 001635

 

SIPDIS

 

APCSS FOR GENERAL STACKPOLE FROM BANGKOK DCM ARVIZU

 

E.O. 12958: N/A

TAGS: PREL AMGT TH POL MIL

SUBJECT: NOTIFYING BANGKOK ABOUT APCSS SEMINARS AND

TRAINING COURSES

 

¶1. (U) General Stackpole,

 

As you know, our Mission in Bangkok is a long-standing

supporter of the Asia-Pacific Center for Security Studies.

The courses you have organized are among the best of their

type in the world. Thai alumni return better informed about

vital issues of mutual concern and better prepared to work

with American counterparts. We will continue to work with

your staff to identify qualified military and civilian

candidates who will benefit from the excellent training APCSS

provides and who will make candid contributions to your

courses.

 

¶2. (U) Recently, however, we have had a few problems

coordinating responsibilities among the various U.S. military

and civilian offices in Bangkok with a stake in APCSS courses

and seminars. At times, the confusion stemmed from informal

emails from APCSS alerting either JUSMAGTHAI or DAO Bangkok

about upcoming courses. In order to avoid these problems, I

ask that future notifications of courses or seminars be made

via front channel cable to Embassy Bangkok. Doing so will

insure that the Ambassador and I determine which Embassy

office would be best able to provide a participant for an

APCSS seminar or be assigned primary responsibility for

selecting Thai candidates to attend an APCSS course. I

assure you that we will be responsive and more quickly and

effectively able to support your work if we receive future

notifications front channel.

 

¶3. (U) Sincerely yours,

 

Alexander A. Arvizu

Deputy Chief of Mission

U.S. Embassy, Bangkok

BOYCE

05BANGKOK1191 BLUE LANTERN LEVEL 3: PRE-LICENSE END USE CHECK ON

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS BANGKOK 001191

 

SIPDIS

 

DEPARTMENT FRO PM/DTCC (TWATKINS)

 

E.O. 12958: N/A

TAGS: KOMC ETTC TH BLUE LANTERN

SUBJECT: BLUE LANTERN LEVEL 3: PRE-LICENSE END USE CHECK ON

LICENSE 05-951264

 

REF: SECSTATE 21858

 

¶1. (U) Political FSN contacted the Royal Thai Navy’s

Personnel Data Center, the Royal Thai Supreme Command’s

Directorate of Joint Personnel, the Ministry of Defense’s

Office of Personnel and the Naval Air Division at Sattahip

Royal Thai Naval Base. None of these offices have a record

of a “Direk Promwichal” who signed the end user document

outlined in reftel. Captain Kritsada of the Royal Thai

Navy’s Air Division’s Logistics arm notified FSN that “Direk

Promwichal” is no longer a member of the Royal Thai Navy and

should not have been authorized to sign an end user

certificate. He indicated that Direk Promwichal is now an

administrator for a company doing business as “Aero Hitech

Company.” A check of the Thai Ministry of Commerce’s

Department of Business Development’s webpage does not/not

show a listing for “Aero Hitech.”

BOYCE

05BANGKOK918 POST REQUESTS TIMETABLE FOR PSYOP ASSESSMENT TEAM

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS BANGKOK 000918

 

SIPDIS

 

SENSITIVE

 

DEPARTMENT FOR EAP/BCLTV

PACOM FOR FPA HUSO AND JIACG-CT

 

E.O. 12958: N/A

TAGS: PGOV PREL MARR TH POL MIL

SUBJECT: POST REQUESTS TIMETABLE FOR PSYOP ASSESSMENT TEAM

 

¶1. (SBU) On December 9, 2004, the 5th Psychological

Operations (PSYOP) Battalion Commander, 4th Psyop Group,

briefed the DCM on the Rewards for Information/Military

Support to Public Diplomacy Programs. These programs have

been successfully used by AmEmbassy Manila to assist the

Philippines Government deal with insurgency issues there.

The briefing in Bangkok was in response to directive from ADM

Fargo, PACOM Commander, that JUSMAGTHAI explore creative ways

the United States can assist the RTG address the ongoing

unrest in southern Thailand.

 

¶2. (SBU) During the meeting, the DCM agreed that PACOM

could deploy a small team of experts to identify needs and

offer recommendations on how to implement a Military Support

to Public Diplomacy program in Thailand. It was agreed that

any recommendation made by the team would be vetted and

endorsed by the RTG and the Country Team. Post requests an

initial assessment team deploy within 30 days of receipt of

this message. Post requests that any team coming be limited

to no more than four persons and be deployed for no more than

90 days.

BOYCE

10BANGKOK298 SCENESETTER FOR THE CSA-HOSTED VISIT OF THAI ARMY COMMANDER GENERAL ANUPONG

“247126”,”2/4/2010 5:35″,”10BANGKOK298″,

“Embassy Bangkok”,”CONFIDENTIAL”,””,

“VZCZCXRO5800

OO RUEHCHI RUEHCN RUEHDT RUEHHM

DE RUEHBK #0298/01 0350535

ZNY CCCCC ZZH

O 040535Z FEB 10

FM AMEMBASSY BANGKOK

TO RUEADWD/DA WASHINGTON DC IMMEDIATE

RUEHC/SECSTATE WASHDC IMMEDIATE 9825

INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS IMMEDIATE

RUEHBJ/AMEMBASSY BEIJING IMMEDIATE 7989

RUEHBY/AMEMBASSY CANBERRA IMMEDIATE 0404

RUEHUL/AMEMBASSY SEOUL IMMEDIATE 6185

RUEHKO/AMEMBASSY TOKYO IMMEDIATE 2329

RUEHWL/AMEMBASSY WELLINGTON IMMEDIATE 0310

RUEKJCS/SECDEF WASHINGTON DC IMMEDIATE

RHMFISS/CJCS WASHINGTON DC IMMEDIATE

RUEAIIA/CIA WASHINGTON DC IMMEDIATE

RHEHNSC/NSC WASHINGTON DC IMMEDIATE

RUEKDIA/DIA WASHINGTON DC IMMEDIATE

RHHMUNA/HQ USPACOM HONOLULU HI IMMEDIATE”,”C O N F I D E N T I A L SECTION 01 OF 05 BANGKOK 000298

 

SIPDIS

 

E.O. 12958: DECL: 02/04/2020

TAGS: PGOV, PTER, MARR, MOPS, PINS, PHUM, TH

SUBJECT: SCENESETTER FOR THE CSA-HOSTED VISIT OF THAI ARMY

COMMANDER GENERAL ANUPONG

 

Classified By: Ambassador Eric G. John, reasons 1.4 (b) and (d).

 

1. (C) General Casey, the upcoming visit of Thai Army

Commander General Anupong Paojinda will be an important

occasion to demonstrate our appreciation for the U.S.-Thai

relationship. Despite ongoing domestic political challenges,

Thailand\’s adherence to democratic values should not go

unrecognized. General Anupong has been invaluable the past

two years as he has resisted pressures from all sides for

military intervention into politics; as a result, a full

range of actors on the Thai political scene are able to

openly and vigorously debate policies and the state of

democracy. This visit is a prime opportunity to demonstrate

clearly to our close ally that we intend to engage fully in

the partnership, at a time when many in Thailand question

U.S. commitment to the region in comparison to a sustained

Chinese charm offensive. As examples of benefits from the

relationship, the U.S.-Thai partnership has yielded a

promising new lead in the drive to develop an HIV vaccination

and the seizure of more than 35 tons of North Korean weapons

in just the last three months alone, two examples that serve

to illustrate the depth and breadth of a relationship.

Furthermore, the Thai Cabinet in December approved a

supplemental budget to facilitate a peacekeeping deployment

to Darfur.

 

2. (C) General Anupong is the preeminent military leader in

our steadfast ally and has been a strong advocate of not

staging a coup and permitting the democratic process to play

out, although with the Army ensuring security. Indeed, if

you look back at the political turbulence of the past two

years, he has been one of the more admirable figures in

Thailand, and this counterpart visit is one way to express

our appreciation for his actions. Anupong has had to make an

extraordinary series of tough decisions over the past

eighteen months, and his intellect and disposition have been

key ingredients that have enabled him to make the choice to

come down on the side of democracy, even as his troops wage a

counterinsurgency campaign in Thailand\’s troubled

southernmost provinces. We will also want to use this visit

to send a signal to the rest of the Royal Thai Army that the

United States values its relationship with the Thai military

and Thailand. Anupong will likely be interested in pursuing

discussions on regional security challenges, and how the

U.S.-Thai alliance can be focused to assist as Thailand

prepares for changing threats. Anupong will also look to

discuss areas of cooperation, such as bilateral exercises and

training, whereby we can assist the Thai military modernize.

Thai government officials and military leaders have also

expressed strong interest in receiving excess defense

articles by way of Thailand\’s status as a Major Non-NATO

Ally, as Foreign Minister Kasit Piromya raised in 2009 with

Secretary Clinton and other senior USG officials.

 

POLITICAL ENVIRONMENT

———————

 

3. (SBU) The past eighteen months were turbulent for

Thailand. Court decisions forced two Prime Ministers from

office in 2008, and twice the normal patterns of political

life took a back seat to disruptive protests in the streets.

The yellow-shirted People\’s Alliance for Democracy (PAD)

occupied Government House from August to December 2008 and

shut down Bangkok\’s airports for eight days, to protest

governments affiliated with ex-Prime Minister Thaksin

Shinawatra. The red-shirted United Front for Democracy

against Dictatorship (UDD), followers of Thaksin, disrupted a

regional Asian Summit and sparked riots in Bangkok in

mid-April 2009 after Thaksin, now a fugitive abroad in the

wake of an abuse of power conviction, called for a revolution

to bring him home.

 

4. (C) 2010 promises to be contentious as well, with Thaksin

and the red-shirts having vowed to redouble their efforts to

topple the government. In recent weeks, the red-shirts have

steadily increased a campaign to discredit and undermine the

government, with promises of a \”final battle\” in late

February that has many worried that violence could again

return to the streets of Bangkok. Among their activities has

 

BANGKOK 00000298 002 OF 005

 

been an operation to spread rumors of an impending coup, a

rumor for which we have seen no basis.

 

5. (C) Prime Minister Abhisit Vejjajiva is a photogenic,

eloquent 45-year old Oxford graduate who generally has

progressive instincts and says the right things about basic

freedoms, social inequities, policy towards Burma, and how to

address the troubled deep South, afflicted by a grinding

ethno-nationalist Muslim-Malay separatist insurgency.

Delivering results has proved more elusive, though the Thai

economy is growing again, driven by expanding exports.

 

6. (C) While both yellow and red try to lay exclusive claim

to the mantle of democracy, both have ulterior motives in

doing so. Both movements reflect deep social concerns

stemming from widespread perceptions of a lack of social and

economic justice, but both seek to triumph in competing for

traditional Thai hierarchical power relationships. New

elections would not appear to be a viable solution to

political divide, and political discord could persist for

years. We continue to stress to Thai interlocutors the need

for all parties to avoid violence and respect democratic

norms within the framework of the constitution and rule of

law, as well as our support for long-time friend Thailand to

work through its current difficulties and emerge as a more

participatory democracy.

 

RECEDING MONARCHY

—————–

 

7. (C) Underlying the political tension in Bangkok is the

future of the monarchy. On the throne for 62 years,

U.S.-born King Bhumibol is Thailand\’s most prestigious

figure, with influence far beyond his constitutional mandate.

Many actors, including in the military, are jockeying for

position to shape the expected transition period in Thailand

during royal succession after the eventual passing of the

King. Few observers believe that the deep political and

social divides can be bridged until after King Bhumibol

passes and Thailand\’s tectonic plates shift. Crown Prince

Vajiralongkorn neither commands the respect nor displays the

charisma of his beloved father, who has greatly expanded the

prestige and influence of the monarchy during his reign.

Nearly everyone expects the monarchy to shrink and change in

function after succession. How much will change is open to

question, with many institutions, figures, and political

forces positioning for influence, not only over redefining

the institution of monarchy but, equally fundamentally, what

it means to be Thai.

 

SOUTHERN THAILAND – SEPARATIST INSURGENCY

—————————————–

 

8. (C) An ethno-nationalist Malay Muslim insurgency in

southern Thailand has claimed an estimated 3,500 lives since

2004. Fundamental issues of justice and ethnic identity

drive the violence as many Malay Muslims feel that they are

second-class citizens in Thailand, and ending the insurgency

will require the government to deal with these issues on a

national level. The insurgents use IEDs, assassinations, and

beheadings to challenge the control of the Thai state in the

deep South; the government has responded through special

security laws that give security forces expanded power to

search and detain people. The Thai military is now deeply

involved in counter-insurgency efforts; in contrast, from the

late 1990s-2004, the military viewed the top national

security threat to be the flow of illegal narcotics from

neighboring Burma.

 

9. (C) The insurgents direct their anger at the government in

Bangkok, not at the United States. Since a U.S. presence or

perception of U.S. involvement in the South could redirect

that anger towards us and link it to the international

jihadist movement — a link that is currently absent – we

ensure that any offers of assistance or training pass the

\”location and label\” test. Put simply, we keep U.S. military

personnel away from the far South and we make sure that we do

not label any assistance or training as directly linked to

the southern situation. This approach dovetails with the

 

BANGKOK 00000298 003 OF 005

 

Thai interest in keeping outside influences and actors away

from the internal conflict.

 

10. (C) General Anupong has dedicated more of his time to

overseeing RTA counter-insurgency efforts in South than past

Army Commanders, who often were more focused on politics in

Bangkok. Anupong makes almost weekly trips to the South, and

he and his senior staff have engaged the Embassy and USARPAC

in an effort to learn counter-insurgency and counter-IED best

practices.

 

ENDURING BILATERAL RELATIONSHIP

——————————-

 

11. (C) Despite the political divide, Thailand\’s unparalleled

strategic importance to the U.S. should not be understated.

The U.S.-Thai military relationship, which began during World

War II when the U.S. trained Thais to covertly conduct

special operations against the Japanese forces occupying

Thailand has evolved into a partnership that provides the

U.S. with unique benefits. Our military engagement affords

us unique training venues, the opportunity to conduct

exercises that are nearly impossible to match elsewhere, a

willing participant in international peacekeeping operations,

essential access to facilities amid vital sea and air lanes

that support contingency and humanitarian missions, and a

partner that is a key ASEAN nation in which we continue to

promote democratic ideals.

 

12. (C) Thailand\’s willingness to allow the United States to

use Utapao Naval Air Station as the hub for our regional

assistance program was key to making the 2004 tsunami and the

2008 Cyclone Nargis relief operations a success. While those

high-profile relief operations highlighted publicly the value

of access to Utapao, the air base is used regularly for

military flights. A prime example was the critical support

Utapao provided during OEF by providing an air bridge in

support of refueling missions en route to Afghanistan.

Approximately 1,000 flights transit Utapao every year in

support of critical U.S. military operations both regionally

and to strategic areas of the world. Thailand also provides

valued port access with U.S. naval vessels making calls,

primarily at Laem Chabang and Sattahip, over sixty times per

year for exercises and visits.

 

13. (SBU) Beyond traditional military activities, our

bilateral military relationship provides benefits in other

important areas. One example is the Armed Forces Research

Institute of Medical Sciences\’ (AFRIMS) collaboration with

Thai counterparts on basic research and trial vaccines. The

sophistication of the Thai scientific and public health

community makes collaboration as useful to the USG as it is

to the Thais. A number of important breakthroughs, such as

in the prevention of HIV/AIDS transmission from mothers to

children, were developed here, and the first partially

successful phase III, double blind trial for a potential HIV

vaccine occurred in 2009; a second such trial run by CDC is

currently ongoing.

 

COBRA GOLD AND THE MILITARY EXERCISE PROGRAM

——————————————–

 

14. (C) By means of access to good military base

infrastructure and large areas to conduct unrestricted

operations, Thailand gives the U.S. military a platform for

exercises unique in Asia. Thai leaders are far more willing

to host multinational and bilateral exercises than are other

countries in Asia. This has allowed us to use exercises in

Thailand to further key U.S. objectives, such as supporting

Japan\’s growing military role in Asia and engaging the

Indonesian and Singaporean militaries.

 

15. (C) Cobra Gold, the capstone event of our exercise

program and being held during the visit, is the largest

annual multi-lateral exercise in the Pacific region and for

29 years has served to strengthen our relations with

Thailand, highlight our commitment to Southeast Asia, and

provide exceptional training opportunities for our troops.

The event has evolved over the years and now facilitates

 

BANGKOK 00000298 004 OF 005

 

important objectives such as promoting a greater role in the

Asian Pacific region for Japan, Singapore, and South Korea

and re-establishing a partner role with Indonesia. As an

example of the tangible benefits of the exercise, USARPAC is

using this year\’s Cobra Gold to test a deployable command

post for crisis situations such as HA/DR incidents. Cope

Tiger, a leading air exercise with the Thailand and

Singapore, and CARAT, a bilateral naval event, are key

mechanisms for engagement of the Royal Thai Air Force and

Navy. The Thai military continues to highlight to us the

significance of these events for training and for

relationship building.

 

PEACEKEEPING EFFORTS AND DARFUR DEPLOYMENT

——————————————

 

16. (C) Thailand has historically been a strong supporter of

UN peacekeeping missions and was an early contributing nation

to operations in Afghanistan and Iraq. In addition, Thai

generals very effectively led UN forces in East Timor, to

which Thailand contributed 1,500 troops, and in Aceh where a

Thai general served as the principal deputy of the Aceh

Monitoring Mission. Thailand is preparing for deploying a

battalion of troops for a difficult UNAMID mission in Darfur

and has asked for USG assistance. State recently identified

$2.4 million to be used to support equipment needed by the

Thai for the deployment, and we have used various funding

sources to increase overall Thai peacekeeping capabilities,

both as a contributing nation and as a trainer of neighboring

nations.

 

BORDER CONFLICT WITH CAMBODIA

—————————–

 

17. (C) Bilateral relations with Cambodia remain volatile,

primarily due to a border dispute centered on 4.6 square

kilometers of overlapping territorial claims adjacent to the

11th century Hindu Preah Vihear temple. Minor skirmishes

have erupted four times since mid-2008, leading to the deaths

of seven soldiers. Cambodian Prime Hun Sen\’s November 2009

decision to appoint Thaksin as an economic advisor further

stoked cross-border tensions. Furthermore, there have been

at least six reports of small-scale conflicts resulting from

cross-border illegal logging activities in recent months.

 

18. (C) The roots of the border dispute lie in the

Siam-France agreements of 1904-8 and a 1962 International

Court of Justice ruling that granted Cambodia the temple but

left the rest of disputed land unresolved. Tensions spiked

in 2008 when the Thai government in power at that time

supported Cambodia\’s application to UNESCO for a joint

listing of the temple as a world heritage site, only to face

opposition in parliament and an adverse court ruling. Thorny

internal political considerations and historical rancor

between Thailand and Cambodia make progress difficult. We

urge both sides to resolve their differences peacefully

through bilateral negotiations, border demarcation, and a

reduction of troops deployed along the border.

 

ONGOING REFUGEE CONCERNS: HMONG AND BURMA

—————————————–

 

19. (C) Due to inherent institutional capabilities, the Thai

military plays a prominent role in the management of the many

refugees that enter Thailand from neighboring countries.

Thailand continues to host more than 140,000 Burmese and

facilitate resettlement of more than 14,000 refugees to the

U.S. annually, but the recent forced repatriation of two

groups of Lao Hmong in late December provoked international

outcry. The USG and Congress are also focused on 4,000

ethnic Karen in a Thai army-run camp along the Thai-Burma

border who came into Thailand last June fleeing an offensive

and who may be sent back in the near future. (Note: 140,000

Karen and Karenni have lived in RTG-sanctioned camps along

the border since 1990. End Note.) We underscore to the RTG

our disappointment with the Hmong deportation decision and

our continuing concern over access to the Hmong now that they

have been returned to Laos, as well as our concerns on the

Thai-Burma border.

 

BANGKOK 00000298 005 OF 005

 

THE INCREASING ROLE OF CHINA

—————————-

 

20. (C) As the shape of Southeast Asia, Asia writ large, and

the world has changed, so have Thai attitudes. The Chinese

have been making a major push to upgrade all aspects of

relations, including mil-mil. Thailand is not interested in

making a choice between the U.S. and China (nor do we see

closer Chinese-Thai relations as automatically threatening to

our interests here), but we will need to work harder to

maintain the preferred status we have enjoyed. While Thai

military links with the United States are deeper and far more

apparent than Sino-Thai links, China\’s growing influence in

Thailand is readily evident.

 

21. (C) The Chinese have made a strong effort to court the

Thai. The Thai military has a range of Chinese weapons

systems in its arsenal; the PLA Navy is interested in closer

links with the Thai navy, and China has worked with Thailand

to improve air defense equipment provided to Thailand in the

late 1980\’s. In 2007 and 2008, Thai and Chinese Special

Forces conducted joint exercises, and other mil-to-mil

exchanges have expanded in recent years, as has the number of

bilateral military VIP visits.

 

22. (C) During a visit to Thailand by Chinese Minister of

National Defense Liang Guanglie for the King\’s birthday

celebrations in early December 2009, the Thai and Chinese

militaries agreed to expand bilateral exercises to include

the two nations\’ navies, marines, and air forces. The

initial exercise will be conducted early this year, with the

PLA engaging Thai sailors and marines through an amphibious

landing event and a naval rescue and humanitarian relief

exercise. While some entities within the RTG resisted the

expanded engagement, reportedly the MFA and the Marine

Commandant, the Thai tell us that the Chinese pushed hard for

a rapid expansion of bilateral exercises. The Thai Marines

suggested to us that the exercise would be held at the

platoon or company level; it is unclear how many Navy

personnel may participate. While there are those in the Thai

military who have resisted expanding ties with the Chinese,

Foreign Minister Kasit during an early November meeting with

EAP Deputy Assistant Secretary Scot Marciel warned that

Thailand could not continue to say no, and that the U.S.

military needed to more seriously re-engage with their Thai

counterparts.

 

23. (C) The expansion of joint exercises follows China

providing Thailand with $49 million in military assistance

following the 2006 coup. Beyond exercises and assistance,

the number of exchanges by Thai and Chinese officers studying

at military institutes has increased significantly in recent

years, particularly since the coup. The PLA has also

actively courted Thai military leaders, including Defense

Minister Prawit Wongsuwan, Chief of Defense Forces General

Songkitti Jaggabatra, and General Anupong, through multiple

hosted-visits to China.

JOHN

“

10BANGKOK226 SCENESETTER FOR THE VISIT OF ADMIRAL WILLARD

“245714”,”1/27/2010 10:07″,”10BANGKOK226″,

“Embassy Bangkok”,”CONFIDENTIAL”,””,”VZCZCXRO9110

OO RUEHCHI RUEHCN RUEHDT RUEHHM

DE RUEHBK #0226/01 0271007

ZNY CCCCC ZZH

O 271007Z JAN 10

FM AMEMBASSY BANGKOK

TO RUEHC/SECSTATE WASHDC IMMEDIATE 9719

RHHMUNA/HQ USPACOM HONOLULU HI IMMEDIATE

INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS IMMEDIATE

RUEHBJ/AMEMBASSY BEIJING IMMEDIATE 7934

RUEHBY/AMEMBASSY CANBERRA IMMEDIATE 0359

RUEHUL/AMEMBASSY SEOUL IMMEDIATE 6142

RUEHKO/AMEMBASSY TOKYO IMMEDIATE 2286

RUEHWL/AMEMBASSY WELLINGTON IMMEDIATE 0280

RUEKJCS/SECDEF WASHINGTON DC IMMEDIATE

RHMFISS/CJCS WASHINGTON DC IMMEDIATE

RUEAIIA/CIA WASHINGTON DC IMMEDIATE

RHEHNSC/NSC WASHINGTON DC IMMEDIATE

RUEKDIA/DIA WASHINGTON DC IMMEDIATE”,”C O N F I D E N T I A L SECTION 01 OF 05 BANGKOK 000226

 

SIPDIS

 

E.O. 12958: DECL: 01/27/2020

TAGS: PGOV, PTER, MARR, MOPS, PINS, PHUM, TH

SUBJECT: SCENESETTER FOR THE VISIT OF ADMIRAL WILLARD

 

Classified By: Ambassador Eric G. John, reasons 1.4 (b) and (d).

 

1. (C) Admiral Willard, Embassy Bangkok welcomes you to

Thailand. Despite ongoing domestic political challenges,

Thailand\’s adherence to democratic values should not go

unrecognized. That a full range of actors in the Thai

political scene can openly and vigorously debate policies and

the state of democracy is indeed evidence that Thailand is a

positive role model for other nations in the region. In

addition, Thailand, while chairing ASEAN last year, was a

leading proponent of democracy and human rights within ASEAN.

As such, now is a prime opportunity to demonstrate clearly

to our close ally that we intend to engage fully in the

partnership. Your visit will provide such an opportunity as

it will signal the United States\’ appreciation for the

long-standing bilateral relationship, which has facilitated

shared benefits in the fields of security, law enforcement,

and intelligence efforts, as well as groundbreaking

health/research collaboration and long-standing refugee

support. In just the last three months alone, the U.S.-Thai

partnership has yielded a promising new lead in the drive to

develop an HIV vaccination and the seizure of more than 35

tons of North Korean weapons, two examples that serve to

illustrate the depth and breadth of a relationship.

Furthermore, the Thai Cabinet in December approved a

supplemental budget to facilitate a peacekeeping deployment

to Darfur.

 

2. (C) Thai interlocutors will likely be interested in

pursuing discussions on strategic views of regional security

challenges, and how the U.S.-Thai alliance can be focused to

assist as Thailand prepare for threats. The Thai will also

look to discuss areas of cooperation, such as bilateral

exercises and training, whereby we can assist the Thai

military modernize. The Thai have also expressed strong

interest in receiving excess defense articles by way of

Thailand\’s status as a Major Non-NATO Ally, as Foreign

Minister Kasit Piromya raised in 2009 with Secretary Clinton

and other senior USG officials.

 

POLITICAL ENVIRONMENT

———————

 

3. (SBU) The past eighteen months were turbulent for

Thailand. Court decisions forced two Prime Ministers from

office, and twice the normal patterns of political life took

a back seat to disruptive protests in the streets. The

yellow-shirted People\’s Alliance for Democracy (PAD) occupied

Government House from August to December 2008 and shut down

Bangkok\’s airports for eight days, to protest governments

affiliated with ex-Prime Minister Thaksin Shinawatra. The

red-shirted United Front for Democracy against Dictatorship

(UDD), followers of Thaksin, disrupted a regional Asian

Summit and sparked riots in Bangkok in mid-April 2009 after

Thaksin, now a fugitive abroad in the wake of an abuse of

power conviction, called for a revolution to bring him home.

This year promises to be contentious as well, with Thaksin

and the red shirts having vowed to redouble their efforts to

topple the government. All sides hopefully learned a

valuable lesson against the use of violence, however, by

seeing their support plummet when such tactics were used.

 

4. (C) Prime Minister Abhisit Vejjajiva is a photogenic,

eloquent 45-year old Oxford graduate who generally has

progressive instincts and says the right things about basic

freedoms, social inequities, policy towards Burma, and how to

address the troubled deep South, afflicted by a grinding

ethno-nationalist Muslim-Malay separatist insurgency.

 

5. (C) While both yellow and red try to lay exclusive claim

to the mantle of democracy, both have ulterior motives in

doing so. Both movements reflect deep social concerns

stemming from widespread perceptions of a lack of social and

economic justice, but both seek to triumph in competing for

traditional Thai hierarchical power relationships. New

elections would not appear to be a viable solution to

political divide, and political discord could persist for

years. We continue to stress to Thai interlocutors the need

for all parties to avoid violence and respect democratic

norms within the framework of the constitution and rule of

law, as well as our support for long-time friend Thailand to

 

BANGKOK 00000226 002 OF 005

 

work through its current difficulties and emerge as a more

participatory democracy.

 

RECEDING MONARCHY

—————–

 

6. (C) Underlying the political tension in Bangkok is the

future of the monarchy. On the throne for 62 years,

U.S.-born King Bhumibol is Thailand\’s most prestigious

figure, with influence far beyond his constitutional mandate.

Many actors are jockeying for position to shape the expected

transition period in Thailand during royal succession after

the eventual passing of the King. Few observers believe that

the deep political and social divides can be bridged until

after King Bhumibol passes and Thailand\’s tectonic plates

shift. Crown Prince Vajiralongkorn neither commands the

respect nor displays the charisma of his beloved father, who

greatly expanded the prestige and influence of the monarchy

during his 62-year reign. Nearly everyone expects the

monarchy to shrink and change in function after succession.

How much will change is open to question, with many

institutions, figures, and political forces positioning for

influence, not only over redefining the institution of

monarchy but, equally fundamentally, what it means to be Thai.

 

SOUTHERN THAILAND – SEPARATIST INSURGENCY

—————————————–

 

7. (C) An ethno-nationalist Malay Muslim insurgency in

southern Thailand has claimed an estimated 3,500 lives since

2004. Fundamental issues of justice and ethnic identity

drive the violence as many Malay Muslims feel that they are

second-class citizens in Thailand, and ending the insurgency

will require the government to deal with these issues on a

national level. The insurgents use IEDs, assassinations, and

beheadings to challenge the control of the Thai state in the

deep South; the government has responded through special

security laws that give security forces expanded power to

search and detain people. The Thai military is now deeply

involved in counter-insurgency efforts; in the late

1990s-2004, the military viewed the top national security

threat to be the flow of illegal narcotics from neighboring

Burma.

 

8. (C) The insurgents direct their anger at the government in

Bangkok, not at the United States. Since a U.S. presence or

perception of U.S. involvement in the South could redirect

that anger towards us and link it to the international

jihadist movement — a link that is currently absent — we

ensure that any offers of assistance or training pass the

\”location and label\” test. Put simply, we keep U.S. military

personnel away from the far South and we make sure that we do

not label any assistance or training as directly linked to

the southern situation.

 

ENDURING BILATERAL RELATIONSHIP

——————————-

 

9. (C) Despite the political divide, Thailand\’s unparalleled

strategic importance to the U.S. should not be understated.

The U.S.-Thai military relationship, which began during World

War II when the U.S. trained Thais to covertly conduct

special operations against the Japanese forces occupying

Thailand has evolved into a partnership that provides the

U.S. with unique benefits. Our military engagement affords

us unique training venues, the opportunity to conduct

exercises that are nearly impossible to match elsewhere, a

willing participant in international peacekeeping operations,

essential access to facilities amid vital sea and air lanes

that support contingency and humanitarian missions, and a

partner that is a key ASEAN nation in which we continue to

promote democratic ideals.

 

10. (C) Thailand\’s willingness to allow the United States to

use Utapao Naval Air Station as the hub for our regional

assistance program was key to making the 2004 tsunami and the

2008 Cyclone Nargis relief operations a success. While those

high-profile relief operations highlighted publicly the value

of access to Utapao, the air base is used regularly for

military flights. A prime example was the critical support

Utapao provided during OEF by providing an air bridge in

 

BANGKOK 00000226 003 OF 005

 

support of refueling missions en route to Afghanistan.

Approximately 1,000 flights transit Utapao every year in

support of critical U.S. military operations both regionally

and to strategic areas of the world. Thailand also provides

valued port access with U.S. naval vessels making calls,

primarily at Laem Chabang and Sattahip, over sixty times per

year for exercises and visits.

 

11. (SBU) Beyond traditional military activities, our

bilateral military relationship provides benefits in other

important areas. One example it the Armed Forces Research

Institute of Medical Sciences\’ (AFRIMS) collaboration with

Thai counterparts on basic research and trial vaccines. The

sophistication of the Thai scientific and public health

community makes collaboration as useful to the USG as it is

to the Thais. A number of important breakthroughs, such as

in the prevention of HIV/AIDS transmission from mothers to

children, were developed here, and the first partially

successful phase III, double blind trial for a potential HIV

vaccine occurred in 2009; a second such trial run by CDC is

currently ongoing.

 

COBRA GOLD AND THE MILITARY EXERCISE PROGRAM

——————————————–

 

12 (C) By means of access to good military base

infrastructure and large areas to conduct unrestricted

operations, Thailand gives the U.S. military a platform for

exercises unique in Asia. Thai leaders are far more willing

to host multinational and bilateral exercises than are other

countries in Asia. This has allowed us to use exercises in

Thailand to further key U.S. objectives, such as supporting

Japan\’s growing military role in Asia and engaging the

Indonesian and Singaporean militaries.

 

13. (C) Cobra Gold, the capstone event of our exercise

program, is the largest annual multi-lateral exercise in the

Pacific region and for 29 years has served to strengthen our

relations with Thailand, highlight our commitment to

Southeast Asia, and provide exceptional training

opportunities for our troops. The event has evolved over the

years and now facilitates important objectives such as

promoting a greater role in the Asian Pacific region for

Japan, Singapore, and South Korea and re-establishing a

partner role with Indonesia. Cope Tiger, a leading air

exercise with the Thailand and Singapore, and CARAT, a

bilateral naval event, are key mechanisms for engagement of

the Thai air force and navy. The Thai military continues to

highlight to us the significance of these events for training

and for relationship building.

 

PEACEKEEPING EFFORTS AND DARFUR DEPLOYMENT

——————————————

 

14. (C) Thailand has historically been a strong supporter of

UN peacekeeping missions and was an early contributing nation

to operations in Afghanistan and Iraq. In addition, Thai

generals very effectively led UN forces in East Timor, to

which Thailand contributed 1,500 troops, and in Aceh where a

Thai general served as the principal deputy of the Aceh

Monitoring Mission. Thailand is preparing for deploying a

battalion of troops for a difficult UNAMID mission in Darfur

and has asked for USG assistance. Using various funding

sources, we are working to support the request and to

increase overall Thai peacekeeping capabilities, both as a

contributing nation and as a trainer of neighboring nations.

 

BORDER CONFLICT WITH CAMBODIA

—————————–

 

15. (C) Bilateral relations with Cambodia remain volatile,

primarily due to a border dispute centered on 4.6 square

kilometers of overlapping territorial claims adjacent to the

11th century Hindu Preah Vihear temple. Minor skirmishes

have erupted four times since mid-2008, leading to the deaths

of seven soldiers. Furthermore, there have been at least

five reports of Thai rangers firing upon illegal Cambodian

loggers in Thai territory in recent months. Cambodian Prime

Hun Sen\’s November 2009 decision to appoint Thaksin as an

economic advisor further stoked cross-border tensions.

 

BANGKOK 00000226 004 OF 005

 

16. (C) The roots of the border dispute lie in the

Siam-France agreements of 1904-8 and a 1962 International

Court of Justice ruling that granted Cambodia the temple but

left the rest of disputed land unresolved. Tensions spiked

in 2008 when the Thai government in power at that time

supported Cambodia\’s application to UNESCO for a joint

listing of the temple as a world heritage site, only to face

opposition in parliament and an adverse court ruling. Thorny

internal political considerations and historical rancor

between Thailand and Cambodia make progress difficult. We

urge both sides to resolve their differences peacefully

through bilateral negotiations, border demarcation, and a

reduction of troops deployed along the border.

 

ONGOING REFUGEE CONCERNS

————————

 

17. (C) Due to inherent institutional capabilities, the Thai

military plays a prominent role in the management of the many

refugees that enter Thailand from neighboring countries.

Thailand continues to host more than 140,000 Burmese and

facilitate resettlement of more than 14,000 refugees to the

U.S. annually, but the recent forced repatriation of two

groups of Lao Hmong in late December provoked international

outcry. We underscore to the RTG our disappointment with the

deportation decision and our continuing concern over access

to the Hmong now that they have been returned to Laos. The

Thai have asked privately about possible Congressional

repercussions due to the deportation.

 

THE INCREASING ROLE OF CHINA

—————————-

 

18. (C) As the shape of Southeast Asia, Asia writ large, and

the world has changed, so have Thai attitudes. The Chinese

have been making a major push to upgrade all aspects of

relations, including mil-mil. Thailand is not interested in

making a choice between the U.S. and China (nor do we see

closer Chinese-Thai relations as automatically threatening to

our interests here), but we will need to work harder to

maintain the preferred status we have enjoyed. While Thai

military links with the United States are deeper and far more

apparent than Sino-Thai links, China\’s growing influence in

Thailand is readily evident.

 

19. (C) The Chinese have made a strong effort to court the

Thai. The Thai military has a range of Chinese weapons

systems in its arsenal; the PLA Navy is interested in closer

links with the Thai navy, and China has worked with Thailand

to improve air defense equipment provided to Thailand in the

late 1980\’s. In 2007 and 2008, Thai and Chinese Special

Forces conducted joint exercises, and other mil-to-mil

exchanges have expanded in recent years, as has the number of

bilateral military VIP visits.

 

20. (C) During a visit to Thailand by Chinese Minister of

National Defense Liang Guanglie for the King\’s birthday

celebrations in early December 2009, the Thai and Chinese

militaries agreed to expand bilateral exercises to include

the two nations\’ navies, marines, and air forces. The

initial exercise will be conducted early this year, with the

PLA engaging Thai sailors and marines through an amphibious

landing event and a naval rescue and humanitarian relief

exercise. While some entities within the RTG resisted the

expanded engagement, reportedly the MFA and the Marine

Commandant, the Thai tell us that the Chinese pushed hard for

a rapid expansion of bilateral exercises. The Thai Marines

suggested to us that the exercise would be held at the

platoon or company level; it is unclear how many Navy

personnel may participate. While there are those in the Thai

military who have resisted expanding ties with the Chinese,

Foreign Minister Kasit during an early November meeting with

EAP Deputy Assistant Secretary Scot Marciel warned that

Thailand could not continue to say no, and that the U.S.

military needed to more seriously re-engage with their Thai

counterparts.

 

21. (C) The expansion of joint exercises follows China

providing Thailand with $49 million in military assistance

following the 2006 coup. Beyond exercises and assistance,

the number of exchanges by Thai and Chinese officers studying

 

BANGKOK 00000226 005 OF 005

 

at military institutes has increased significantly in recent

years, particularly since the coup. The PLA has also

actively courted Thai military leaders, including Defense

Minister Prawit Wongsuwan, Chief of Defense Forces General

Songkitti Jaggabatra, and Army Commander General Anupong

Paojinda, through multiple hosted-visits to China.

JOHN

“

10PHNOMPENH29 2010 INVESTMENT CLIMATE STATEMENT – CAMBODIA

“244036”,”1/19/2010 0:41″,”10PHNOMPENH29″,

“Embassy Phnom Penh”,”UNCLASSIFIED”,

“09STATE124006|10SINGAPORE1|10SINGAPORE199”,

“VZCZCXRO8739

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RUCPDOC/USDOC WASHDC

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RUEATRS/DEPT OF TREASURY WASHINGTON DC 0822

RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC”,”UNCLAS SECTION 01 OF 17 PHNOM PENH 000029

 

STATE FOR EAP/MLS, EB/IFD/OIA, EB/TPP/ABT, EEB/TPP/MTA, EEB/TPP/BTA

STATE PASS TO USTR/KLEIN AND WEISEL

STATE PASS TO USTDA/ROSSITER

BANGKOK FOR USAID/CARDUNER, FCS/GRIFFIN

HANOI FOR FAS/BAILEY

HO CHI MINH CITY FOR FAS/ REIDEL

 

SIPDIS

 

E.O. 12958:N/A

TAGS: ECON, EFIN, EINV, ELAB, ETRD, KIPR, OPIC, KTDB, USTR, CB

SUBJECT: 2010 INVESTMENT CLIMATE STATEMENT – CAMBODIA

 

REF: 09 STATE 124006

 

PHNOM PENH 00000029 001.12 OF 017

 

1. Cambodia, a developing country, began the transformation from a

command economy to the free market in the late 1980s. It is now

integrating into the regional and world trading framework. In 1999,

Cambodia joined the Association of Southeast Asian Nations (ASEAN)

and in September 2004, became a member of the World Trade

Organization (WTO). On December 15, 2008 the entry into force of

the ASEAN Charter brought Cambodia and other member states into a

new regional legal framework. Cambodia has shown interest in

participating in other international trading arrangements, including

the Asia-Pacific Economic Cooperation forum (APEC).

 

2. As part of its WTO commitments to strengthen the investment

climate for both foreign and domestic businesses, Cambodia committed

to enact 47 laws or regulations to address areas where existing law

did not meet WTO requirements. Cambodia has been behind schedule in

fulfilling its WTO commitments to pass necessary business

legislation concerning the general business environment, trade in

goods, trade in services, and the protection of intellectual

property rights. However, the country has made progress recently,

passing several significant laws in 2008, including a Law on Plant

Breeder Rights and Law on Civil Aviation, and in 2009, the

government promulgated a Law on Tourism, a Law on Insolvency, and a

sub-decree establishing a national commercial arbitration body. The

government has either completed drafts of most of the remaining

required laws or is waiting for their approval by the legislature.

 

3. Since the re-establishment of a constitutional monarchy in 1993,

the economy has grown steadily. From 2004 to 2008, the economy grew

at an average of approximately 10 percent per year, driven largely

by an expansion in the garment, construction, agriculture, and

tourism sectors. In 2005, exploitable oil and natural gas deposits

were found beneath Cambodia\’s territorial waters, representing a new

revenue stream for the government if commercial extraction begins.

Mining also is attracting significant investor interest,

particularly in the northern parts of the country. However, the

global economic crisis has adversely affected the economy\’s key

pillars and economic growth was expected to contract in 2009.

 

4. Inflation decreased from its sharp rise in 2008, which peaked at

25.7 percent in May 2008 driven largely by the global surge in oil

and food prices. Because the economy is heavily dollarized, a

depreciation of the Cambodian riel and the U.S. dollar against

trading partner currencies contributed to imported inflation, while

rising domestic demand contributed to domestically generated

pressures. However, these pressures lessened in 2009 and Cambodia

recorded an average inflation rate of an estimated 4.5 percent and a

7.5 percent year-on-year inflation rate.

 

5. Foreign Direct Investment (FDI) approved by the Council for the

Development of Cambodia (CDC), Cambodia\’s investment approval body,

has dramatically increased in recent years, with approved proposals

peaking at nearly USD 11 billion in 2008, compared with USD 201

million in 2004. However, figures for the first 10 months of 2009

reveal that investment has slowed significantly to only USD 1.6

billion, an 82 percent decrease compared to total investments in

2008. The CDC does not have a functional mechanism to monitor

implementation of projects, so it is not clear how many proposed

projects are fully implemented. Corruption has been singled out as

one of the most serious deterrents to private investment.

 

6. Since early 1999, the Cambodian government has intensified its

economic reform program, a process the international financial

institutions and donors encourage, participate in, and monitor

closely. In recent years the government has publicly committed

itself on numerous occasions to fighting corruption, pursuing good

governance, and increasing transparency and predictability. This

strategy is set out in phase II of the government\’s latest public

reform effort called the \”Rectangular Strategy for Growth,

Employment, Equity, and Efficiency.\”

 

7. The government has initiated specific measures to promote

business, especially small and medium-sized businesses, by reducing

costs and the time required for business registration and by

establishing a number of committees for business promotion and trade

facilitation.

 

PHNOM PENH 00000029 002.8 OF 017

 

Openness to Foreign Investment

——————————

 

8. Cambodia officially welcomes foreign direct investment.

Cambodia\’s 1994 Law on Investment established an open and liberal

foreign investment regime. All sectors of the economy are open to

foreign investment and 100 percent foreign ownership is permitted in

most sectors. Article 44 of the Constitution provides that only

Cambodian citizens and legal entities have the right to own land.

However, a new law allowing foreign ownership of properties located

above the ground floor is expected to be passed in 2010. Aside from

this, there is little or no discrimination against foreign investors

either at the time of initial investment or after investment.

However, some foreign businesses have reported that they are at a

disadvantage vis-a-vis Cambodian or other foreign rivals, who engage

in acts of corruption or tax evasion, or take advantage of

Cambodia\’s poor enforcement of legal regulations.

 

9. In addition, there are a few sectors open to foreign investors

which are subject to conditions, local equity participation, or

prior authorization from relevant authorities. These sectors

include manufacture of cigarettes, movie production, rice milling,

exploitation of gemstones, publishing and printing, radio and

television, manufacturing wood and stone carvings, and silk weaving.

The government has issued a sub-decree restricting foreign

ownership of hospitals and clinics and forbidding the employment of

non-Cambodian doctors in any specialty in which the Ministry of

Health considers there to be an adequate number of Cambodian

practitioners.

 

10. Under a sub-decree dated September 2005, Cambodia prohibits

certain investment activities, including investment in production or

processing of psychotropic and narcotic substances, poisonous

chemicals, agricultural pesticides and insecticides, and other goods

that use chemical substances prohibited by international regulations

or the World Health Organization that affect public health and the

environment. Production of electric power by using waste imported

from foreign countries is prohibited, as is forestry exploitation.

 

11. The privatization of state enterprises and transactions

involving state property has not always been carried out in a

transparent manner. In several instances, the public learned that

enterprises were for sale or swap only after the government

announced a sale or deal to a particular buyer.

 

12. Investor rights (investment guarantees) provided for in the Law

on Investment include:

— Foreign investors shall not be treated in a discriminatory

manner by reason of being a foreign entity, except in respect to

land ownership as provided for in the Constitution of the Kingdom of

Cambodia.

— The Royal Government of Cambodia shall not undertake a

nationalization policy that adversely affects the private property

of investors.

— The Royal Government of Cambodia shall not fix the price of

products or fees for services.

— The Royal Government of Cambodia, in accordance with relevant

laws and regulations, shall permit investors to purchase foreign

currencies through the banking system and to remit abroad those

currencies as payments for imports, repayments on loans, payments of

royalties and management fees, profit remittances and repatriation

of capital.

 

13. The following is a summary of Cambodia\’s rankings in

international indexes and the Millennium Challenge Corporation score

card.

 

Measure Year Index/Ranking

TI Corruption Index 2009 2/158

Heritage Economic Freedom 2009 56.6/106

World Bank Doing Business 2010 145/145

MCC Govnt Effectiveness 2009 0.00/05 percent

MCC Rule of Law 2009 -0.20/33 percent

MCC Control Corruption 2009 -0.30/12

MCC Fiscal Policy 2009 -2.4/35 percent

MCC Trade Policy 2009 63.4/36 percent

MCC Regulatory Quality 2009 0.21/65 percent

 

PHNOM PENH 00000029 003.8 OF 017

 

MCC Business Start Up 2009 0.765/16 percent

MCC Land Rights Access 2009 0.769/88 percent

MCC Natural Resource Mgmt 2009 68.75/61 percent

 

Conversion and Transfer Policies

——————————–

 

14. There are no restrictions on the conversion of capital for

investors. The Foreign Exchange Law allows the National Bank of

Cambodia (the central bank) to implement exchange controls in the

event of a crisis; the law does not define what would constitute a

crisis. The U.S. Embassy is not aware of any cases in which

investors have encountered obstacles in converting local to foreign

currency or in sending capital out of the country.

 

15. The U.S. dollar is widely used and circulated in the economy.

The 2009 exchange rate was stable, although slightly depreciated

compared to 2008. As of December 2009, the exchange rate was USD 1

= 4,164 riel. The government is committed to maintaining exchange

rate stability.

 

Expropriation and Compensation

——————————

 

16. Article 44 of the Cambodian Constitution, which restricts land

ownership to Cambodian nationals, also states that \”the (state\’s)

right to confiscate properties from any person shall be exercised

only in the public interest as provided for under the law and shall

require fair and just compensation in advance.\” Article 58 states

that \”the control and use of state properties shall be determined by

law.\” The Law on Investment provides that \”the Royal Government of

Cambodia shall not undertake a nationalization policy which

adversely affects the private property of investors.\”

 

17. In late 2009, the National Assembly approved the Law on

Expropriation which sets broad guidelines on land-taking procedures

for public interest purposes and defines public interest activities

such as construction of infrastructure projects, development of

buildings for national protection and civil security, construction

of facilities for research and exploitation of natural resources,

and construction of oil pipeline and gas networks.

 

18. In spite of various legal protections, protection of immovable

property rights is complicated by the fact that most property

holders do not have legal documentation of their ownership rights.

Numerous cases have been reported of influential individuals or

groups acquiring property through means not entirely in keeping with

the Constitution or laws. This murky property holding environment

may adversely affect long-term leases and /or corporate social

responsibility goals unless proper due diligence is conducted. Cases

of inhabitants being forced to relocate continued to occur when

officials or businesspersons colluded with local authorities,

although the numbers reported dropped significantly from the

previous year. Human rights NGO ADHOC reported receiving 186 land

related cases during the year. During the same period, another NGO

received 115 land related cases in Phnom Penh and 14 provinces,

affecting a total of 8,806 families. Some of those expelled

successfully contested these actions in court, but the majority of

the cases in the courts were still being processed.

 

19. To date, there are no known investment disputes involving

government expropriation of property belonging to U.S. citizens. Up

to 17 Thai businesses sustained varying degrees of damage during

anti-Thai rioting in Phnom Penh on January 29, 2003. The Cambodian

government pledged to compensate Thai business owners, and all of

claims have been resolved.

 

Dispute Settlement

——————

 

20. Cambodia\’s legal system is a mosaic of pre-1975 statutes

modeled on French law, communist-era legislation dating from

1979-1991, statutes put in place by the UN Transitional Authority in

Cambodia (UNTAC) during the period 1991-93, and legislation passed

by the Royal Government of Cambodia since 1993.

 

21. Cambodian culture and its legal system have traditionally

favored negotiation and conciliation over adversarial conflict and

 

PHNOM PENH 00000029 004.10 OF 017

 

adjudication. Thus, compromise solutions are the norm, even in

cases where the law clearly favors one party in a dispute. In civil

cases, courts will often try conciliation before proceeding with a

trial.

 

22. Cambodia\’s court system is generally seen as non-transparent

and subject to outside influence. Judges, who have been trained

either for a short period in Cambodia or under other systems of law,

have little access to published Cambodian statutes. Judges can be

inexperienced and courts are often understaffed with little

experience, particularly in adjudicating commercial disputes. The

local and foreign business community reports frequent problems with

inconsistent judicial rulings as well as outright corruption, and

difficulty enforcing judgments. For these reasons, U.S. investors

are reluctant to resort to the courts to resolve commercial

disputes.

 

23. The Cambodian judiciary system is beginning to undergo reform.

To provide the necessary background knowledge, judges and court

staff from around the country are being trained by the Royal Academy

for Judges and Prosecutors, which was created in 2002. In an effort

to clean up the court system, the Prime Minister has announced ad

hoc anti-corruption measures, including the dismissal, replacement,

and transfer of judges and prosecutors. The Supreme Council of

Magistracy, comprised of a president (the King) and eight other

members, is responsible for the appointment and conduct of judges

and prosecutors.

 

24. To address the perception of many Cambodian and foreign

business representatives that the court system is unreliable and

susceptible to external political and commercial influence, the

Cambodian government is finalizing draft legislation to create a

Commercial Court. In July 2009, the government passed a sub-decree

creating a commercial arbitration body, the National Arbitration

Center in the Ministry of Commerce. When the National Arbitration

Center is operational, parties involved in a commercial dispute that

have a written arbitration agreement will be able to settle

commercial disputes by means of quasi-judicial methods without

involvement of the Cambodian courts. Parties will be able to select

arbitrators without direct government interference. The Law on

Commercial Arbitration also allows the Cambodia Chamber of Commerce

to establish its own arbitration center for disputes between members

or between members and third parties. The law also mandates

recognition of arbitral awards made outside of Cambodia.

Arbitration awards can be appealed to the Appellate and Supreme

Court of Cambodia based on limited grounds.

 

25. To handle specific disputes with regard to labor, the Ministry

of Labor and Vocational Training established an Arbitration Council

in May 2003. Basing its decision on the provisions of the Labor

Law, the Council has 30 arbitrators. The Council is an independent

body whose function is to resolve collective labor disputes that the

Ministry is unable to solve by conciliation. The Council\’s

decisions are non-binding but it has been very successful in

reducing the number of industrial actions in the garment sector.

The Council plays a vital role in contributing to the development of

healthy industrial relations in Cambodia. The Council\’s success in

the garment industry has prompted unions in other sectors, e.g., the

hospitality and tourism sectors, to seek the Council\’s arbitration

and mediation services.

 

26. Cambodia became a party to the Convention for the Settlement of

Investment Disputes between States and Nationals of Other States in

2005. In 2009, the International Center for the Settlement of

Investment Disputes (ICSID) approved a U.S. investor\’s Request for

Arbitration in a case against the Kingdom of Cambodia.

 

Performance Requirements and Incentives

—————————————

 

27. The Council for the Development of Cambodia (CDC), Cambodia\’s

foreign investment approval body, administers a package of

investment incentives. The CDC was created as a one-stop shop to

facilitate foreign direct investment.

 

28. Seeking to increase government revenue, the international

financial institutions recommended that the Cambodian government

scale back its investment incentives. Consequently, the Cambodian

 

PHNOM PENH 00000029 005.8 OF 017

 

government amended the Law on Investment in 2003. The law creates

regimes for profit (20 percent), salary (5 to 20 percent),

withholding (4 to 15 percent), value-added (10 percent) and excise

taxes (rates vary). While some incentives have been eliminated, the

law provides a simplified, more transparent, and faster mechanism

for investment approval.

 

29. Under the amended Law on Investment, the profit tax exemption

is allocated automatically on the basis of activity and minimum

investment amounts as set out in the sub-decree. To maintain the

incentives under the law, qualified investment projects (QIP) are

required to obtain an annual Certificate of Compliance from the CDC

and file this with the annual tax return.

 

30. The amended Law on Investment includes the following

provisions, which include the exemption, in whole or in part, of

customs duties and taxes, for QIPs:

— An exemption from the tax on profit imposed under the Law on

Taxation for a set period. The tax exemption period is composed of

a trigger period + three years + n years (a number of years

determined according to the Financial Management Law and depending

on the economic sector). The maximum allowable trigger period is to

be the first year of profit or three years after the QIP earns its

first revenue, whichever is sooner.

— 100 percent exemption from import duties for construction

material, production equipment and production input materials for

export QIPs and supporting industry QIPs in accordance with the

provisions of the sub-decree on the Implementation of the Amendment

to the Law on Investment

— Transfer of incentives by merger or acquisition.

— Renewable land leases of up to 99 years on concession land for

agricultural purposes and land ownership permitted to joint ventures

with over 50 percent equity owned by Cambodians.

— No price controls on goods produced or services rendered by

investors.

— No discrimination between foreign and local investors.

— 100 percent exemption from export tax or duty, except for

activities specifically mentioned in the Law on Customs.

— Employment of foreign expatriates where no qualified Cambodians

are available. QIPs are entitled to obtain visas and work permits.

— A QIP that is located in a designated special economic zone

(SEZ) is entitled to the same incentives and privileges as other

QIPs as stipulated in the law.

 

31. The September 2005 sub-decree on the Implementation of the

Amendment to the Law on Investment also details investment

activities that are excluded from incentives, although investment is

permitted. They include the following sectors: retail, wholesale,

and duty-free stores; entertainment (including restaurants, bars,

nightclubs, massage parlors, and casinos); tourism service

providers; currency and financial services; press and media related

activities; professional services; and production and processing of

tobacco and wood products.

 

32. Incentives are also excluded in the production of certain

products with an investment of less than USD 500,000 such as food

and beverages; textiles, garments and footwear; and plastic, rubber,

and paper products. Investors are encouraged to refer to the

sub-decree for details of other investment activities that are

excluded from incentives.

 

33. Investment activities that are eligible for customs duty

exemption, but not eligible for the profit tax exemption, are

telecommunication basic services; exploration of gas and oil,

including supply bases for gas and oil activities; and mining.

 

34. Cambodia allows foreign lawyers to supply legal services with

regard to foreign law and international law, and allows them to

supply certain legal services with regard to Cambodian law in

\”commercial association\” with Cambodian law firms. Cambodia\’s WTO

General Agreement on Trade in Services (GATS) commitment defines

\”commercial association\” as any type of commercial arrangement,

without any requirement as to corporate form. Thus, there are no

equity limitations on the practice of foreign and international law

by foreign enterprises and there are no equity limitations on the

formation of \”commercial associations\” under which foreigners may

practice certain legal services with regard to Cambodian law.

 

PHNOM PENH 00000029 006.8 OF 017

 

35. Investors who wish to take advantage of investment incentives

must submit an application to the Cambodian Investment Board (CIB),

the division of the CDC charged with reviewing investment

applications. Investors not wishing to apply for investment

incentives, or who are ineligible, may establish their company

simply by registering corporate documents with the Department of

Legal Affairs of the Ministry of Commerce. Once an investor\’s

application is submitted, the CDC will issue to the applicant either

a Conditional Registration Certificate or a Letter of Non-Compliance

within three workdays. The Conditional Registration Certificate

will set out the terms, such as approvals, authorization,

clearances, permits or registrations required. If the CDC fails to

issue the Conditional Registration Certificate or Letter of

Non-Compliance within three workdays, then the Conditional

Registration Certificate will be considered approved.

 

36. The CDC has the responsibility to obtain all of the licenses

from relevant government agencies on behalf of investor applicants.

The relevant government agencies must issue the required documents

no later than 28 workdays from the date of the Conditional

Registration Certificate. At the end of the 28 days, the CDC will

issue a Final Registration Certificate.

 

37. The Sub-decree on the Implementation of the Amendment of the

Law on Investment adopted on September 27, 2005 does not require

investors to place a deposit guaranteeing their investment except in

cases in which the deposit is required in a concession contract or

real estate development project. Investors who wish to apply are

required to pay an application fee of seven million riel (approx.

USD 1,750) representing the administration fees for securing the

approvals, authorizations, licenses, or registrations from all

relevant ministries and entities including stamp duty.

 

38. Under a 2008 sub-decree, the CDC is required to submit to the

Council of Ministers for approval investment proposals with an

investment capital of USD 50 million or more; involve politically

sensitive issues; involve the exploration and the exploitation of

mineral or natural resources; may have a negative impact on the

environment; have long-term strategy; or, involve infrastructure

concessions.

 

Right to Private Ownership and Establishment

——————————————–

 

39. There are no limits on the rights of foreign and domestic

entities to establish and own business enterprises or to compete

with public enterprises. However, the Constitution provides that

only Cambodian citizens or legal entities have the right to own

land. A legal entity is considered to be Cambodian when at least 51

percent of its shares are owned by Cambodian citizen(s) or by

Cambodian legal entities. A new law allowing foreign ownership of

properties, such as apartments and condominiums is expected to be

passed in 2010. The current draft stipulates that only properties

located above the ground floor can be foreign-owned, and foreigners

would not be able to own property within 30 kilometers of a national

border.

 

40. Under the 2001 Land Law, foreign investors may secure control

over land through concessions, long-term leases, or renewable

short-term leases. If investors intend to take a long-term lease

interest in land or ownership interest through a 51 percent

Cambodian company, it is essential that caution be exercised to

ensure that clear and unencumbered ownership of the land is

verified.

 

41. The Land Law establishes a comprehensive legal framework for

long-term leasing. The leaseholder has a contractual interest in

the land, which means the lease can be sold or transferred through

succession and can be pledged as security in order to raise

financing. It is also important to make sure that the land

ownership is clearly and legally established before entering into

any leasing agreement.

 

42. Qualified investors approved by the Council for the Development

of Cambodia have the right to own buildings built on leased

property. However the law is unclear as to whether buildings from

qualified projects can be transferred between foreign investors or

whether foreign investors can own buildings built through projects

 

PHNOM PENH 00000029 007.8 OF 017

 

not approved by the CDC.

 

Protection of Property Rights

—————————–

 

43. Cambodia has adopted legislation concerning the protection of

property rights, including the Land Law and the Law on Copyrights

and Law on Patent and Industrial Design. Cambodia is a member of

the World Intellectual Property Organization (WIPO) and the Paris

Convention for the Protection of Industrial Property.

 

44. Chattel and real property: The 2001 Land Law provides a

framework for real property security and a system for recording

titles and ownership. Land titles issued prior to the end of the

Khmer Rouge regime in 1979 are not recognized due to the severe

dislocations that occurred during the Khmer Rouge period. The

government is making efforts to accelerate the issuance of land

titles, but in practice, the titling system is cumbersome,

expensive, and subject to corruption. The majority of property

owners lack documentation proving ownership. Even where title

records exist, recognition of legal title to land has been a problem

in some court cases where judges have sought additional proof of

ownership. Although foreigners are constitutionally forbidden to

own land, the 2001 law allows long or short-term leases to

foreigners.

 

45. Intellectual property rights (IPR): Cambodia\’s IPR regime is

in compliance with its WTO member commitments; however,

comprehensive enforcement remains problematic. The 1996

U.S.-Cambodia Trade Agreement contained a broad range of IPR

protections, but given Cambodia\’s very limited experience with IPR,

the WTO agreement granted phase-in periods for the Cambodian

government to fully implement IPR protections. On November 9, 2005,

the WTO granted a deadline extension until 2013 for Cambodia and

other least developed countries to enforce copyright laws and begin

accepting patents.

 

46. In a significant step toward consolidating IPR policy-making,

enforcement and technical assistance, the Council of Ministers

created the National Committee for Intellectual Property Management

on September 18, 2008 with its secretariat within the Ministry of

Commerce. This committee is responsible for developing national

policy on intellectual property, strengthening interagency

cooperation, preparing and disseminating new laws and regulations,

and acting as a clearinghouse for technical assistance relating to

the intellectual property sector. This new interagency IPR

committee chaired by the Minister of Commerce includes a broad range

of IPR actors including representatives from the Council of

Ministers and the Ministries of Industry Mines and Energy; Culture

and Fine Arts; Interior; Economy and Finance; Posts and

Telecommunications; Health; Agriculture, Forestry and Fisheries;

Environment; Justice; Education; and Tourism.

 

47. Trademarks: The Cambodian National Assembly approved the Law

Concerning Marks, Trade Names and Acts of Unfair Competition to

comply with Cambodia\’s WTO obligations under the Agreement on

Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Signed in February 2002, the law outlines specific penalties for

trademark violations, including jail sentences and fines for

counterfeiting registered marks. It also contains detailed

procedures for registering trademarks, invalidation and removal,

licensing of marks, and infringement and remedies.

 

48. Since 1991, the Ministry of Commerce has maintained an

effective trademark registration system, registering more than

35,500 trademarks (nearly 6,599 for U.S. companies) under the terms

of a 1991 sub-decree, and has proven cooperative in preventing

unauthorized individuals from registering U.S. trademarks in

Cambodia.

 

49. Despite lacking clear legal authority to conduct enforcement

activities, the Ministry of Commerce has taken effective action

against trademark infringement in several cases since 1998. The

Ministry has ordered local firms to stop using well-known U.S.

marks, including Pizza Hut, McDonalds, Nike, Scotties, Marlboro,

Seven Eleven, and Pringles. In 2009, the Ministry of Commerce

resolved 12 cases of trademark infringements.

 

PHNOM PENH 00000029 008.8 OF 017

 

50. Copyrights: Copyrights are governed by the Law on Copyrights

and Related Rights, which was enacted in January 2003.

Responsibility for copyrights is split between the Ministry of

Culture and Fine Arts, which handles phonograms, CDs, DVDs, and

other recordings, and the Ministry of Information, which deals with

printed materials. Pirated CDs, videos, textbooks, and other

copyrighted materials are widely available in Cambodian markets and

used throughout the country. Before the adoption of the law, there

were no provisions for enforcement of copyrights.

 

51. To protect and manage their economic rights, authors and

related rights holders are allowed by law to establish a collective

management organization (CMO). The creation of the CMO requires

authorization from either the Ministry of Culture and Fine Arts or

the Ministry of Information, depending on the nature of their work.

The Ministry of Culture and Fine Arts is developing a sub-decree on

collective management. In mid-2007, the Ministry of Culture and

Fine Arts created a Copyright Department which is gradually building

capacity.

 

52. Patents and industrial designs: Cambodia has a very small

industrial base, and infringement on patents and industrial designs

is not yet commercially significant. With assistance from WIPO, the

Ministry of Industry, Mines, and Energy (MIME) prepared a

comprehensive law on the protection of patents and industrial

designs which went into force in January 2003. The law provides for

the filing, registration, and protection of patents, utility model

certificates and industrial designs. The MIME issued a declaration

in June 2006 on granting patents and registering industrial

designs.

 

53. Encrypted satellite signals, semiconductor layout designs, and

trade secrets: The Ministry of Commerce is preparing a draft law

for trade secrets while the Ministry of Industry, Mines, and Energy

is drafting a law on integrated circuit protection. Cambodia has

not yet made significant progress toward enacting required

legislation on encrypted satellite signals, although it obtained a

model law on encrypted satellite signals and semiconductor layout

designs from WIPO in March 1999.

 

54. IPR enforcement: With the exception of the trademark

enforcement, the Cambodian government has taken few significant

actions to enforce its IPR obligations. However, in January 2008,

at the annual conference of the Ministry of Culture and Fine Arts,

the government suggested it would increase prosecutions for

copyright violations on domestically produced products before

expanding prosecutions for foreign products. Cambodian copyright

law allows IPR owners to file a complaint with the authorities to

take action. Law enforcement action taken at the request of owners

is directed against the piracy of domestically produced music or

video products, but not against piracy of foreign optical media.

The owners requesting crackdowns must pay support costs to the

authorities for conducting the operation. Crackdowns on such IPR

violations are not conducted on a consistent basis.

 

55. Infringement of IPR is pervasive, ranging from software,

compact discs, and music, to photocopied books and the sale of

counterfeit products, including cigarettes, alcohol, and

pharmaceuticals. In 2008, the Business Software Alliance estimated

a 95 percent software piracy rate in Cambodia which cost the

industry USD 47 million in 2007. Although Cambodia is not a major

center for the production and export of pirated CDs, videos, and

other copyrighted materials, local businesses report Cambodia is

becoming an increasingly popular source of pirated material due to

weak enforcement. The Ministry of Commerce has plans to put in

place measures to stop IPR-violating products at borders, as

post-inspection mechanisms are unlikely to be effective. During the

TIFA discussions in November 2007, Cambodia requested technical

assistance for a draft sub-decree on Border Measures detailing

procedures at the borders allowing IPR owners to file an application

with customs to suspend clearance of suspected counterfeit goods.

 

Transparency of the Regulatory System

————————————-

 

56. There is no pattern of discrimination against foreign investors

in Cambodia through a regulatory regime. Numerous issues of

transparency in the regulatory regime arise, however, from the lack

 

PHNOM PENH 00000029 009.8 OF 017

 

of legislation and the weakness of key institutions. Investors

often complain that the decisions of Cambodian regulatory agencies

are inconsistent, irrational, or corrupt.

 

57. The Cambodian government is still in the process of drafting

laws and regulations that establish the framework for the market

economy. In addition to existing laws and regulations, in 2009, the

government adopted the Law on Tourism, the Insolvency Law, and a

sub-decree establishing a national commercial arbitration body. A

commercial contract law and other important business-related laws

such as commercial court, e-commerce, telecommunications, and

personal property leasing laws are in draft.

 

58. Cambodia currently has no anti-monopoly or anti-trust statutes.

On a practical level, Cambodia has indicated a desire to discourage

monopolistic trading arrangements in most sectors.

 

59. Cambodia is currently working on the establishment of standards

and other technical measures based on international practice,

guidelines, and recommendations. Under the Law on Standards in

Cambodia, passed in 2007, the Institute of Standards in Cambodia

(ISC) was created within the Ministry of Industry, Mines, and Energy

(MIME) as a central authority to develop and certify national

standards for products, commodities, materials, services, and

practices and operations. The ISC serves as the secretariat of the

National Standards Council which consists of representatives from

various government ministries, state-controlled academic/research

institutions, the private sector, and a consumer representative

created to advise as well as approve standards.

 

60. The ISC has been assigned as the focal point for technical

barriers to trade (TBT) and as the agency responsible for

notifications and publications required by the WTO TBT Agreement.

The Ministry of Health is charged with prescribing standards,

quality control, distribution and labeling requirement for

medicines, but this responsibility may be brought under the ISC in

the future.

 

61. Quality control of foodstuffs, plant and animal products is

currently under the General Directorate of CamControl of the

Ministry of Commerce. Cambodia is a member of the Codex

Alimentarius Commission. Currently CamControl is the national

contact point for Codex Alimentarius. Its primary responsibility is

the enforcement of quality and safety of products and services

relating to sanitary and phytosanitary (SPS) measures. Cambodia was

provided a transition period until January 2007 to implement its WTO

TBT Agreement commitments and until January 2008 to implement its

SPS Agreement commitments, but has not yet fully implemented these

commitments. The RGC plans to adopt a subdecree on Automatic

Adoption of Codex Norms by the end of 2010.

 

62. The Cambodian Constitution and the 1997 Labor Code provide for

compliance with internationally recognized core labor standards.

The law authorizes the Ministry of Labor and Vocational Training to

set health, safety and other conditions for the workplace. (The

\”Labor\” Section of this report discusses the labor situation in more

detail.)

 

63. The National Bank of Cambodia supervises Cambodia\’s banks and

financial institutions while the Ministry of Economy and Finance

regulates the insurance industry. The insurance market in Cambodia

is relatively new, but has recently begun to gain credibility and

expand its scope. Currently, there are a few major insurance

companies operating here such as Asia Insurance, the state-owned

insurance company Caminco, Forte Insurance, Campubank Lonpac

Insurance, and Infinity Insurance. Cambodia Reinsurance Company

(Cambodia Re) is the only reinsurance company in Cambodia

established by the government to carry out reinsurance business

operations for all classes of risk, including general insurance and

life insurance.

 

64. To help Cambodian businesses stay competitive in the world

market, the government introduced specific measures to facilitate

business, in particular exports, by attempting to reduce informal

costs and streamline bureaucratic hurdles. Measures included: (1)

introduction of a joint inspection by CamControl and the Customs and

Excise Department and issuance of a common inspection report valid

for both agencies and the \”Federal Office\” in order to reduce the

 

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amount of time spent applying for export goods inspection; (2) based

on this common report, MIME and the Ministry of Commerce will issue

the Certificate of Processing (CP) and the Certificate of Origin

(CO), respectively; (3) reduction of the costs of registration from

USD 615 to USD 177 and of the time limit for Cambodian government

issuance of registration from 30 days to ten and a half working

days; and (4) reduction of time required to acquire documents

related to the CO and exports and for goods inspection.

 

65. Cambodia has renewed its commitment to creating a favorable

environment for investment and trade and has further committed to

reducing unofficial fees and costs related to imports and exports.

 

Efficient Capital Markets and Portfolio Investment

——————————————— —–

 

66. Cambodia is moving to address the need for capital markets. In

November 2006, the National Assembly passed legislation to permit

the government to issue bonds and use the capital to make up budget

deficits. However no bonds have been issued since 2007 and Prime

Minister Hun Sen said in 2008 that the government does not plan to

issue bonds in the near future. In 2007, the government also passed

the Law on the Issuance and Trading of Non-government Securities,

and, in partnership with the Korean Stock Exchange, plans to

establish a stock market by the end of 2010.

 

67. At the end of November 2009, the Securities and Exchange

Commission of Cambodia (SECC) released a draft administrative order

on equity securities issuance, which is expected to be adopted in

2010. According to the regulation, the issuance of equity

securities in the Cambodia stock market can be private placement or

public offering. Private placement refers to a personal offer that

is made to no more than 30 investors and with an issue size not

exceeding 20 percent of shareholder\’s equity when shareholder\’s

equity is less than USD 4.8 million or with an issue size not

exceeding 15 percent of shareholder\’s equity when shareholder\’s

equity is more than USD 4.8 million during a 12-month period. In

addition, the allotment of equity securities of public offerings are

divided, with a reserve of 20 percent of total public offering for

investors who are Cambodian citizens, and 80 percent of the

remaining public offering amount open to investors who are both

Cambodian and non-Cambodian citizens.

 

68. The Cambodian government does not use regulation of capital

markets to restrict foreign investment. Domestic financing is

difficult to obtain at competitive interest rates. A new law

addressing secured transactions, which includes a system for

registering such secured interests, was promulgated in May 2007.

Most loans are secured by real property mortgages or deposits of

cash or other liquid assets, as provided for in the existing

contract law and land law.

 

69. The total assets of Cambodia\’s banking system as of September

2009 were approximately USD 4.9 billion, an increase of nearly 22

percent from 2008. Loans account for about 49 percent of the

banking system\’s assets. The National Bank of Cambodia (NBC)

reported that the non-performing loans (NPLs) ratio of banks has

increased from 3.7 percent in December 2008 to 5.2 percent in May

2009 and that the rate could reach as high as 10 percent by the end

of the year. Credit disbursement has also slowed, from a growth

rate of 50 percent in 2008 to just 1 percent through the middle of

2009. As of September 2009, credit granted by the commercial banks

amounted to USD 2.4 billion. Loans made to services and the

wholesale and retail sectors accounted for over 40 percent of total

loans. The banking sector has shown significant improvement, but

requires continued progress to gain international confidence.

 

70. Under the amended Law on Banking and Financial Institutions,

all of Cambodia\’s commercial banks had to reapply for licenses from

the NBC and meet new, stricter capital and prudential requirements

by the end of 2001. As a result, there was a significant shakeout

and consolidation within the banking sector with the closure and

liquidation of 12 banks. In September 2008, the National Bank of

Cambodia moved to slow the rapid growth in the number of commercial

banks, which increased by more than 20 percent in the first nine

months of 2008, giving commercial banks without an investment grade

shareholder until the end of 2010 to triple minimum capital from USD

13 million to USD 37 million. In January 2008, Cambodia\’s banks

 

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were given their first-ever risk assessment from Standard & Poor\’s

of a \’B+/B\’ rating with stable outlook. Their placement was

alongside that of banks in Venezuela, Bolivia, Ukraine, and Jamaica.

Banks have been free to set their own interest rates since 1995 and

average annual interest rate spread has declined from 15.3 percent

in 2004 to 9.6 percent in May 2009 which reflects an increase in the

interest rate for deposits and a decline in the interest rate for

credit.

 

Competition from State Owned Enterprises

—————————————-

 

71. Private enterprises are allowed to compete with public

enterprises under the same terms and conditions and in general are

not entitled to special trading rights or privileges. However,

certain laws and regulations reserve special rights for the state to

monopolize various services including the Electricity Law which

provides special privilege for the Electricity of Cambodia (EDC) to

provide power transmission to the distribution companies and bulk

power consumers.

 

72. Cambodia has several state-owned enterprises and two

joint-venture enterprises with a majority state holding. These

include rubber plantations and an agricultural inputs company,

infrastructure operating companies, the Phnom Penh Water Supply, the

EDC, the Rural Development Bank, and two joint-venture companies –

telecommunication operator Camintel and Cambodia Pharmaceutical

Enterprise. Currently, the country does not have a sovereign wealth

fund.

 

73. All SOEs are under the supervision of certain line Ministries

or government institutions and are overseen by boards of directors

drawn from among senior government officials. The Law on Audit

established the National Audit Authority and empowers the Auditor

General to conduct audits of state-owned enterprises. The audit

conducted by the Auditor General\’s Office primarily focuses on

compliance with rules governing SOE financial management. Limited

information is publicly available on the financial position and

performance of state-owned enterprises.

 

74. Cambodia has yet to pass the Law on Competition as part of its

WTO accession obligations. Under the draft law, a National

Committee on Competition will be established. However, the 1993

Constitution of Cambodia provides for the state to take necessary

intervention measures to protect the competitive process of the

marketplace as well as to protect consumer welfare.

 

Corporate Social Responsibility (CSR)

————————————-

 

75. CSR is a new concept to Cambodia and is not widely understood

among local producers or consumers. However, certain labor and

social standards have been established in key industries,

particularly in the garment sector. Under the terms of the 1999

U.S.-Cambodia Trade Agreement, the U.S. Government committed to

increase the size of Cambodia\’s garment export quota if the country

could demonstrate improvements in labor standards. This was the

first bilateral trade agreement to positively link market access

with progress in compliance with labor obligations. Currently labor

standard monitoring in the garment sector is being conducted by the

International Labour Office (ILO) in coordination with the

government. The ILO project succeeded in improving compliance with

labor standards, virtually eliminating the worst labor abuses such

as forced labor and child labor within the garment sector. Socially

responsible businesses continue to source garments from Cambodia due

to its well-deserved reputation for high labor standards.

 

76. Currently, the ILO\’s Better Work and Better Factories Cambodia

program is developing a training package on planning and

implementing the transition of the inspections regime towards

substantial compliance with international labor standard such as the

OECD Guidelines for Multinational Enterprises. In addition, several

multinational enterprises conduct CSR programs in Cambodia which are

viewed favorably by the local community.

 

Political Violence

——————

 

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77. Cambodia is relatively peaceful compared to its pre-UNTAC

history. Election-related violence has decreased in each national

election held at five-year intervals since 1993. Cambodia\’s 2007

commune council elections followed by the July 2008 National

Assembly election had little of the pre-election violence or

intimidation that preceded the 2002 and 2003 elections. The 2007

and 2008 polls resulted in clear victories for the Cambodian

People\’s Party, with the Sam Rainsy Party emerging as the main

opposition party.

 

78. Cambodian political activities have turned violent in the past,

and the possibility for politically motivated violence remains.

During the anti-Thai riots in 2003, the Royal Embassy of Thailand

and Thai-owned commercial establishments were attacked. In November

2006, police arrested six people for allegedly plotting to conduct

bomb attacks in Phnom Penh during the Water Festival.

 

79. On July 29, 2007, three improvised explosive devices (IEDs)

were planted at the Vietnam-Cambodia Friendship Monument in Phnom

Penh. One of the IEDs partially exploded, but the others failed to

detonate and were recovered by Cambodian authorities. No one was

injured. On January 2, 2009, two undetonated IEDs were found near

the Ministry of National Defense and state-owned TV3. While there

is no indication these incidents were directed at U.S. or other

Western interests, the possibility remains that further attacks

could be carried out.

 

80. Following the July 2008 UNESCO World Heritage Site listing of

the Preah Vihear Temple, thousands of Thai and Cambodian soldiers

amassed in a few isolated areas along the Thai-Cambodian border,

particularly near the disputed Preah Vihear temple area. Since

then, soldiers have clashed near the temple resulting in deaths on

both sides, but the outbreaks of violence have been rare and lasted

only a few hours. Both the Thai and Cambodian governments have

committed to a peaceful resolution of the dispute.

 

Corruption

———-

 

81. Despite increasing investor interest, Cambodia continues to

rank poorly on global surveys of competitiveness and corruption.

According to the World Economic Forum\’s Global Competitiveness

Report 2009-2010, Cambodia\’s competitiveness ranking slipped by one

point to 110 of 133 countries surveyed, a reversal of the one point

climb to 109 in the 2008-2009 report (of 134 countries). The World

Bank also ranked Cambodia in the lower half of the list, 145 of 183,

on business climate. In 2009, Cambodia scored 2.0 on a scale of 0

(highly corrupt) to 10 (highly clean) in Transparency

International\’s Corruption Perceptions Index, ranking 158 out of 180

countries assessed, suggesting widespread and endemic forms of

corruption.

 

82. Business people, both local and foreign, have identified

corruption, particularly within the judiciary, as the single biggest

deterrent to investment in Cambodia. Corruption was cited by a

plurality of respondents to the World Economic Forum survey as the

most problematic factor for doing business in Cambodia. A 2007

USAID-funded survey of the Phnom Penh Chamber of Commerce also found

that corruption is considered to be the main obstacle for doing

business.

 

83. Public sector salaries range from USD 25-60 per month for

working level officials, and around USD 2000 per month for

high-ranking officials. Although there is an annual salary increase

of 10-15 percent, these wages are far below the level required to

maintain a suitable quality of life in Cambodia, and as a result,

public employees are susceptible to corruption and conflicts of

interest. Local and foreign businesses report that they must often

pay extra facilitation fees to expedite any business transaction.

Additionally, for those seeking to enter the Cambodian market, the

process for awarding government contracts is not transparent and is

subject to major irregularities.

 

84. Current Cambodian laws and regulations and their application

are insufficient to address the problem of corruption. Laws dating

from the UNTAC period (1991-93) against embezzlement, extortion, and

bribing public officials exist, but are enforced rarely, often for

political reasons.

 

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85. Cambodia is not a signatory to the OECD Anti-Bribery

Convention, but has endorsed the ADB/OECD Anti-Corruption Action

Plan for Asia and the Pacific. In 2007, the government signed a

regional anti-corruption pact with eight other ASEAN countries, and

in September of the same year, also signed the UN Convention Against

Corruption. Cambodia is considering joining the Extractive

Industries Transparency Initiative governing the oil sector.

 

86. Cambodia is under increasing pressure from donors to address

the issue of good governance in general, and corruption in

particular. Cambodia began efforts to draft and enact

anti-corruption legislation in the 1990\’s. In a draft action plan

on good governance presented to donors in May 2000, Cambodia

promised to pass anti-corruption legislation by late 2001. Since

then, donors have become increasingly frustrated with the

government\’s failure to meet a series of benchmarks to enact new

anti-corruption legislation.

 

87. However, in October, the National Assembly passed a new Penal

Code, which the government has long stated was a prerequisite to the

heavily anticipated anti-corruption law. In December, the Cambodian

government finally approved the draft anti-corruption law which is

expected to be approved by the National Assembly in 2010. Under the

new law, all civil servants would be obliged to declare their

financial assets to the government every two years.

 

88. The Ministry of National Assembly-Senate Relations and

Inspection (MONASRI) has an anti-corruption mandate, but is largely

inactive. In 2007, however, MONASRI, with technical assistance from

USAID, created a draft Access to Information Policy. The draft has

yet to be forwarded to the Council of Ministers. The government

also created an anti-corruption commission within the cabinet in

late 1999, which has undertaken a few investigations, one of which

resulted in the dismissal of a mid-level official in late 2001.

Also in 2001, the government established a National Audit Authority,

which has been only marginally effective because of its lack of

transparency and independence.

 

89. Ignoring the existing anti-corruption commission, the

government established the Anti-Corruption Unit (ACU) in August

2006, a temporary body designed to address corruption until the

anti-corruption legislation is passed. The mission of the ACU is to

focus on preventing corruption, strengthening law enforcement, and

obtaining public support for combating corruption. However the ACU

is considered to be ineffective because of its lack of independence

and capacity.

 

90. In its most comprehensive reform strategy, the Rectangular

Strategy Phase II, adopted as the government platform in 2008 after

phase I in 2004, the Cambodian government once again renewed its

commitment to fight corruption and make good governance the

centerpiece of reform. The strategy acknowledges the importance of

taking action against corruption, but the challenge remains a

daunting and long-term one that will require political will at the

highest levels of the government.

 

Bilateral Investment Agreements

——————————-

 

91. Cambodia has signed bilateral investment agreements with

Australia, China, Croatia, Cuba, the Czech Republic, France,

Germany, Indonesia, Kuwait, Japan, Laos, Malaysia, the Netherlands,

North Korea, the Organization of the Petroleum Exporting Countries

(OPEC), Pakistan, the Philippines, Singapore, South Korea,

Switzerland, Thailand, and Vietnam. Future agreements with Algeria,

Bulgaria, Burma, Egypt, Hungary, Libya, Malta, Qatar, Russia, the

United Kingdom, and Ukraine are planned. The agreements provide

reciprocal national treatment to investors, excluding benefits

deriving from membership in future customs unions or free trade

areas and agreements relating to taxation. The agreements preclude

expropriations except those that are undertaken for a lawful or

public purpose, are non-discriminatory, and are accompanied by

prompt, adequate and effective compensation at the fair market value

of the property prior to expropriation. The agreements also

guarantee repatriation of investments and provide for settlement of

investment disputes via arbitration.

 

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92. In addition, in July 2006, Cambodia signed a Trade and

Investment Framework Agreement (TIFA) with the United States, which

will promote greater trade and investment in both countries and

provide a forum to address bilateral trade and investment issues.

Two very successful meetings were held under the TIFA in 2007 in

which the U.S. and Cambodian governments discussed WTO accession

requirements, trade facilitation and economic development

initiatives, and progress on intellectual property rights. Since

then, several bilateral working level meetings have been held to

advance the TIFA agenda.

 

OPIC and Other Investment Insurance Programs

——————————————–

 

93. Cambodia is eligible for the Quick Cover Program under which

the Overseas Private Investment Corporation (OPIC) offers financing

and political risk insurance coverage for projects on an expedited

basis. With most investment contracts written in U.S. dollars,

there is little exchange risk. Even for riel-denominated

transactions, there is only one exchange rate, which is fairly

stable. Cambodia is a member of the Multilateral Investment

Guarantee Agency (MIGA) of the World Bank, which offers

political-risk insurance to foreign investors.

 

94. The Export-Import Bank of the United States (Ex-Im Bank)

provides financing for purchases of U.S. exports by private-sector

buyers in Cambodia on repayment terms of up to seven years. Ex-Im

Bank support typically will be limited to transactions with a

commercial bank functioning as an obligor or guarantor; however, it

will consider transactions without a bank undertaking on a

case-by-case basis.

 

Labor

—–

 

95. The country has an economically active population (defined as

being ten years of age and older) of some 8.8 million people out of

a population of 13.4 million. While government statistics are

somewhat higher, they do not fully capture the problems of

unemployment and underemployment in Cambodia.

 

96. The economy is not able to generate enough jobs in the formal

sector to handle the large number of entrants to the job market.

This dilemma is likely to become more pronounced over the next

decade. Cambodia suffers from a large demographic imbalance.

According to the 2008 General Population Census of Cambodia,

Cambodia\’s annual population growth rate is 1.54 percent. Persons

20 years of age or younger account for 48.1 percent of the total

population. As a result, over the next decade at least 275,000 new

job seekers will enter the labor market each year.

 

97. Approximately 65 – 70 percent of the labor force is engaged in

subsistence agriculture. At the end of 2009, about 278,000 people,

the majority of whom are women, were employed in the garment sector,

with 300,000 Cambodians employed in the tourism sector, and a

further 50,000 people in construction.

 

98. The 2009-2010 Global Competitiveness Report of the World

Economic Forum identified an inadequately educated workforce as one

of the most serious problems in doing business in Cambodia. Given

the severe disruption to the Cambodian education system and loss of

skilled Cambodians during the 1975-79 Khmer Rouge period, workers

with higher education or specialized skills are few and in high

demand. A Cambodia Socio-Economic Survey conducted in 2004 found

that about 12 percent of the labor force has completed at least an

elementary education. Only 1.2 percent of the labor force completed

post-secondary education.

 

99. Overall literacy, for those aged fifteen and over, is 75.1

percent with male literacy rates considerably higher than those for

females in both urban and rural areas. Many adults and children

enroll in supplementary educational programs, including English and

computer training. Employers report that Cambodian workers are

eager to learn and, when trained, are excellent, hardworking

employees.

 

100. Cambodia\’s 1997 labor code protects the right of association

and the rights to organize and bargain collectively. The code

 

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prohibits forced or compulsory labor, establishes 15 as the minimum

allowable age for paid work, and 18 as the minimum age for anyone

engaged in work that is hazardous, unhealthy or unsafe. The statute

also guarantees an eight-hour workday and 48-hour work week, and

provides for time-and-a-half pay for overtime or work on the

employee\’s day off. The law gives the Ministry of Labor and

Vocational Training (MOLVT) a legal mandate to set minimum wages

after consultation with the tripartite Labor Advisory Committee. In

January 2007, the minimum wage for garment and footwear workers was

officially set at USD 50 per month. In April 2008, a USD 6 per

month cost of living allowance was instituted to offset high levels

of inflation. There is no minimum wage for any other industry. To

increase competitiveness of garment manufacturers, the labor code

was amended in 2007 to establish a night shift wage of 130 percent

of day time wages.

 

101. Acleda Bank, a local commercial bank, is currently managing

Cambodia\’s first National Social Security Fund (NSSF), which

protects workers against occupational risks and workplace accidents.

The fund was established by sub-decree in 2007 and requires

employers to contribute 0.8 percent of each employee\’s salary to the

NSSF. As December 29, 2009, approximately 350,000 workers, most

from the garment sector, contribute to the fund through their

employer. The Cambodian government has responded to the global

economic crisis by temporarily contributing 0.3 percent towards the

NSSF on behalf of employers for two years (2009-2010) which has

resulted in a reduction of employers\’ obligation from 0.8 percent to

0.5 percent of total wages. A second phase of the fund, to be

implemented in 2010, will focus on health care for employees,

followed by pensions in 2012.

 

102. Enforcement of many aspects of the labor code is poor, albeit

improving. Labor disputes can be problematic and may involve

workers simply demanding conditions to which they are legally

entitled. In labor disputes in which workers complain of poor or

unhealthy conditions, MOLVT and the Ministry of Commerce have

ordered the employer to take corrective measures. The U.S.

Government, the ILO, and others are working closely with Cambodia to

improve enforcement of the labor code and workers\’ rights in

general. The U.S.-Cambodia Bilateral Textile Agreement linked

Cambodian compliance with internationally recognized core labor

standards with the level of textile quota the U.S. granted to

Cambodia. While the quota regime ended on January 1, 2005, a

\”Better Factories\” program continues to build on the labor standards

established.

 

Foreign Trade Zones

——————-

 

103. To facilitate the country\’s development, the Cambodian

government has shown great interest in increasing exports via

geographically defined special economic zones (SEZs), with the goal

of attracting much-needed foreign direct investment.

 

104. The government is preparing a Law on Special Economic Zones

which will define SEZs and establish the rules under which they will

operate. The law may be submitted for approval of the Council of

Ministers in 2010.

 

105. In late December 2005, the Council of Ministers passed a

sub-decree on Establishment and Management of Special Economic Zones

to speed up the creation of the zones. The sub-decree details

procedures, conditions and incentives for the investors in the

zone.

 

106. Since issuing the sub-decree, the Cambodia Special Economic

Zones Board (CSEZB) has approved 21 SEZs as of December 2009, of

which 4 are in operation, located near the borders of Thailand and

Vietnam, and in Phnom Penh, Kampot, and Sihanoukville.

 

Foreign Investment Statistics

—————————–

 

107. Foreign Direct Investment (FDI) proposals approved by the

Council for the Development of Cambodia (CDC) have dramatically

increased in recent years, with approved FDI reaching USD 10.9

billion in 2008, compared with USD 201 million in 2004. However, FDI

inflows declined dramatically to only USD 1.6 billion as of October

 

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2009 due to the impact of the global economic crisis. FDI registered

capital however, has been modest since 1995, with an average inflow

of USD 304 million in the period 1995-2008. The FDI registered

capital figures probably understate actual investment, since they

report only registered capital and not fixed assets. CDC statistics

for fixed assets, however, are based on projections, and the CDC has

no effective monitoring mechanism to determine the veracity of the

numbers. The FDI registered capital flow into Cambodia is uneven

and gradually declined from USD 135 million in 1999 to USD 30

million in 2003, but rose to USD 105 million in 2009.

 

108. Total FDI registered capital flows into Cambodia for the years

1998-2009 are presented in the table below, in USD million.

(Source: CDC) (Note: statistics from the National Bank of Cambodia

differ significantly from CDC\’s figures.)

 

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

320 135 74 81 50 30 45 383 209 473 260 105

 

109. Figures from the CDC for registered capital of approved

projects, including domestic investment, and broken down by country

of origin and economic sector, are provided below. The FDI

registered capital figures below may overstate investment because

they include projects that have not yet been, or may never be, fully

implemented and retention of dormant or defunct projects from

earlier years makes the investment figures appear higher.

 

110. Total cumulative registered investment projects approved, by

country of origin, August 1994 to October 2009 (source: CDC)

 

Country USD millions Pct.

Malaysia 1,736 32.17

Cambodia 1,526 28.28

China 603 11.17

Taiwan 405 7.50

Thailand 221 4.09

Singapore 199 3.68

South Korea 170 3.15

U.K. 132 2.44

USA 71 1.31

Vietnam 69 1.27

Indonesia 55 1.01

Australia 55 1.01

France 42 0.77

Japan 24 0.44

Other 88 1.63

Total 5,396 100

 

111. Total cumulative registered investment capital by sector, from

January 1998 to October 2009 (source CDC)

 

Sector USUSD millions Number of Projects

Industry 1,538.7 748

– Food Processing 93.5 13

– Garments 469.4 421

– Petroleum 212.2 9

– Wood Processing 100.3 17

– Footwear 33.8 27

Agriculture 209.6 90

Services 342.8 81

– Construction 64.6 15

– Telecommunications 94.5 16

Tourism 446.4 98

Total 2537.5

 

112. New investment projects in USD million, by country of origin,

2004-2009(source: CDC)

 

Country 2004 2005 2006 2007 2008 2009

Malaysia 7.81 0.6 2.5 19.8 1 na

Cambodia 15 78.5 116.8 264.3 99.8 17.6

U.S. 2.1 2.2 4.3 6.5 12.3 1

Taiwan 4.6 4.1 16.4 14 9.5 5

Singapore 1.6 5.3 3.8 1 12 5.5

China 24 38 28.3 40.4 37.9 34.5

South Korea 4.1 16 4.5 22 19.5 5.2

Hong Kong na 0.3 1.5 0.6 na 1

France 0.6 0.4 na 0.3 2.3 1.6

 

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Thailand 2 15 10 13.8 30.6 15.5

U.K. 1.5 1 1 1.5 1 2

Canada 1.7 0.6 1.5 na 4.8 1

Indonesia na na na na na 1

Australia na 7 na 3.5 1 na

Japan 0.7 na 1 7.5 4.6 1

Other na na 8.1 78.5 4.1 11

Total 65.71 169 199.7 473.7 240.4 102.9

 

113. New investment projects in USD million, by sector, 2004-2009

(source: CDC)

 

Sector 2004 2005 2006 2007 2008 2009

Industry 53.5 325 173.4 269.9 90 56.7

– Food Processing 1 na 22 24 4 2

– Garments 19 54 41.9 45.1 49 20

– Petroleum 1 200 na na na 9.2

– Wood Processing 1 na na 2 na 2

– Mining na 30 1 149 4 7

Agriculture 2 4 2 50.1 26 32.5

Services 5 32 16.3 127.2 43 4

– Construct 3 31 6 5 1 na

– Telecom na na na 42.2 2 2

– Infrastructure na na na 65 na 1

Tourism 5.5 18 18 33.5 101 12

Total 66 379 209.7 480.7 260 105.2

 

114. The CDC has registered approximately USD 71 million in U.S.

investment since August 1994. Caltex has a chain of service

stations and a petroleum holding facility in Sihanoukville; Crown

Beverage Cans Cambodia Limited, a part of Crown Holdings Inc.,

produces aluminum cans; and Chevron is actively exploring offshore

petroleum deposits. W2E Siang Phong Co., Ltd., a joint venture

between U.S.- Dutch investors, invested in biogas power generation.

There are also U.S. investors in a number of Cambodia\’s garment

factories.

 

115. In 2008, several Cambodia-focused private equity funds emerged

seeking to raise between USD 100 and USD 500 million each for

investments in infrastructure, agriculture, tourism, and real estate

development, among other sectors. However it appears the global

economic slowdown is limiting fund-raising abilities, and widespread

investments by these funds have not yet materialized.

 

116. Major non-U.S. foreign investors include Asia Pacific

Breweries (Singapore), Asia Insurance (Hong Kong), ANZ Bank

(Australia), BHP Billiton (Australia), Oxiana (Australia), Infinity

Financial Solutions (Malaysia), Total (France), Cambodia Airport

Management Services (CAMS) (France), Samart Mobil Phone (Malaysia),

Shinawatra Mobile Phone (Singapore), Thakral Cambodia Industries

(Singapore), Petronas Cambodia (Malaysia), Charoeun Pokphand

(Thailand), Siam Cement (Thailand), and Cambrew (Malaysia).

 

117. Since 2007, several well-known U.S. companies opened or

upgraded their presence in Cambodia. General Electric and DuPont

have established representative offices. Otis Elevators, a division

of United Technologies, also upgraded to a branch office, and

Microsoft initiated a presence through its Market Development

Program.

 

118. Some major local companies and their sectors are: Sokimex

(petroleum, tourism, garment), Royal Group of Companies (mobile

phone, telecommunication, banking, insurance), AZ Distribution

(construction, telecommunication), Mong Rethy Groups (construction,

agro-industry, rubber and oil palm plantation), KT Pacific Group

(airport project, construction, tobacco, food and electronics

distribution), Hero King (cigarettes, casinos and power), Anco

Brothers (cigarettes, casinos and power), Canadia Bank (banking and

real estate), Acleda Bank (microfinance), and Men Sarun Import and

Export (agro-industry, rice and rubber export).

 

119. In 2009 Acleda Bank opened its first bank branch outside of

Cambodia in Laos, and has announced plans for further expansion into

Vietnam and China. Statistics on Cambodian investment overseas are

not available, but such investments are likely minimal.

 

RODLEY

“

10BANGKOK45 SCENESETTER FOR ASSISTANT SECRETARY SHAPIRO

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E.O. 12958: DECL: 01/07/2020

TAGS: PGOV, PREL, MARR, MOPS, PINS, PHUM, TH

SUBJECT: SCENESETTER FOR ASSISTANT SECRETARY SHAPIRO

 

REF: BANGKOK 3116

 

Classified By: Ambassador Eric G. John, reasons 1.4 (b) and (d).

 

1. (C) Assistant Secretary Shapiro, Embassy Bangkok welcomes

you to Thailand. Despite ongoing domestic discord and

current inward focus, Thailand\’s strategic importance to the

U.S. cannot be overstated. Your visit provides an

opportunity to signal the United States\’ appreciation for the

long-standing bilateral relationship, which has facilitated

shared benefits in the fields of security, law enforcement,

and intelligence efforts, as well as groundbreaking

health/research collaboration and long-standing refugee

support. In just the last three months alone, the U.S.-Thai

partnership has yielded a promising new lead in the drive to

develop an HIV vaccination and the seizure of more than 35

tons of North Korean weapons, two examples which serve to

illustrate the depth and breadth of a relationship. In late

December, the Thai Cabinet approved a supplemental budget to

facilitate the delayed peacekeeping deployment to Darfur.

 

2. (C) As your visit will take place in the run up to the

expected U.S.-Thai Strategic Dialogue, Thai interlocutors

will likely be interested in pursuing discussions on

strategic views of regional security challenges and how the

U.S.-Thai alliance can be focused to assist as Thailand

prepare for threats. The Thai will look to discuss U.S.

assistance through bilateral exercises and training, and

helping the Thai military modernize either by means of

procuring U.S. defense articles or via the hoped for receipt

of excess defense articles by way of Thailand\’s status as a

Major Non-NATO Ally, as Foreign Minister Kasit Piromya raised

in 2009 with Secretary Clinton and other senior USG

officials. In addition, with the Royal Thai Armed Forces

Headquarters (RTARF) preparing for a difficult deployment to

UNAMID in Darfur, the Thai military will look to explore ways

whereby the U.S. can assist.

 

POLITICAL ENVIRONMENT

———————

 

3. (SBU) The last eighteen months were turbulent for

Thailand. Court decisions forced two Prime Ministers from

office, and twice the normal patterns of political life took

a back seat to disruptive protests in the streets. The

yellow-shirted People\’s Alliance for Democracy (PAD) occupied

Government House from August to December 2008, shutting down

Bangkok\’s airports for eight days, to protest governments

affiliated with ex-Prime Minister Thaksin Shinawatra. The

red-shirted United Front for Democracy against Dictatorship

(UDD), followers of Thaksin, disrupted a regional Asian

Summit and sparked riots in Bangkok in mid-April 2009 after

Thaksin, now a fugitive abroad in the wake of an abuse of

power conviction, called for a revolution to bring him home.

2010 promises to be contentious as well, with Thaksin and the

red shirts having vowed to redouble their efforts to topple

the government.

 

4. (C) Prime Minister Abhisit Vejjajiva is a photogenic,

eloquent 44-year old Oxford graduate who generally has

progressive instincts and says the right things about basic

freedoms, social inequities, policy towards Burma, and how to

address the troubled deep south, afflicted by a grinding

ethno-nationalist Muslim-Malay separatist insurgency.

Delivering is another matter, and Abhisit has disappointed us

recently on the repatriation of the Lao Hmong and his

handling of several foreign investment-related issues.

Despite recent higher approval ratings, Abhisit remains

beset by a fractious coalition, vigorous parliamentary

opposition in the form of a large block of politicians under

the Puea Thai Party banner, and street protests from the

red-shirts.

 

5. (C) While both yellow and red try to lay exclusive claim

to the mantle of democracy, neither side of this split is as

democratic as it claims to be. Both movements reflect deep

social concerns stemming from widespread perceptions of a

lack of social and economic justice, but both seek to triumph

in competing for traditional Thai hierarchical power

relationships. New elections would not appear to be a viable

solution to political divide, and political discord could

persist for years. We continue to stress to Thai

interlocutors the need for all parties to avoid violence and

respect democratic norms within the framework of the

constitution and rule of law, as well as our support for

long-time friend Thailand to work through its current

 

BANGKOK 00000045 002 OF 004

 

difficulties and emerge as a more participatory democracy.

 

RECEDING MONARCHY

—————–

 

6. (C) Underlying the political tension in Bangkok is the

future of the monarchy. On the throne for 62 years,

U.S.-born King Bhumibol is Thailand\’s most prestigious

figure, with influence far beyond his constitutional mandate.

Many actors are jockeying for position to shape the expected

transition period Thailand during royal succession after the

eventual passing of the King, who is currently in poor

health. Few observers believe that the deep political and

social divides can be bridged until after King Bhumibol

passes and Thailand\’s tectonic plates shift. Crown Prince

Vajiralongkorn neither commands the respect nor displays the

charisma of his beloved father, who greatly expanded the

prestige and influence of the monarchy during his 62-year

reign. Nearly everyone expects the monarchy to shrink and

change in function after succession. How much will change is

open to question, with many institutions, figures, and

political forces positioning for influence, not only over

redefining the institution of monarchy but, equally

fundamentally, what it means to be Thai.

 

SOUTHERN THAILAND – SEPARATIST INSURGENCY

—————————————–

 

7. (C) An ethno-nationalist Malay Muslim insurgency in

southern Thailand has claimed an estimated 3,500 lives since

2004. The fundamental issues of justice and ethnic identity

drive the violence as many Malay Muslims feel that they are

second-class citizens in Thailand, and ending the insurgency

will require the government to deal with these issues on a

national level. The insurgents use IEDs, assassinations, and

beheadings to challenge the control of the Thai state in the

deep South; the government has responded through special

security laws which give security forces expanded power to

search and detain people. The Thai military is now deeply

involved in counter-insurgency efforts; in the late

1990s-2004, the military viewed the top national security

threat to be the flow of illegal narcotics from neighboring

Burma.

 

8. (C) The insurgents direct their anger at the government in

Bangkok, not at the United States. Since a U.S. presence or

perception of U.S. involvement in the South could redirect

that anger towards us and link it to the international

jihadist movement — a link that is currently absent — we

ensure that any offers of assistance or training pass the

\”location and label\” test. Put simply, we keep U.S. military

personnel away from the far South and we make sure that we do

not label any assistance or training as directly linked to

the southern situation. Likewise, we work to avoid feeding

rampant, outlandish speculation that we are somehow fomenting

the violence in the South in order to justify building

permanent bases — a very sensitive issue in Thailand. We do

not want to jeopardize our access to key military facilities

in Thailand like Utapao Naval Air Station.

 

ENDURING BILATERAL RELATIONSHIP

——————————-

 

9. (C) Despite the political divide, Thailand\’s strategic

importance to the U.S. should not be understated. The

U.S.-Thai military relationship, which began during World War

II when the U.S. trained Thais to covertly conduct special

operations against the Japanese forces occupying Thailand has

evolved into a partnership that provides the U.S. with unique

benefits. Thailand remains crucial to U.S. interests in the

Asia-Pacific region and beyond. Our military engagement

affords us unique training venues, the opportunity to conduct

exercises that are nearly impossible to match elsewhere, a

willing participant in international peacekeeping operations,

essential access to facilities amid vital sea and air lanes

that support contingency and humanitarian missions, and a

partner that is a key ASEAN nation in which we continue to

promote democratic ideals.

 

10. (C) Thailand\’s willingness to allow the United States to

use Utapao Naval Air Station as the hub for our regional

assistance program was key to making the 2004 tsunami and the

2008 Cyclone Nargis relief operations a success. While those

high-profile relief operations highlighted publicly the value

of access to Utapao, the air base is used regularly for

military flights. A prime example was the critical support

 

BANGKOK 00000045 003 OF 004

 

Utapao provided during OEF by providing an air bridge in

support of refueling missions en route to Afghanistan.

Approximately 1,000 flights transit Utapao every year in

support of critical U.S. military operations both regionally

and to strategic areas of the world. Thailand also provides

valued port access with U.S. naval vessels making calls,

primarily at Laem Chabang and Sattahip, over sixty times per

year for exercises and visits.

 

11. (SBU) Beyond traditional military activities, our

bilateral military relationship provides benefits in other

important areas. One example it the Armed Forces Research

Institute of Medical Sciences\’ (AFRIMS) collaboration with

Thai counterparts on basic research and trial vaccines. The

sophistication of the Thai scientific and public health

community makes collaboration as useful to the USG as it is

to the Thais. A number of important breakthroughs, such as

in the prevention of HIV/AIDS transmission from mothers to

children, were developed here, and the first partially

successful phase III, double blind trial for a potential HIV

vaccine occurred in 2009; a second such trial run by CDC is

currently ongoing.

 

COBRA GOLD AND THE MILITARY EXERCISE PROGRAM

——————————————–

 

12 (C) By means of access to good military base

infrastructure and large areas to conduct unrestricted

operations, Thailand gives the U.S. military a platform for

exercises unique in Asia. Thai leaders are far more willing

to host multinational and bilateral exercises than are other

countries in Asia. This has allowed us to use exercises in

Thailand to further key U.S. objectives, such as supporting

Japan\’s growing military role in Asia and engaging the

Indonesian and Singaporean militaries.

 

13. (C) Cobra Gold, the capstone event of our exercise

program, is PACOM\’s largest annual multi-lateral exercise and

for 29 years has served to strengthen our relations with

Thailand, highlight our commitment to Southeast Asia, and

provide exceptional training opportunities for our troops.

The event has evolved over the years and now facilitates

important objectives such as promoting a greater role in the

Asian Pacific region for Japan, Singapore, and South Korea

and re-establishing a partner role with Indonesia. Cope

Tiger, a leading air exercise with the Thailand and

Singapore, and CARAT, a bilateral naval event, are key

mechanisms for engagement of the Thai navy and air force.

The Thai military continues to highlight to us the

significance of these events for training and for

relationship building.

 

PEACEKEEPING EFFORTS AND DARFUR DEPLOYMENT

——————————————

 

14. (C) Thailand has historically been a strong supporter of

UN peacekeeping missions and was an early contributing nation

to operations in Afghanistan and Iraq. In addition, Thai

generals very effectively led UN forces in East Timor, to

which Thailand contributed 1,500 troops, and in Aceh where a

Thai general served as the principal deputy of the Aceh

Monitoring Mission. Thailand is preparing for deploying a

battalion of troops for a difficult UNAMID mission in Darfur

and has asked for USG assistance (Ref A). During your visit,

the Thai will be very interested in discussing ways ahead on

the deployment. Using GPOI funding, we are working with the

military to increase its peacekeeping capabilities, both as a

contributing nation and as a trainer of neighboring nations.

 

BORDER CONFLICT WITH CAMBODIA

—————————–

 

15. (C) Bilateral relations with Cambodia remain volatile,

primarily due to a border dispute centered on 4.6 square

kilometers of overlapping territorial claims adjacent to the

11th century Hindu Preah Vihear temple. Minor skirmishes

have erupted three times since mid-2008, leading to the

deaths of seven soldiers. Cambodian Prime Hun Sen\’s November

2009 decision to appoint Thaksin as an economic advisor

further stoked cross-border tensions.

 

16. (C) The roots of the border dispute lie in the

Siam-France agreements of 1904-8 and a 1962 International

Court of Justice ruling that granted Cambodia the temple but

left the rest of disputed land unresolved. Tensions spiked

in 2008 when the Thai government in power at that time

 

BANGKOK 00000045 004 OF 004

 

supported Cambodia\’s application to UNESCO for a joint

listing of the temple as a world heritage site, only to face

opposition in parliament and an adverse court ruling. Thorny

internal political considerations and historical rancor

between Thailand and Cambodia make progress difficult. We

urge both sides to resolve their differences peacefully

through bilateral negotiations, border demarcation, and a

reduction of troops deployed along the border.

 

REFUGEE CONCERNS

—————-

 

17. (C) Due to inherent institutional capabilities, the Thai

military plays a prominent role in the management of the many

refugees that enter Thailand from neighboring countries.

Thailand continues to host more than 140,000 Burmese and

facilitate resettlement of more than 14,000 refugees to the

U.S. annually, but the recent forced repatriation of two

groups of Lao Hmong in late December provoked international

outcry. We underscore to the RTG our disappointment with the

deportation decision and our continuing concern over access

to the Hmong now that they have been returned to Laos. The

Thai have asked us privately about possible repercussions due

to the deportation.

 

THE INCREASING ROLE OF CHINA

—————————-

 

18. (C) As the shape of Southeast Asia, Asia writ large, and

the world has changed, so have Thai attitudes. The Chinese

have been making a major push to upgrade all aspects of

relations, including mil-mil. Thailand is not interested in

making a choice between the U.S. and China (nor do we see

closer Chinese-Thai relations as automatically threatening to

our interests here), but we will need to work harder to

maintain the preferred status we have enjoyed. While Thai

military links with the United States are deeper and far more

apparent than Sino-Thai links, China\’s growing influence in

Thailand is readily evident.

 

19. (C) The Chinese have made a strong effort to court the

Thai military. The Thai military has a range of Chinese

weapons systems in its arsenal; the PLA Navy is interested in

closer links with the Thai navy, and China has worked with

Thailand to improve air defense equipment provided to

Thailand in the late 1980\’s. In 2007 and 2008, Thai and

Chinese Special Forces conducted joint exercises, and other

mil-to-mil exchanges have expanded in recent years, as has

the number of bilateral military VIP visits.

 

20. (C) During a visit to Thailand by Chinese Minister of

National Defense Liang Guanglie for the King\’s birthday

celebrations in early December 2009, the Thai and Chinese

militaries agreed to expand bilateral exercises to include

the two nations\’ navies, marines, and air forces. The

initial exercise will be conducted early this year, with the

PLA engaging Thai sailors and marines through an amphibious

landing event and a naval rescue and humanitarian relief

exercise. While some entities within the RTG resisted the

expanded engagement, reportedly the MFA and the Marine

Commandant, the Thai tell us that the Chinese pushed hard for

a rapid expansion of bilateral exercises. The Thai Marines

suggested to us that the exercise will be held at the platoon

or company level; it is unclear how many Navy personnel may

participate.

 

21. (C) The expansion of joint exercises follows China

providing Thailand with $49 million in military assistance

following the 2006 coup. Beyond exercises and assistance,

the number of exchanges by Thai and Chinese officers studying

at military institutes has increased significantly in recent

years, particularly since the coup. The PLA has also

actively courted Thai military leaders, including Defense

Minister Prawit Wongsuwan and Army Commander General Anupong

Paojinda, through multiple hosted-visits to China.

JOHN

“