Valerie Niquet is Senior Research Fellow at The French Institute of International Relations (IFRI), Sinologist and Japanologist, Doctor in political science and writes about the evolution of regional balances and strategic issues in Asia since the end of the Cold War. Funded in in 1979 by Thierry de Montbrial, IFRI is France’s leading independent international relations center, dedicated to policy-oriented research and analysis of global political affairs.

This is how she describes her work:

Thirty years after the start of the policy of reform and opening up launched by Deng Xiaoping in 1978, the political system and Chinese society are considerably more open. However, there still are many gray areas, one of which is the question of decision-making: the way the decision-making process is concretely implemented remains opaque. Between statements of principle and apparent inconsistencies, an analysis of the decision-making process helps to shed light on the conflicts within the political apparatus, the debates on the evolution of the regime, the interests at work, and the power games that take place.

This is a very interesting piece of work if you are interested in how complex and opaque the decision-making process at the top political level in the Middle Kingdom is. Above all, she deserves all the credit for bringing to the mass – me (sic)- in less than 30 pages:

- The management of the Olympic Games

- How China is handling the international financial crisis and social challenges

- Environmental issues and the promotion of the “China” brand

- Last but not least, corruption and the power of influence networks

p/s. All the credit goes to Arnaud de la Grange who first spotted this article. You can download it here (PDF-122Kb).

Britain-based Global Witness said that rights to exploit the resources have been allocated behind closed doors by a small number of power brokers around Prime Minister Hun Sen and other senior officials.

Over the past few years, Cambodia has been buzzing with excitement — and anxiety — about an oil discovery by U.S. energy giant Chevron Corp. off the southwestern coast. There have also been discoveries of other minerals including bauxite, iron ore, copper and chromium, while onshore oil reserves are also being explored.

Some estimate that in coming years Cambodia may reap some $1 billion in annual oil revenues, enough to cut its ties to foreign development aid if the funds are properly utilized.

More than 75 companies, including such internationals as Chevron Corp. and BHP Billiton, were already working in the mining and oil sectors and have paid upfront sums to the government, the report said.

“Companies need to come clean on what they have paid to the government to secure access to these natural resources, or risk becoming complicit in a corrupt system,” the report said.

Of the mine sites investigated in 2008, Global Witness said every one was controlled or owned by members of Cambodia’s political and military elite, including top military commanders and relatives of Hun Sen and cabinet ministers.

The full report is available for download here [PDF - 4.5 MB]

It started all here on Dec. 26th by ChinaSmack, when Chinese Netizens noticed in pictures the Commissioner of the Nanjing Housing Administration Bureau was smoking very expensive cigarettes and wearing an expensive watch that a government official should not be able to afford [Read: on his salary]. ChinaSmack has translated in his post the numerous comments originally from Tanya. [Update: this link has been "harmonized"]

Yesterday, The Strait Times revealed this Government Official had been dismissed and that authorities in Jiangsu province where Internet users exposed an allegedly corrupt official’s taste for luxury have made posting information about private life illegal.

The ruling Communist Party’s parliament in eastern Jiangsu province approved a law making it illegal for people in the city of Xuzhou to publish ‘private information’ on the Internet, the China Daily reported.

But now, anyone in Xuzhou who posts ‘private information’ online will be fined up to 5,000 yuan and could be barred from using the Internet for six months.

Today the news has been reported by Shanghaiist and China Digital Times [Proxy required] as well.

One year later, this strong message seems to have been totally unheard. Behind the growing baby milk scandal, the scandal reveals more than a recurrent regulatory problem, CSM reports, what appears to be an ethical gap in China’s business.

It pointed to a deeper malaise in Chinese society where private profit often trumps the public good as the country races to create a market economy that has outstripped government regulators.

“China has the problems of any transitional economy,” says Yanzhong Huang, a global health expert at Seton Hall University in South Orange, N.J. “But the deeper and more fundamental challenge China faces is a systematic lack of business ethics.”

Among the companies under investigation for having produced melamine-tainted milk, the Sanlu case is rather embarrassing, since the company has been exempted from government food safety inspections since December 2005.

Such certification means that “the products are exempted from quality monitoring and inspection conducted by the government,” the website explains. In return, it adds, “internal inspection should be reinforced.”

Forty-seven Chinese dairy companies currently enjoy such an exemption, according to AQSIQ, after demonstrating that they have “a complete quality guarantee system,” among other criteria.

The incident became public only after Sanlu’s New Zealand partner, Fonterra, which holds three seats on the company board, informed New Zealand diplomats who told Chinese government officials in Beijing of the problem.

Today, Shanghai Daily revealed that more melanine was found in national milk check, in three of China’s leading brands – Mengniu, Yili and Bright. What will be next ?

Learning from the past is obviously not the answer, what is needed here is definitely a ethic and cultural shift in the way of doing business.

The mood is set right from the beginning, by raising the question :

Can foreign investment flourish in a state notorious for corruption, weak laws and business secrecy?

While we could make up our mind right at this point, let’s continue reading. What kind of risks investors face then ? Entry-strategy risk ? Not only:

While finding suitable targets in Cambodia may be difficult enough, private-equity buyers are also certain to face challenges when they try to exit years from now. “This really is a frontier market,” said Chris Leahy, a managing director in Singapore at risk consultant Kroll Inc.

Then come the three major risk areas:

• Lack of skilled people

Roughly 1.7 million people, a fifth of the population, were killed during the communist Khmer Rouge’s reign of terror from 1975 to 1979. Special attention was paid to exterminating the educated. Three decades later, the consequences continue to ripple through the country; a lack of skilled people hampers efforts to lift millions out of grinding poverty.

• Corruption

Transparency International, of Berlin, ranked Cambodia the 14th most corrupt out of 179 nations in its 2007 study.

• Business contracts law enforcement

“There are issues in Indonesia or Philippines enforcing rights but it’s much harder in Cambodia,” said Kroll’s Leahy. “A creditor needs more than 400 days to get a claim enforced, and that’s assuming the court decides to side with a foreign creditor’s claim”

Despite this, what is attracting private equity funds then ?

“Cambodia offers an enormous potential for future capital gains,” Mr. Faber wrote in a recent newsletter for acolyte investors. Faber and Rogers are advising some of the private-equity firms that will pour upward of $500 million into Cambodia from already completed and continuing fund-raising.

Malaysian interests have been active in the country for years and South Koreans are investing in banking and property, including a $2 billion satellite city on the outskirts of the capital, Phnom Penh.

What is the key to success ?

Given the perception that large-scale business activities require an unsavory accommodation with powerful figures in the government, staying small may be the key to success for private equity investors.

“We want the small- and medium-sized investments below the political radar screen,” said Douglas Clayton, a managing partner of Leopard Asia, which is raising $100 million for its Cambodia fund.

Last but not leats…

But finding enough suitable opportunities to absorb several hundred million dollars of private equity capital is another issue facing investors. The challenge is finding companies with accounting and management standards that approach international norms, said Peter Brimble, managing director of the Cambodia Emerald Fund

So go or no-go ?

The money can be absorbed if the economy continues to grow strongly and the government continues to improve transparency and legal standards, Mr. Brimble said. “As we dig deeper into this country and connect with the entrepreneurial class we are finding a lot of opportunities,” he said.

Finally, this looks like a GO !

“Five hundred million dollars is really just a few golf courses and hotels. A lot more could be absorbed,” said Douglas Broderick, the U.N. Development Program’s resident representative in Cambodia

What I understand from this is that Cambodia actually offers huge opportunities for those who take risks, those who were among the first to step in and now don’t want too many people to join…

Even some of them wave the ugly flag of corruption to keep the big players away by now, I feel like Cambodia is one of the next frontier around here.