Jack Adamović Davies on the Rise and Rise of Cambodia’s Prince Group

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Jack Adamović Davies on the Rise and Rise of Cambodia’s Prince Group

“The era of the ‘shell country’ is having its ascendancy and Cambodia is a prime example of the phenomenon.”

Jack Adamović Davies on the Rise and Rise of Cambodia’s Prince Group

A photo of Prince Happiness Plaza, a real estate development being undertaken by Prince Real Estate Group, part of the Prince Group, one of Cambodia’s largest conglomerates. The photo was posted on the company’s Facebook page on February 7, 2024.

Credit: Facebook/Prince Real Estate Group

Over the past several weeks, the U.S.-funded broadcaster Radio Free Asia (RFA) has published a three-part investigative report into the clandestine dealings of the Prince Group, a multi-billion-dollar Cambodian conglomerate. Over the past decade, Prince and its enigmatic chief executive, the Chinese national Chen Zhi, have risen from obscurity to the top echelon of Cambodia’s economic elite, with the ear of the country’s top leaders and a place in the inner circle of the ruling Cambodian People’s Party (CPP). The product of three years of work, the RFA reports allege that at least $700 million of Prince Group’s profit is from illegal transnational crime.

Jack Adamović Davies, a former journalist for the English-language Phnom Penh Post who is now based in Belgrade, was the lead investigator and author of the report. He spoke with The Diplomat’s Southeast Asia Editor Sebastian Strangio about Chen’s swift rise, what it says about the structure of Cambodia’s political economy, and the story’s broader relevance.

Your most recent investigation focuses on Chen Zhi, the chairman of the tentacular Prince Group, which in less than a decade has risen to become one of the most prominent conglomerates in Cambodia, and now holds a considerable portfolio of overseas assets. Who is Chen, how did he end up in Cambodia, and what is the primary source of his wealth, according to your research?

Chen was born in China in 1987 and sometime between now and then he’s become one of Cambodia’s richest and best connected citizens. Three years ago I set out to answer a question: how was this guy able to transform himself from a fresh-faced nobody into a billionaire advisor to the Cambodian prime minister in less than a decade?

We still can’t say for certain where all his money comes from. But, what we have found is that Chinese law enforcement has been investigating his Prince Group of companies for several years now and has identified $700 million in profits they believe Prince has generated from illegal online gambling and money laundering operations.

It’s important to point out that the Prince Group has strenuously – and since we started publishing quite aggressively – denied that they have anything to do with these alleged criminal activities. Prince’s position is that they are the victims of impersonators who have managed to dupe China’s police, prosecutors, and courts.

But that response doesn’t explain other instances we’ve identified in which Chen and other senior Prince Group officials have controlled companies involved in what experts have described as looking an awful lot like money laundering. Nor does it explain the Prince-linked compound on Cambodia’s border with Vietnam that locals say is rife with torture and enslaved workers. To this day the compound is still advertised on a Prince subsidiary’s website. They insist that they merely built it for a client, but we’ve identified plenty of crossover between the Prince Group and the compound’s management.

What does Chen’s sudden prominence say about the ways that business works in Cambodia under the CPP? What does it say about the country’s politics more broadly?

In every country the politically powerful and the mega-wealthy seem to have a magnet-like attraction to one another. What sets Cambodia apart is the almost total lack of societal or regulatory checks on these relationships. Plenty of individuals like Chen have turned up in Phnom Penh with lots of cash and few explanations of where the money came from. And they have been welcomed by the country’s political elites with wide open arms.

For most of its history, Cambodia’s ruling party has kept the wheels of its patronage machine oiled with kickbacks on concessions to strip the country’s forests, parcel out its land, and extract its natural resources. But Cambodia’s forests today are decimated and much of what’s left of them was parceled out to political cronies over the last couple of years in what looked like former Prime Minister Hun Sen securing loyalty ahead of the transfer of power last August to his son and successor Hun Manet. Attempts to tap Cambodia’s undersea oil reserves ended in bankruptcy. The decade-long real estate bubble has burst. Even tourism has failed to recover from the COVID-19 pandemic in line with comparable countries.

Legitimate sources of revenue are fast drying up for the CPP and into that fiscal void have stepped characters like Chen. Cambodia under the CPP has always been something of a protection racket. So long as businesses kicked up bribes to officials and politicians, they would have access to the resources they needed, helpful investment conditions and favorable treatment by the courts. Much of that money would go towards furnishing the officials’ mansions and educating their children at elite foreign schools. But lots of it would also go towards doling out “gifts” to the general population – the carrots to the CPP’s repressive stick that has kept it in power and ensured a stable investment climate for the businesses paying the kickbacks.

Businesses are teetering on the edge of collapse in almost every sector of the economy. The population is over-indebted and under-employed. The patronage machine needs cash more than ever to assuage the people’s increasing hardship and the pool of profitable enterprises to tap for that cash is draining by the day.

The darkly ingenious solution the party has arrived at is to rent out Cambodia’s sovereignty. The U.N. estimated last year that more than 100,000 people are being held as slaves across the country. The criminals that are holding them captive are only able to do so because they enjoy protection from every level of the Cambodian government, protection that is very well remunerated.

One of the most explosive claims in your investigation is the alleged involvement in cyberscam operations, which have recently attracted a lot of international attention, particularly in Myanmar. Describe these operations for us. What evidence is there tying Prince to these sorts of criminal activities, and what has its response been to the allegations?

The most prevalent form of cyberscam in Southeast Asia today is known as “pig butchering” in which victims are lured via social media into a relationship with the scammer, who is usually posing as an attractive member of the opposite sex. Like a pig being readied for slaughter, the victim is metaphorically fattened up. They are induced to trust the scammer and then gently lured into putting money in a phony investment scheme. Usually, they will be shown astronomic returns on their first few investments to convince them to put more in. They will often be kept on the hook until they don’t have a penny left to invest, at which point the slaughter is complete. The scammer then disappears leaving the victim distraught and destitute.

The actual scammers are usually the enslaved people I mentioned a moment ago. They are forced to commit the scams in captivity under the threat of violence, which is often brutally delivered.

The compound we identified on Cambodia’s border with Vietnam, known as the Golden Fortune Science and Technology Park, bears all the usual characteristics of a cyberscam compound. Local residents consistently told us that they had seen escaped workers hunted down by security guards, beaten mercilessly, and then dragged back inside. A former security guard told us that the compound pays a $50 bounty for every escaped worker he returns to them.

Again, it’s important to stress that the Prince Group insists they were merely the construction contractors for the project. But as we show in our story, the linkages between Prince and the compound go far beyond simple client-contractor relations.

Your story does not only involve domestic political machinations; it also deals with a plethora of offshore financial holdings and shell companies, through which Chen Zhi and his business associates have dispersed and concealed their assets. Explain the role of the international financial system in the story of Prince Group. What role does it play in enabling figures like Chen and the illicit/black economies more generally?

For most of the country’s modern history, the international financial system was something that happened to Cambodia. Shell companies would take custody of tracts of the kingdom’s forests and the trees would disappear, for example. Government officials who suddenly became very rich because of those deals would take their newfound wealth and park it in places like Singapore, Hong Kong, New York and London.

Over the last decade or so, though, the wealthier nations of the world have begun waking up to the fact that welcoming dirty money also means welcoming some pretty unpleasant baggage. Anti-money laundering regulations and corporate transparency laws have been beefed up in response. Shell companies are still living up to the description Global Witness gave them as “the getaway cars for financial crime,” but they’re proving less effective. For example, we were able to identify more than $170 million of Prince-linked real estate in London precisely because of recent improvements in British beneficial ownership legislation. Leaked banking records revealed to us that a shell company beneficially owned by Chen was rejected for a bank account in an offshore jurisdiction because he either couldn’t or wouldn’t comply with their due diligence procedures.

But, as the era of the shell company passes its peak, the era of the “shell country” is having its ascendancy and Cambodia is a prime example of the phenomenon.

It is possible to turn up in Cambodia with boatloads of dirty cash and build not just a web of shell companies to mask it, but instead an entire Potemkin business empire to justify your wealth’s existence – providing you get the right politicians on your side. Cambodia has become a country where an individual or company can choose to tell almost any story about themselves and their wealth.

If you decide a few years later that you’d like your children to grow up in London, Paris or New York, you’re no longer a suspiciously youthful billionaire, you’re a visionary entrepreneur who struck it rich in Cambodia.

Chen’s London mansion is owned through a company in Jersey, a tax haven off the coast of France. He bought it from a consortium of minor Qatari royals, among them a former government minister. On the paperwork filed with the Jersey companies registry to record his takeover of the shell company, Chen was invited to list his occupation, which he (or at least his representatives) did: “Chairman Prince Holding Group.”

What does the story of Prince say about the state of Cambodia-China relations? Do you think Chen’s rise is thinkable without the “ironclad” relationship that has grown between Beijing and Phnom Penh?

I have no doubt that the deep alliance between Cambodia and China provided ample cover for Chen’s rise, as it did many others like him. One of the Prince Group’s investment firms in Phnom Penh is even called Belt Road Capital Management, in a clear nod to Beijing’s Belt and Road policy.

Plenty of dubious characters have waved the Belt and Road banner as cover for activities that most likely had no official approval from Beijing. The Chinese police investigations into the Prince Group that we’ve uncovered suggest that Chen was likely one of them.

The Prince Group first made its name as a real estate business, throwing up apartment blocks primarily catering to Chinese nationals looking for somewhere to park their cash overseas. That market has all but dried up. When I was last in Sihanoukville in early 2023, I popped into a Prince Group shopping mall. On the ground floor there was a huge display of Prince apartment projects, whose units were being sold under a confusing “buy two, get one free” offer, which perhaps spoke to some difficulties in shifting them.

But even now the most plausible explanation I’ve heard as to why the Chinese authorities’ investigation of Prince has not charged any of the company’s management is that targeting them would implicate the Cambodian elites they are so interwoven with, including Premier Hun Manet. Beijing has few regional friends quite so reliable as the Cambodian government, I can imagine at some level a desire by China not to upset that relationship has offered Prince a degree of protection.