Cambodia’s NagaCorp gaming giant is suddenly at the center of a controversy that could break the nation’s Covid-19 containment winning streak amid its worst-yet viral outbreak.
The Hong Kong-listed integrated casino firm, which has exclusive gambling rights in Phnom Penh, earlier this month shut its two casino and hotel resorts in the capital after 11 workers tested positive for Covid-19.
Cambodia recorded a daily record of 105 new Covid-19 cases today (March 16), forcing the government to restrict travel between regions. Cambodia has among the fewest cases in Asia at 1,430, but that figure has tripled from a month ago.
Last week, Cambodia acknowledged its first confirmed Covid-19 fatality. It’s unclear what role, if any, NagaCorp’s integrated resort may have played in the current Covid outbreak.
NagaWorld, the branded casino-hotel in the capital Phnom Penh, has tried to portray its closure as a cautious response to the pandemic, but in reality it was under heavy pressure to do so.
Even after several guests were inexplicably taken away from the casino’s hotel and it closed its operations on February 25, the associated casinos were back up and running by the following morning.
That day, the NagaCorp’s union representing 4,000 staff members publicly called on management to put in place Covid-19 specific cleaning protocols and demanded they pay for all workers to be tested for the virus.
An estimated 3,000 workers chose to stay at home over the subsequent days, according to the workers’ union, and those who showed up engaged in go-slow work to pressure the owners to increase Covid-19 testing.
After the workers began their slowdown on February 25, the firm’s owners decided to close operations on March 1. They stated at the time in a letter to shareholders that 3,000 staff had been tested and eleven received positive tests.
In a bid to reopen the casinos and hotels, workers returned for a second test on March 12 but found that their appointment times were ill-planned, leading to winding queues and packed crowds around the casino for much of the day.
A local newspaper quoted one queuing worker: “Have [we] come to give samples or to infect each other? Is this the company or ministry’s mistake?”
NagaCorp’s management has big incentive to re-open as fast as possible.
The company reported a US$102 million net profit in 2020, a reflection of Cambodia’s comparatively light pandemic experience, but well below the $521 million earned in 2019, when the country was swimming in Chinese tourist punters.
To keep investors interested, NagaCorp recently announced it would make an “unprecedented 100% dividend payout” of profits earned in the second quarter this year.
NagaCorp’s founder and chief executive officer, Chen Lip Keong, a Malaysian billionaire who became a naturalized Cambodian citizen in 2020, owns a 66% stake in NagaCorp through two wholly-owned funds, ChenLipKeong Fund Limited and ChenLipKeong Capital Limited, both of which are registered in the Cayman Islands.
He also controls stakes in NagaCorp through a discretionary trust, the ChenLa Foundation.
Chen, among Malaysia’s top 10 wealthiest and worth more than $5 billion according to Forbes, will be one of the recipients of NagaCorp’s “hardship relief dividend” payments. He has invested significantly in Cambodia since the 1990s and is thought to be very close to senior CPP figures, including Hun Sen, to whom he once served as an economic adviser.
By any measure, 2020 was not a good year for NagaCorp. Last January, NagaCorp was hit by strikes as workers protested for higher pay, including a $300 a month minimum for hotel staff and $500 a month for those on the gambling floor.
In June, after NagaWorld had been forced to close for several months due to the pandemic, workers protested again after the company stopped paying their furlough wages. Workers had been guaranteed 50% of pay when the casinos closed but such payments dried up by June, they alleged.
Operations reopened on July 8, but the company noted in its financial records the following month that net profits from the first half of the year fell to $20.6 million, down 91.6% compared with the second half of 2019.
Moody’s changed its outlook on NagaCorp’s “B1” ratings from stable to negative in April, due to the effects of the pandemic and also its considerable new investments totaling more than $4 billion. Of this, $3 billion has been earmarked for the construction of a third integrated casino and hotel resort, Naga3, in Phnom Penh.
More controversy was around the corner when, in November, NagaCorp revealed its plans to build a $350 million “Angkor Lake of Wonder” theme park – which the company compared to Disneyland – just a stone’s throw from the Angkor Wat archaeological ruins, a World Heritage site.
The Angkor Wat temple complex dates back to the 12th century and was the capital of the Khmer Empire, which controlled vast swathes of mainland Southeast Asia and was one of the most advanced societies in Asia at the time.
The Cambodian government granted NagaCorp a 50-year lease on land 500 meters south of the Angkor Wat complex in May, for which the gaming firm will not pay any rent for the first ten years.
The International Coordinating Committee for Angkor, a multinational mechanism to oversee Angkor’s conservation and development, met in late January to discuss how the planned resort – boasting a water park, indoor theme park, several hotels and an entertainment area – would affect the adjacent World Heritage site.
The following month, UNESCO publicly called into question the potential ill-effects of the resort on Angkor Wat, which was designated a World Heritage site in 1992.
Since November, the Cambodian government has attempted to temper such concerns. NagaCorp and Prime Minister Hun Sen have both vowed that the tourism development would not include any gambling facilities, which would seek to attract mostly Chinese tourists.
But the planned mega-resort does include an entertainment district, called “China Town”, which will feature restaurants, bars and nightclubs. Given NagaCorp’s portfolio in gaming and the government’s penchant for opacity, there are still questions about whether the “Angkor Lake of Wonder” resort won’t include casinos.
Questions remain on how the government will handle the affair, which is expected to be debated again by UNESCO’s World Heritage Committee in mid-2021.
On February 19, a secretary of state at the Ministry of Culture and Fine Arts, Sum Mab, said that the project was now on hold as the authorities looked into the objections raised by UNESCO.
In mid-February, French newspaper published an article claiming that Hun Sen was willing to jeopardize Angkor Wat’s UNESCO status for the sake of the resort project. The Cambodian Ambassador to France, Ket Sophann, lashed out at the newspaper for reporting “technical lies and manipulation of public opinion.”
But the NagCorp project puts the Cambodian government in a tight spot.
On the one hand, it could be spun as a sign that the country is prioritizing needed investment, especially as it attempts to recover from an economic contraction in 2020, while focusing on creating jobs in the service sector hard hit by the pandemic.
Cambodia’s vital tourism sector, which contributed around a third of GDP in 2019, has been hardest hit by the pandemic, with mass layoffs mainly among the young and educated.
Some Cambodian news outlets are leading with this positive spin. NagaCorp founder Chen is reportedly very close to the Khmer Times, an English-language daily that writes favorably of the Cambodian government and is owned by another Malaysian businessman.
NagaCorp’s alleged good connections with the Cambodian media have brought it good publicity.
After Chen donated $5 million to the country’s vaccination fund in December, the Khmer Times stated: “The contribution of Tan Sri Dato’ Dr Chen Lip Keong is invaluable and will always be remembered in the history of the people of Cambodia.”
On the other hand, the government might see that nationalist sentiment overrides economic gains, particularly if it senses that the public is opposed to its plans for a historical site seen as the heart of the nation, or perceptions gather NagaCorp’s labor practices sparked the nation’s worst-yet Covid-19 outbreak.