Authorities in Laos have taken into custody a former finance minister and four colleagues in connection with a scheme in which private companies cashed government bonds issued in promise of payment for work they never performed, according to a source in the one-party communist state.
Phouphet Khamphounvong, Lao finance minister from 2012 to 2014 and formerly a governor of the Bank of the Lao PDR (People’s Democratic Republic), was arrested “at the end of December 2015 while attending a party,” a finance ministry source told RFA’s Lao Service.
Taken into custody at the same time were Phouphet’s former secretary general, a director general of the ministry, a vice director of the ministry’s budget department, and another official whose job was not specified, RFA’s source said, speaking on condition of anonymity.
After serving two terms as bank governor, Phouphet was appointed finance minister in 2012, and in March 2014 was abruptly removed from his post, RFA’s source said.
“His demotion was linked to corruption connected to the issuance of bonds and his involvement in so-called ‘ghost projects’ while he was at the ministry,” he said.
The Lao government had previously granted concessions to private firms to build roads in Oudomxay province in northern Laos to support the country’s 10th National Sport Games, which were held in December 2014, sources said in earlier reports.
And though those roads were never built, the contracting firms later converted bonds issued in promise of future payment into cash with the help of “commissions” paid to finance ministry officials, sources said.
The scheme has caused losses so far of over 300 billion kip (U.S. $36,840,092) to the state budget, with little chance that money will ever be recovered.
The governor of Oudomxay province has now been “urgently removed” from office on suspicion of involvement in the scheme, with Phetsakhone Luangaphay, a deputy minister serving in the central government, replacing him as governor in September 2015, sources said.
According to a report presented to the National Assembly last year by head of the Government Inspection Authority Bounthong Chitmany, Laos suffered losses from corruption of more than 1 trillion kip (U.S. $123 million) between 2012 and 2014.
Corruption among high-level officials in Laos is so widespread that it has deterred foreign investors, created problems with the country’s ability to enforce business contracts and regulations, and left many ordinary citizens frustrated and impoverished.
Reported by RFA’s Lao Service. Translated by Ounkeo Souksavanh. Written in English by Richard Finney.