As the U.S. and U.K. governments sanctioned Cambodia corporations Prince Group and Chair Chen Zhi over alleged online fraud and forced labor, Korea's retail and food sectors that have entered Cambodia are keeping a close watch on the situation.
There are no direct transactions, but operations could be disrupted if banks or buildings used by local partner companies are swept up in the sanctions net.
According to the retail industry on the 21st, Korea's retail and food corporations that have entered Cambodia are operating under a master franchise (MF) model. MF is a method in which the headquarters grants a local company the rights to operate franchises in a designated area instead of operating stores directly. It reduces the headquarters' risk while enabling market expansion, so it is a model mainly chosen by corporations entering Southeast Asia.
Major Korean brands that have entered Cambodia include Shinsegae Group's Emart24, SPC Group's Paris Baguette, and CJ Foodville's Tous Les Jours. Emart24, in cooperation with local partner Saihan Partners, operates seven stores in key commercial districts of the capital, Phnom Penh. Paris Baguette is also operating three stores through local joint venture HSC F&B. CJ Foodville is also operating stores through a local MF company. In all three corporations, local staff are fully responsible for store operations, so there are few cases where domestic staff are stationed or directly involved in operations.
The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) on the 14th (local time) designated Prince Group, 146 affiliated entities, and Chen as a transnational criminal organization (TCO) and announced asset freezes and blocks on financial transactions. The U.K. government the same day froze transactions totaling about 107 million pounds (Hanwha about 204.7 billion won), including a London residence owned by Chen's side, as well as several office buildings and apartments.
Immediately after the two countries' sanctions, a large-scale bank run (mass withdrawal of deposits) occurred at Prince Bank, an affiliate of Prince Group. Prince Bank is one of the major commercial banks in the country. It appears consumer concerns that parent-company risk could spread across financial transactions were reflected.
Unrelated to Cambodia, after U.S. and European Union (EU) sanctions on Russia in 2022, Starbucks withdrew all about 130 stores as its payment network with a local partner was blocked. As sanctioned banks increased, royalty remittances and payments for materials and supplies were cut off, effectively making operations impossible.
In Myanmar, after the 2021 coup, when a military-linked corporations was added to the U.S. Treasury's OFAC sanctions list, some foreign retailers from Japan and Singapore that had leased shopping centers and real estate owned by the corporation terminated or adjusted contracts on the grounds that paying rent could constitute a sanctions violation.
Kim Tae-hwang, a professor in the Department of International Trade at Myongji University, said, "Although these U.S. and U.K. sanctions stem from social issues rather than geopolitical disputes or war, indirect risks can arise depending on the financial and real estate linkages of local partner companies."
The retail industry is also staying on alert as risks could spill over. An industry official said, "We are continuing to communicate with local partners," and noted, "We have found no issues yet with local sales or store-opening plans."
Another official said, "We are closely monitoring the situation with our local partners, bearing in mind that remittances and payments could be disrupted if local transaction networks become entangled with sanctioned entities."