In return for millions in investments, Cambodia is giving out huge land concessions to China and Vietnam, displacing tens of thousands.

LAURA RENA MURRAY THE WORLD POLICY JOURNAL INVESTIGATIVEFUND, JUN. 06 2012

PHNOM PENH, CAMBODIA —

The 328 acres known as Boeung Kak Lake still appear on maps of Cambodia’s capital as a large blue patch, though its waters are now only a memory. Pumped full of sand, the area is being readied for a promised development that has already displaced some 4,000 families. Looming over the puddles and dirt, two massive billboards display portraits of the high-end residential and commercial wonderland intended for the plot.

In 2007, the Cambodian government handed Boeung Kak Lake to Phnom Penh-based Shukaku Inc. in the form of a 99-year lease, which allows the company to clear the land for economic development. The local company belongs to Lao Meng Khin, a close friend of Prime Minister Hun Sen and a senator from the ruling Cambodian People’s Party, but several Chinese companies also have a share in the new development project. The Inner Mongolian firm Erdos Hongjun Investment Corporation has a 50 percent stake in Shukaku. Another Chinese firm, Guangdong New Golden Foundation, has also announced its intent to invest in the project.

Cambodia today is quite literally giving itself away, especially to China and Vietnam — two rivals vying for regional influence. As the Cambodian government welcomes millions of dollars in investments from both nations, the land concessions handed out to these foreigners are forcing tens of thousands off their property and imperiling Cambodia’s future. Over the last 30 years, the Sino-Vietnamese rivalry has shaped Cambodia militarily, politically, and economically, and there are no signs this will change.

Much of the backdrop for this current activity was set during the 2008 financial meltdown that took a wrecking ball to the world economy and sent investors searching for stability in unexpected places. Mineral resources continue to deplete, while the costs of labor are rising in the mega manufacturing centers of southern China. Neutral, well-positioned smaller nations in Southeast Asia like Cambodia have become alluring targets for new investments. Although the commercial benefits have bolstered the economies of such nations, the smaller states have become ground zero in the struggle for resources by more dominant countries.

Following decades of conflict, Cambodia now actively courts foreign investors and aid organizations in its long process of rebuilding. With that aim, the nation’s leaders have sought to attract competing superpowers, drawn to the country by its cheap labor and strategic geographic location, and balance them against each other.

In Channy, president and CEO of Acleda Bank, notes that as of 2010, “foreigner investors can [now] own up to 100 percent of the company.” But it often remains difficult to decipher which companies are foreign and which are locally owned. Like Boeung Kak Lake’s Shukaku Inc., businesses may appear to be local, though the controlling stake is actually held by a foreign company. “There are different arrangements of shareholders,” says Chan Sophal, president of the Cambodian Economic Association. “So sometimes we might see the names of the company as local, but it could represent a lot of foreign interests as well.” such scenarios, he says, occur much more often than is officially reported.

Giant Steps

Negotiating with giants has accelerated the pace of Cambodia’s economic development over the last decade. But as Cambodia becomes the stage of an economic power play between Vietnam and China, maintaining the delicate balance between regional powers will be risky. The Cambodian government says land concessions bolster the country’s economy and improve its infrastructure. Each concession is leased for 70 to 99 years for agricultural or industrial development. The Land Law stipulates that economic land concessions cannot exceed 25,000 acres, a rule that is easily and frequently circumvented by using multiple companies with interlocking ownerships, subsidiaries, or directorships. According to the Cambodian Economic Association’s Chan, half of the land concessions are held by foreign corporations, which he predicts will spell disaster for Cambodians in the years to come. “Land is limited,” he warns. “When you give a lot to foreign companies as free economic concessions, that means there will be less for the future generations.”

Although the law stipulates the concessions are given transparently to stimulate economic growth, the land goes most frequently to those coughing up the largest bribe and often spells disaster for residents living on the land without documents, says Chan. “The payment is informal with a lot of informal dealings in order to get the formal free economic land concessions,” he says.

Most Cambodians do not have land titles — one consequence of the Khmer Rouge decision to abolish all private property after they seized control of the nation in 1975. The continuing lack of such titles makes it easier for a corrupt government to evict people whose legal rights are difficult to prove even if they’ve lived and worked the lands for decades. Since 2007, almost 30,000 families have been forced from their homes, relocated to less desirable areas to make way for wealthy Cambodians or companies, according to Thun Saray, the Cambodian Human Rights and Development Association.

Land concessions are often given in large swaths to the country’s oknhas, wealthy and influential businessmen allied with the Cambodian People’s Party and favored by Hun Sen. Many of these oknhas, such as Shukaku’s Lao, are using their insider status with the current regime to attract foreign investment. In addition to Shukaku, Lao co-owns Pheapimex Fu Chan Co. Ltd. with his wife, Choeung Sopheap. The two companies share an address as well as a reputation for land grabbing. In February, Pheapimex demolished the homes of some 400 families after they were forcibly evicted from Phnom Penh’s Borei Keila settlement. The month before, 10 organizations issued a joint statement calling for the release of 24 women and six children from the Prey Speu center, a detention facility with a history of human rights abuses, where they were unlawfully detained following the demolition of their Borei Keila homes. According to a 2009 Global Witness report, Pheapimex holds more than three million acres in logging and economic land concessions.

In an August 9, 2007 cable released by Wikileaks, the American embassy in Phnom Penh reported that Choeung, who is ethnically Chinese, “uses her contacts in China to attract foreign investment from Chinese companies such as Wuzhishan Ls and Jiangsu Taihu International.” The cable noted that Hun Sen’s relationship to oknhas was “both symbiotic and self-limiting… Hun Sen’s very reliance on his tycoon network may hinder progress in battling corruption, illegal logging, and other sensitive issues that he claims are priorities.”

“The problem is the coalition between the politicians and businessmen,” says Chheang Vannarith, security director of the Cambodian Institute for Cooperation and Peace, a non-partisan Phnom Penh-based research center. “We don’t know what the deals look like, but most of the time, they violate human rights.”

According to Acleda Bank’s In, the former lake behind his office building showcases the negative repercussions and fallout from the country’s zealous courtship of foreign investors. “Investors from China joined by local investors evicted people from their own land,” he says. “If they don’t follow the law, they evict the people with no compensation and cause a lot of social problems.”

The Cambodian government has granted more than 17 million acres to businesses as land concessions over the last three years, a shocking 40 percent of the country, according to the Cambodian Human Rights and Development Association. Calling the practice “messy” and “difficult,” ANZ Royal Bank CEO Stephen Higgins says the current method for redistributing land is not transparent enough for ANZ Royal, a joint Australian, New Zealand, and Cambodian venture. “We are very wary of touching land concessions,” he says. “There’s a couple that we won’t [underwrite], because they wouldn’t pass the ‘K.Y.C.’ — know your customer test. We need to be able to show that their money is from legitimate sources. Boeung Kak Lake we wouldn’t touch with a 10-foot-pole. It’s just disgraceful.” Higgins believes the practices reflect poorly on the country and attract more shady investors, adding, “Bribery is a way of life in Cambodia.”

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