Petrodollars v smallholders

Apr 23rd 2009

BATTAMBANG

From The Economist print edition
http://www.economist.com

Disputes erupt over plans to invest millions in rice farming

IT SEEMED like the perfect match. Kuwait has a lot of money and needs to import food. Cambodia has a lot of fertile land and wants to attract foreign capital. So, as has been happening around the world since the food-price spike of 2007-08, the government of a poor farming country is planning to hand over vast tracts of land to a richer, oil-producing one.

In a whirlwind courtship, Cambodia and Kuwait have exchanged prime ministerial visits and initialled deals on everything from opening embassies and boosting energy co-operation to opening direct flights and holding football friendlies. Kuwait has now reportedly agreed to offer loans totalling $546m to finance a dam on the Stueng Sen river for irrigation and hydropower and to build a road to the Thai border. The Cambodian government says it has not yet decided what exactly the Kuwaitis will get in return but the speculation in Phnom Penh is that they may be offered 50,000 hectares (124,000 acres) of farmland, possibly on 99-year leases. Kuwait is not alone. Last year the prime minister of another rich Gulf statelet, Qatar, also visited Phnom Penh, with plans to invest $200m in Cambodian agriculture.

Such deals have a way of turning sour because of disputes over details. The Cambodian one seems to be conforming to type. Agreements ratified by the rubber-stamp parliament contain sweeping generalities and less detail than most people would expect when they rent an apartment. Son Chhay, an opposition MP and chairman of the National Assembly’s foreign-affairs committee when the deals were initialled, said he could not now obtain copies. But if foreigners want Cambodian rice, he says, they should buy it, not seek to control vast tracts of land.

The other problem with such deals is that they are made in national capitals and often run into opposition on the ground. Cambodia’s rice-farmers are suspicious enough because the government has a record of throwing them off their land in opaque deals involving rich cronies. Villagers in Battambang province, where the Kuwaiti road will run, say they know almost nothing about the scheme. They concede that a new road, built on what is currently a dirt track being measured by surveyors, would help them get crops to market. And according to one happy rumour, Kuwait has agreed to buy all their produce. But they are worried that their land will be confiscated—as has happened before.

The government insists the deal would be good for the country and for economic growth. Cheam Yeap, the chairman of the parliamentary economics and finance committee, says that “somehow we have to attract investors for national development.” He argues that land conflict is the fault of farmers as well as the government and that farmers have to be realistic.

This is not merely self-serving. Cambodia’s rice yields are about half those in neighbouring Thailand and Vietnam. Many people—not just the Kuwaitis—are seeking to modernise farming, which is the largest employer in Cambodia.

International donors are hoping to improve the lot of small-scale farmers by helping them take advantage of world markets by investing in productivity, food processing and transport infrastructure. Other international businessmen, including some from Israel, are seeking to bring foreign technology and capital into Cambodia’s fledgling agri-business sector.

So the question is not whether investment by Kuwait or anyone else is in Cambodia’s long-term interest. It is whether the terms of the particular deal are beneficial. Alas, it is far from clear in this case whether Cambodia’s rulers have been influenced by economic development—or by the prospect of another quick payday.