Concession comes under legal spotlight

Photo by: Uy Nousereimony

A young farm worker in Kandal province plants rice in September. Analysts say that finding sizeable paddy concessions in suitable growing areas has become increasingly difficult in Cambodia.

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Invariably almost all suitable rice production areas have already been utilised."

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via CAAI News Media

Friday, 05 March 2010 15:03 Susan Wilson

Agro-fund backed by Australian ex-treasurer Costello may violate the Cambodian Land Law

THE Cambodian government has given approval for high-profile Australian investment fund Indochina Gateway Capital Ltd to manage a collection of land concessions whose combined areas total 10 times the legal size permitted by any one company under the 2001 Cambodian Land Law.

The project was first reported in January when Australian former treasurer Peter Costello visited Cambodia as managing director of BKK Partners, an Australian company acting as financial adviser for the project with close internal ties to Indochina Gateway Capital.

In a January meeting with Costello and Australian Ambassador to Cambodia Margaret Adamson, Deputy Prime Minister Sok An “expressed his satisfaction and support for the investment project in the agricultural sector in Cambodia, brought in by ... Peter Costello”, according to a statement from the government’s Press and Quick Reaction Unit.

Costello told Sok An he was seeking capital to fund a US$600 million agricultural investment involving 100,000 hectares of land – the equivalent of a block 50 kilometres long and 20 kilometres wide – despite clear restrictions in Cambodian law limiting economic land concessions to 10,000 hectares.

It would be the largest private investment in Cambodian history, slightly greater than the $590 million in total approved investment for the country in 2009 in what was a record investment year for agriculture.

But the legality of the land concessions required for the project remains unclear, with BKK Partners and Indochina Gateway Capital declining to respond to further questions about their size and potential locations, impact studies and ownership agreements.

Costello told Sok An that Indochina Gateway Capital would be working with joint venture partners to develop 10,000 hectares for banana plantations, 10,000 hectares for teak, 20,000 hectares for oil palm plantations, 20,000 hectares for sugarcane and 40,000 hectares for “farmland”, which is presumed to mean rice paddies, based on a previous interview with the Post.

Another managing director of BKK Partners, John Anderson, told Australian news Web site Crikey that the swathes of unoccupied land still available in Cambodia had helped to motivate the deal.

“Commodity prices spiked in 2008, and in many developing countries there’s limited land available, limited water,” Anderson was quoted as saying. “In Cambodia there’s an abundance of land and water because the Khmer Rouge wiped out 40 percent of the people.”

However, Tim Purcell, director of Agricultural Development International in Phnom Penh and an expert on agricultural income and resource management in Cambodia, said the plan might run into trouble.

Speaking to the Post Wednesday, he expressed doubt that the project could legally proceed as announced by BKK Partners and Indochina Gateway Capital in January.

“It is highly sceptical that these plans can be put into place from a technical point of view,” he said, referring to the 2001 Land Law, which states: “Land concession areas shall not be more than 10,000 hectares.”

“For 40,000 hectares, four separate concessions would need to be obtained, each under a different company name-lease agreement,” he said.

He also said it was unlikely Indochina Gateway Capital could find adjacent land without affecting existing settlements or projects.

“Practical experience by companies obtaining ELCs [economic land concessions] indicates that it is extremely difficult to obtain even 10,000 hectares in a contiguous block that is not subject to overlapping claims, existing farmland, established villages, and/or illegal squatters,” he said.

Purcell said that in contrast to Anderson’s comments about unoccupied land, there is relatively limited land available for such a scheme because economic land concessions can only legally be granted on registered and classified state private land.

“Invariably almost all suitable rice production areas have already been utilised by private rice farmers – land which is not classified as state private land,” he said.

Anderson and Costello say they are not interested in dodgy dealings, but they have not explained how the land will be acquired. Anderson told Crikey that there was also a “social development angle”, with 5 percent of the profits going to a charitable fund.

“Village displacement issues are important to us, but we’ve got to focus on the development benefits for the Cambodian people in raising up the agricultural sector to where it should be. The agricultural sector should be the main contributor to GDP. If you raise the standards and raise the yields, the benefit for the Cambodian people will be huge,” he was quoted as saying.

However, experts believe that agricultural development in Cambodia is not so straightforward.

David Pred, national director of Bridges Across Borders Southeast Asia, told the Post that in the current climate any investment involving large tracts of land would be “at the expense of Cambodian people”.

“ELCs may be reaping huge profits for investors, but they are robbing local farmers of the land and natural resources on which their lives depend, and they are often accompanied by a range of other serious human rights violations and harmful social and environmental impacts,” he said.

“The first question that comes to my mind is: Where are they going to find another 100,000 hectares of arable land for more industrial plantations when half the country’s landmass has already been concessioned and much more has been promised to Vietnam, China, Korea, and Kuwait? The only logical conclusion is that they intend to displace people or cut down protected forests”.

Reports by the United Nations Office of the High Commissioner for Human Rights (OHCHR), Global Witness, Licadho, and Adhoc have all expressed serious concerns about the process of granting economic land concessions.

The Global Witness report Country for Sale notes that many concessions exceed Cambodian law’s 10,000-hectare limit, adding that “most, if not all, the ELC holders have failed to meet legal requirements to conduct environmental impact assessments”.

The report Economic Land Concessions in Cambodia – A Human Rights Perspective, published by the UN human rights agency, said government officials were often unwilling to follow legal requirements, adding that “officials have commented that if the Ministry were to wait until it was possible to comply with all of the requirements of the sub-decree prior to granting concessions, investors would no longer be interested in investing in Cambodia”.

Illegal precedents

There are numerous examples of economic land concessions, often managed by government officials, which clearly flout the law.

Cambodian People’s Party Senator Ly Yong Phat is currently involved in a questionable 9,000-hectare land-concession deal that saw more than 1,000 people sleeping in tents on their farmland Tuesday night to prevent surveying by representatives of his Phnom Penh Sugar Company.

Both the UN agency and Adhoc criticise the senator for holding interests in excess of 10,000 hectares. Question were also raised with regard to his Koh Kong Sugar Industry Company concession of 9,700 hectares and Koh Kong Plantation Company concession of 9,400 hectares. When combined, these two concessions – which have both been shown to belong to Ly Yong Phat – are nearly double the legal limit.

This is another hurdle for Indochina Gateway Capital, as the company would likely be considered to have “ownership interests” in the whole land area, depending on the relationship between the investment firm and the proposed joint venture partners, which has never been explained.

Manfred Hornung, legal adviser at Human Rights NGO Licadho, called on the firm to be “open and as inclusive”.

“Whether it is legal or not at this stage is unclear, but it is important for [Indochina Gateway Capital] to come clean, to be open about locations, about the international partners, to provide the community with information about structure and size of locations and to provide a long and protracted process of community involvement,” he said, adding that a “meaningful” environmental and social impact study was crucial.

Pred said such studies were frequently overlooked in another direct violation of the Land Law.

“Despite legal requirements, for the majority of ELCs, local communities are not consulted before the concession is granted, Environmental and Social Impact Assessments are inadequate or not undertaken at all, and solutions for compensation and resettlement are rarely agreed to before the bulldozers start moving in,” he said.

Executive Director of Community Legal Education Centre Yeng Virak agreed there needed to be more of a focus on impact studies, but said that theoretically, the requirements of Cambodian law should be sufficient. “The law is relatively progressive in terms of recognising the possession rights of the Cambodian people, rights of the [indigenous peoples]. The law provides quite clear and strong guidelines about what is allowed and what isn’t,” he said. “The problem is more with the failure to properly implement the law.”