Monday, August 22, 2011

Cambodia shrugs off aid curb

Cambodia shrugs off aid curb

Asia Times online, 23 Aug 2011

Cambodian leaders have shrugged off a World Bank move this month to
suspend new lending due to state-sponsored, large-scale evictions to
clear land for development projects. While rising access to private
Asian capital, particularly from China, has helped Cambodia weather
previous Western donor pressure for reform, the socio-economic costs
of the latest sanction could be much higher.

The World Bank had come under pressure from local and foreign non-
governmental organizations (NGOs) to take a tough stance against
Cambodia's government in response to well-documented forced evictions
of communities. The issue centered on a large-scale urban development
project planned for central Phnom Penh at Boeung Kak lake where many
of the residents are involved in catering to a growing tourist

The pressure increased late last year after an internal investigation
found that the World Bank had violated its own social and
environmental policies in supporting the project. It is being led by
the privately-held Cambodian Shukaku company, which signed a 99-year
lease with the government in 2007 to develop Boeung Kak and the
surrounding area into a district of luxury apartments and high-end

The company is chaired by Lao Meng Khin, a powerful senator affiliated
with the ruling Cambodian People's Party (CPP) and a close associate
of Prime Minister Hun Sen. Shukaku is partnered with the Inner
Mongolia Erdos Hongjun Investment Co Ltd of China, which has pledged
broadly to spend US$3 billion in Cambodia on property development,
metal processing and power generation.

However, the joint venture has raised some eyebrows due to the
unlisted Chinese company's murky background and ownership. Critics say
that the company has no proven expertise in any of the areas in which
it has pledged to invest, and there is an unusual lack of publicity
around a company that has promised to commit such a large amount of
capital outside China.

The developers began pumping sand into the lake in 2008, flooding
homes and virtually wiping out the once tranquil lake's ecology. Land
holders have had no say in the process and have been accused by the
government as illegal squatters on state-owned land. These
accusations, NGOs say, run counter to Cambodia's land law, which
provides protections against evictions to long-time land holders. Many
of the residents at Boeung Kak have lived there for decades.

However, the lake's residents were excluded from a process organized
by the World Bank to adjudicate property claims. Over 2,000 have
already been forced from their homes and another 10,000 now face
eviction. The international lender has since called on the Cambodian
government to halt the evictions and agree to fair compensation for
land holders. After failing to reach an agreement, the World Bank
stated on August 9, "Until an agreement is reached with the residents
of Boeung Kak lake we do not expect to provide new lending to

The World Bank has lent Cambodia between US$50 million and $70 million
annually for the past few years with the last disbursement made in
December 2010. Most of the loans have been committed to health and
education projects. Despite these capital commitments, Cambodian
leaders have so far shrugged off the World Bank's statement about
withholding future loans.

Analysts say they can afford to, given the billions of dollars of aid
and investment the government now receives from China without strings
attached. Cambodia's foreign donors pledged $1.1 billion in aid last
year, with China committing the most of any country. China has also
become Cambodia's largest source of foreign direct investment (FDI),
with stated plans to spend $8 billion on 360 different projects during
the first seven months of 2011.

It is difficult to separate Chinese foreign aid from investment since
they are often intertwined. Chinese companies receive government
subsidies to participate in projects that by Western standards would
often be considered as development related. During a 2010 visit by Hun
Sen to Beijing, China promised to provide a $300 million loan to
construct two national highways and irrigation projects. Other deals
concluded during the visit, mostly related to infrastructure, were
worth around $293 million.

Hun Sen has made it clear in several speeches that he prefers Chinese
to Western aid due to the lack of attached conditions. Western donors
often predicate their aid packages on democratic reforms and
improvements in human rights and counter-corruption. Hun Sen is
apparently not alone in this opinion: the opaque regimes in Laos and
Myanmar have also shown a preference for Chinese aid and investment
for similar reasons.

China became Laos' largest foreign investor in 2010 with total
investments amounting $2.9 billion since 2000. Much of China's
investment there is in mining, hydropower projects, agribusiness and
services. It has also secured a prominent place as an aid donor
through large-scale infrastructure projects such as the construction
of Route 3 connecting southwestern China with northern Thailand
through Laos.

Some of these projects have aimed more at securing goodwill, such as
the widening of the Central Avenue in downtown Vientiane and the
construction of the National Cultural Hall, than making money. That's
evidenced in the fact that many loans are dispensed interest-free.

Last year, largely Western aid agencies and donors cautioned Laos
about racing ahead with a development plan based too heavily on
natural resource exploitation without enough emphasis on health,
education and capacity development among the local population.

The Lao government has stated some of its own concerns over
investment, especially in terms of long-term and concessions, such as
those granted to Chinese investors to build casino complexes. However,
the government has made it clear it intends to reduce its high
dependency on official development assistance in favor of increased
access to Asian private capital, especially from China.

In Myanmar, where the country ostensibly made a transition from direct
military rule to a democratic system earlier this year, there is
increasing Chinese investment as the country's leaders continue to
look to Beijing for economic as well as diplomatic support. Much of
China's investment is in natural resource extraction, hydropower
projects, and infrastructure, but there is a growing interest in
acquiring agricultural land, especially for rubber.

Myanmar's rulers have long relied on Chinese investment and aid to
make up for a lack of development assistance from the West. Sanctions
and concern over human-rights issues have prevented Western donors
from providing funding at levels similar to that donated to Laos and
Cambodia. Human-rights and political opposition groups have long
argued that Chinese aid has allowed the military to stay in power and
continue to repress the population.

China plans in coming years to further expand its trade with the
region and is making moves to develop more extensive physical trade
arteries. Beijing has announced plans to pour money into road and rail
projects in coming years, linking its landlocked southwestern region
with ports in Myanmar, Thailand and Cambodia. It is hoped this will
increase trade, promote regional investment and tourism, as well as
strengthen ties with the member states of the Association of Southeast
Asian Nations (ASEAN).

This may be music to the ears of Southeast Asian policymakers who are
interested in developing their countries' economic potential as well
as improving their own financial situations given the high levels of
corruption in the region. However, growing Chinese influence,
especially in the economic sphere, is becoming increasingly worrisome
to the average farmer and shopkeeper in these countries.

For instance, there is growing discontent in Laos over what some see
as too much Chinese influence in the country. Laos are especially
concerned by the growing number of Chinese migrating to work in the
country on Chinese projects. This became especially acute in Vientiane
when plans for an urban development project near the iconic That Luang
monastery came to light.

The project, which was widely perceived as building a "Chinese city"
in the heart of the capital, has stirred nationalistic responses from
the city's growing middle class. In addition to a penchant by Chinese
companies to import Chinese workers to work on their projects, Laos
are worried those workers will not return home after the projects are
finished, as has been the case on certain roadway projects in remote
northern areas.

Land concessions are also an issue, especially in the north where
Chinese companies have been able to acquire large tracts of land for
plantation agriculture. While many villagers have been able to arrange
contracting agreements to provide rubber to Chinese companies, others
say they have been forced to convert their land to rubber cultivation.
The north is also the location of two Chinese casino, hotel and
shopping complexes at Boten and Huay Xai, where sovereignty has
seemingly been handed over to Chinese developers.

There is also a longstanding, but largely quiet, animosity towards
Chinese influence in Myanmar. Growing Chinese economic influence in
recent years has heightened a perception of Chinese as untrustworthy
businessmen bent on taking over the country.

As evidence, many Burmese point to the large areas of Mandalay and
other cities which have become crowded with shops with store signs
only in Chinese and catering to the growing number of Chinese moving
into them. This perception apparently extends to the upper echelons of
government, where some leaders are reportedly alarmed by China's
growing economic clout vis-a-vis the local population.

For the average Myanmar farmer, especially in the country's northern
region where there is an increase in China-linked agribusiness
projects, there is concern over being evicted from their lands in
favor of commercial plantations. Human rights groups have documented
this practice throughout the country in a process often carried out by
military units.

Others are worried their land will be taken for infrastructure and
other projects. Environmental groups have documented the confiscation
of land to build a deep sea port in Myanmar's south that will ship oil
and gas through pipelines being constructed by Chinese companies to
China's land-locked southwestern region.

While not solely the work of Chinese companies, rising evictions in
Cambodia are creating a huge number of landless displaced people
across the country. Some analysts speculate that the sheer number of
people displaced could lead to social stability problems in the future
as Cambodians forced off their land and without other viable economic
options become increasingly desperate.

Unless Cambodian government policymakers make a shift from their
headlong rush for development and reckless policies to supply China's
demand for natural resources, agricultural products and diplomatic
allies, the risk will rise that their development projects cause more
social problems than they resolve.

It's a message the World Bank has delivered belatedly with its
suspension of new lending and advice Cambodia's leaders would be wise
to heed if they are to maintain social stability amid rapid economic
growth and rising Chinese influence.


*World Bank suspends new lending to Cambodia over eviction of

Relations fray as thousands of residents are evicted to make way for
Phnom Penh property development, Wednesday 10 August 2011 18.14 BST

The World Bank has suspended new lending to Cambodia in a dispute over
the eviction of thousands of poor landowners to make way for a
property development in the capital, Phnom Penh.

Relations between the bank and the Cambodian government have frayed
over plans by a property developer to fill in a lake in the middle of
Phnom Penh to build luxury flats and high-end shops. Thousands have
been forced from their homes, with more facing eviction.

The World Bank responded to a critical internal review by calling on
the Cambodian government to stop evictions and agree to fair
compensation for remaining landowners. But the two sides have failed
to reach agreement and the World Bank's patience has snapped.

In a statement on Tuesday, Annette Dixon, country director, said:
"Until an agreement is reached with the residents of Boeung Kak lake
we do not expect to provide any new lending to Cambodia. The
government is continuing to implement existing programmes and we are
working with the government to ensure that all its legal obligations
under those projects will be met."

The suspension of new lending follows an investigation by the bank's
inspection panel, an internal watchdog, in response to pressure from
NGOs acting on behalf of lake residents.

While noting the undoubted benefits for about 1m households of a
project to provide poor Cambodians with land titles after the
wholesale destruction of legal documents under the Khmer Rouge, the
panel pinpointed several problems.

Residents in the Boeung Kak lake area were denied access to due
process of adjudication of property claims and were displaced, in
violation of the policies the bank agreed with the government for
handling resettlement, the panel found. It also said the bank was too
slow to respond after the expulsion of 2,000 people. Another 10,000
face eviction to make way for the project, which is led by China's
Inner Mongolia Erdos Hongjun Investment Corp, an unlisted firm that
has pledged to spend $3bn in Cambodia on property, metal processing
and power generation.

The figure dwarfs World Bank lending in Cambodia, one of the world's
poorest countries. Existing projects (16 worth about $343m), mainly
for health and education, will carry on. The bank's last loan was made
in December. The World Bank has lent Cambodia about $50-70m annually
in the past few years.

As part of the current spat, the Cambodian government has refused to
consider plans for a 35-acre (15-hectare) plot at Boeung Kak to be set
aside for housing. Landowners at the lake expected their claims would
be respected when government workers began surveying the area in 2006.
But the government excluded them from the process in early 2007, and
then announced a $79m, 99-year lease to a developer with close ties to
the prime minister, Hun Sen. Many of the owners were suddenly accused
by the government of being illegal squatters on state-owned land. In
2008, developers began pumping sand into the lake, flooding out homes
and virtually destroying the lake's ecology.

An estimated 30,000 people are driven from farmland or urban areas
every year to make way for property developments or mining and
agricultural projects.


*Cambodia to World Bank: We Don�t Need Your Money*

Devex, 10 August 2011

The World Bank has frozen new loans to Cambodia over a controversial
real estate project that has already displaced thousands of poor
residents in the capital. Several donors have also threatened to
withdraw aid because of the growing cases of forced evictions.

But the country, one of Asia�s poorest, is undeterred. Why?

Because it has China�s pledges of investments and aid to rely on.

Since 2008 when development of the $2 billion, 133-hectare Boeung Kak
lake area in the capital began, around 3,000 poor residents have been
forcefully evicted from their homes, often because these were flooded
as developers began pumping sand to fill in the lake.

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