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 industry.
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 shops.
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
Cambodia."
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.
Sphere of interest
Together with Cambodia, Myanmar and Laos are often considered Beijing's "sphere
of interest" in Southeast Asia.
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.
Brian McCartan is a freelance journalist. He may be reached at brianpm@comcast.net.
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