Investors Sour on Land’s Conflicts, Complexities

On paper, Cambodia presents an impressive list of things investors require to succeed in the agriculture sector: a good climate, fertile soil, ample water resources and cheap and available labor.

But continuing land disputes and difficulties securing land concessions are discouraging investment and have dimmed optimism in the sector despite clear potential, investors and agriculture experts say.

They describe a nontransparent process of pursuing economic land concessions that can take years and requires approvals from multiple ministries and local authorities. Even when concessions are granted, investors can face long and costly land disputes and the resulting bad press.

Foreign investment has been a sought-after component to economic growth in Cambodia for the last two decades, and some say that Cambodia is missing opportunities.

“When you look at Cambodia from a macroeconomic perspective, it looks great, but actually getting something done is very difficult,” said Scott Lewis, chief investment officer for the private equity fund Leopard Capital.

“Agriculture has a lot of potential, but it needs to be made easier to invest in the sector: It takes too long to get something done,” he said.

When Leopard Capital launched its fund in May 2008, it extolled the obvious opportunity of agriculture in Cambodia. But, Mr Lewis said, its $32 million fund might not invest in the sector after all, focusing instead on nascent industries such as food processing.

“We want to do something, and we are going to keep trying. I am just expressing frustration that it hasn’t happened thus far,” he said.

His fund has considered investing in pepper, rice, rubber and cassava, identifying and pursuing two areas of land that the Agriculture Ministry said were available. Eventually in both cases, after months of work the plots turned out to be on protected areas. They are now trying a third time.

The agriculture sector has steadily grown at about 5 percent before and during the economic crisis that began in 2008, and the International Monetary Fund, Asian Development Bank and World Bank have all said agriculture would soften the crisis as garments and tourism took a hit.

Currently, agriculture makes up about 32 percent of economic activity, but it is unclear how much land concessions contribute to this.

According to a message on the Agricultures Ministry’s website, as of May there were 85 contracted and validated companies, about half of which were foreign, holding economic land concessions in 16 provinces totaling 956,690 hectares, or just over 5 percent of Cambodia.

Still, how many companies have applied remains unclear, though it appears that few are Western.

The criticism of land concessions has raged since the 1990s, with frequent news of evictions and violent confrontation between company officials and villagers.

Human rights workers say the land concession process is often shrouded in illegality and can create poverty, rather than wealth, by resulting in evictions and separating the rural poor from their livelihoods. As many as 150,000 Cambodians are under the threat of forced eviction, according to Amnesty International.

Matthew Rendall, a legal adviser at the firm Sciaroni & Associates, said difficulties with the legal system and land tenure created obstacles that some investors wanted to avoid rather than resolve.

“Two or three years ago, people came to look and they have found it to be more difficult than they anticipated,” he said, adding that the process of getting land concessions was overly complicated. “I think it probably does stall, prevent, these investors from going forward. Some who would invest may not, some that would be up and running may find delays.”

He said that the government needed to sell the land outright and create a clearer system for investment in agriculture, which is currently a “mystery” to some investors wanting to proceed.

The process can be so unclear that the land is not demarcated until after the concession is granted, so investors cannot determine who is on the land beforehand, he said.

And though the national government grants land concessions, commune and district authorities issue some land documentation, such as land titles, which can lead to overlapping claims and disputes.

These problems create fertile ground for land conflict and frustration, he said.

Concession holders find themselves in the unenviable position of sorting out those claims, complicating their efforts to get investments off the ground, he said.

“Anybody coming in now is going to have to deal with all those issues,” he said, adding that the risks were greater in Cambodian than in countries where the legal systems are more developed. “The yields can be greater here.”

While some investors may have no intention stealing land, they fear villagers making unfair claims on land and the suggestion of impropriety, he said.

“That press is a bad thing for any company, and they don’t want to have their name in the same sentence as a land dispute with poor Cambodians being kicked off their land. And it’s hard to convince the court of public opinion.”

Those concerns also affect Western investors, who may face more criticism than Chinese and Vietnamese investors.

Western investors often expect guarantees in contracts that may appear unnecessary to a Cambodian official or to businesspeople.

Still, he said the issues are not permanent ones. In 10 years time, many of the problems will evaporate as enough investors will have dealt with the land problems.

Chan Tong Yves, secretary of state of the Ministry of Agriculture, defended the process for getting land concessions, saying that it took time to survey land properly but that the process can be improved gradually.

“You need to have a lot of land surveys and social impact assessments. There are a lot of things to do before we can grant a economic land concession,” he said.

Asked about accusations that the government does not carry out social and environmental impact assessments or that its handling of land concessions discourages investment, he referred questions to Ith Nody, undersecretary of state of the Ministry of Agriculture. Mr Nody could not be reached and Agriculture Minister Chan Sarun was unavailable.

In the meantime, conflicts can frequently be violent and ugly.

In March villagers in Kompong Speu burned makeshift shelters on a 10,000 hectares economic land concession granted to CPP Senator Ly Yong Phat.

In February, the last remaining ethnic Suoy community in Kompong Speu accused a Singaporean firm HLH of depriving them of their land and threatening the indigenous community’s very existence.

Last year, the UN Committee on Economic, Social and Cultural Rights, a panel of jurists monitoring Cambodia’s compliance with a key human rights treaty, called on the government to enact a moratorium on evictions until satisfactory regulations were adopted to protect human rights guarantees.

In May, a coalition of NGOs including the Cambodian Human Rights Action Committee, and Housing Rights Taskforce, issued a statement calling on the government to stop issuing land concessions until authorities could guarantee proper rights to land owners.

It specifically cited a “failure to conduct a thorough public environmental and social impact assessment and the failure to solve the problems with the people affecting by the concessions beforehand.” It also requested that all information available on economic land concessions be made public.

Land concessions play an important role in land disputes and currently do not provide the economic benefits that the business community claims, said Mathieu Pellerin, a consultant with local rights group Licadho.

A more transparent and organized process would reduce problems on both sides but he expressed doubts that the process would be revamped as the murkiness benefits government officials and particularly Cambodian businesspeople.

“The problem is they don’t want to have proper procedures, if you don’t have any proper processes then it is much easier to use force to take land away,” he said. He said bribes are also more easily paid under a non-transparent system.

He said that, while some opportunists did make claims on land concessions fraudulently, they were a minority used by companies to justify illegal actions.

“It’s an excuse not to do the right thing, the right thing for the legitimate owner of land,” he said.

Agribusiness operator Mong Reththy, who is co-chair of the government-private sector forum working group on agriculture, said that land concessions encouraged investment but agreed with some of the complaints about slowness of the process, stating “The problem is coming from the Ministry of Agriculture.” Still, he declined to elaborate.

He also blamed villagers for creating land disputes by claiming land that was not theirs and said government officials also create obstacles.

“Some government officials are very bad. They always make the problem for the companies by accusing the investors of doing wrong on this or that as their ways to extort the money,” he said.

Foreign investment is badly needed for the sector and few Western companies have ventured into the sector but that local partners should help smooth over the process, he said.

“A foreign company that wants to invest in the agriculture sector can not succeed without having a good local partner,” he said.

But even as he said agriculture has potential, two of Mr Reththy’s land concessions, a palm oil concession in Preah Sihanouk province, and an acacia and sugar plantation, have faced a series of problems including land disputes with villagers who claimed to own the land.

And while he supported agriculture, he said, “I have invested in agro-industry since 1995 and I still could not make my profit back.”

Tim Purcell, managing director of the firm Agricultural Development International, said land concessions did raise concerns among investors but many were simply not prepared for the long term commitment needed in a country such as Cambodia.

“It’s a lot of work. The land concession in general doesn’t pay off in the short term,” he said. “From what we’ve seen, some investors who come in they don’t realize the amount of time, effort and money to turn an land concession into a profitable activity.”

      (Additional reporting by Phann Ana)

 

 

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