VZCZCXRO6128
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHPF #0285/01 1250652
ZNR UUUUU ZZH
R 050652Z MAY 09
FM AMEMBASSY PHNOM PENH
TO RUEHC/SECSTATE WASHDC 0666
INFO RUCNASE/ASEAN MEMBER COLLECTIVE

UNCLAS SECTION 01 OF 05 PHNOM PENH 000285 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS AND DRL 
USAID FOR ASIA BUREAU 
 
E.O. 12958: N/A 
TAGS: PGOV PHUM EAGR SENV KDEM CB
SUBJECT: LAND IN CAMBODIA, PART II: LAND CONCESSIONS AND URBAN 
DEVELOPMENT 
 
REF: A) PHNOM PENH 60, B) 08 PHNOM PENH 1003, C) PHNOM PENH 276, D) 
PHNOM PENH 62 
 
SENSITIVE BUT UNCLASSIFIED 
 
THIS IS THE SECOND OF THREE CABLES ON LAND ISSUES IN CAMBODIA.  FOR 
PART I, SEE REF A. 
 
¶1. (SBU) SUMMARY.  Land concessions, or government-approved leases 
of state land, are among the primary tools the Royal Government of 
Cambodia (RGC) uses to encourage economic development.  The 2001 
Land Law includes size, time, and use limits on Economic Land 
Concessions (ELCs) designated for industrial agricultural 
exploitation, but investors have found legal loopholes and take 
advantage of government connections to skirt these rules.  The RGC 
has recently attempted to crack down on ELC abuse, but its efforts 
may be too little too late.  Use, Development, or Exploitation (UDE) 
land concessions allow private investors to develop public interest 
enterprises the RGC is unable or unwilling to undertake itself, and 
there are few rules governing their implementation.  The RGC uses 
UDE concessions for urban development initiatives, despite questions 
about how some of those initiatives fit the definition of "public 
interest". 
 
¶2. (SBU) Environmental impact assessments (EIAs) should provide a 
check on unsustainable land concessions, but RGC capacity 
limitations and a lack of guidelines hinder the effectiveness of 
EIAs.  Behind the growing number of land concessions in Cambodia 
lies a growing wave of foreign investment, which is necessary for 
the country's economic growth but puts increasing pressure on the 
RGC to promote development by bending the rules designed to protect 
Cambodia's land and its citizens.  The intense emphasis on 
development through land concessions and the weak private land 
titling system in Cambodia (Ref A), are the two overarching factors 
that have contributed to the rise of land disputes over the past 
several years.  END SUMMARY. 
 
CATEGORIES OF LAND CONCESSIONS 
------------------------------ 
 
¶3. (U) The 2001 Land Law defines land concessions as leases under 
which a competent authority grants a recipient the right to use 
state land for a particular purpose.  The RGC uses concessions 
extensively to push economic growth and development initiatives. 
The Land Law defines three categories of land concessions: 1) Social 
Land Concessions, given to individuals or families for residence and 
personal farming use (Ref A); 2) Economic Land Concessions, granted 
to private companies for agro-industry ventures; and 3) Use, 
Development and Exploitation (UDE) land concessions, typically used 
to develop an enterprise that the state requires but is unable to, 
or prefers not to, undertake itself, such as construction of an 
airport or hydropower dam. 
 
ECONOMIC LAND CONCESSIONS (ELCs) 
-------------------------------- 
 
¶4. (U) The Land Law designates ELCs for industrial agricultural 
exploitation and sets specific size and time limits for their 
application.  ELCs legally cannot be larger than 10,000 hectares and 
are limited to maximum lease terms of 99 years, though these may be 
renewable.  By law, ELCs can only be created on state private land 
(Ref A) and cannot be converted to ownership.  Concession grantees 
can exploit and defend their leased land, but they cannot alter the 
land in any way that will leave it unusable when the concession 
lease expires.  A range of crops may be grown on ELCs, but the RGC 
is currently prioritizing rubber plantations. 
 
¶5. (SBU) The Ministry of Agriculture, Forestry and Fisheries (MAFF) 
oversees a Secretariat that manages the creation and monitoring of 
ELCs.  According to Undersecretary of State Ith Nody, Head of the 
ELC Secretariat, there are currently 65 companies with ELCs, 
totaling 912,275 hectares (about 2,254,231 acres).  However, until 
recently provincial governors could also grant ELCs under 1,000 
hectares, which are not included in MAFF's records.  The Community 
Legal Education Center (CLEC) noted for example that Mondulkiri 
government documents alone list 25 concessions in pending or 
operational status at a total of 144,800 hectares (about 357,800 
acres).  MAFF records only list two ELCs in Mondulkiri, one of which 
shows a status of "canceled".  Ith Nody said that the central 
government had now banned provincial and local governments from 
granting ELCs, and that MAFF was in the process of compiling a list 
of all concessions in the country. 
 
PROCESS FOR SECURING AN ECONOMIC LAND CONCESSION 
--------------------------------------------- --- 
 
¶6. (U) According to MAFF, the official process for securing an 
economic land concession is as follows: 
 
PHNOM PENH 00000285  002 OF 005 
 
 
 
  a. The prospective grantee registers its company 
     name with the Ministry of Commerce. 
  b. The prospective grantee submits a concession 
     application to MAFF, including company overview, 
      proposed activities, and capital information. 
  c. The company locates and surveys the prospective 
     concession land, in cooperation with local and 
     provincial authorities.  The company creates a map 
     of the area and submits it to MAFF. 
  d. If MAFF approves the map, the company is then 
     required to conduct an environmental impact 
     assessment (EIA). 
  e. If the Ministry of Environment (MOE) approves the 
     EIA, MAFF sends an interministerial team to the 
     proposed site to conduct a forest inventory, a 
     socio-economic impact survey, and a soil survey to 
     determine if the proposed crops will grow in the 
     area. 
  f. The interministerial team then creates a new 
     concession map based on its findings and issues a 
     recommendation to proceed with or cancel the 
     proposed concession. 
  g. The Council of Ministers issues an agreement in 
     principle to the concession. 
  h. An ELC Secretariat team visits the proposed site 
     and finalizes the concession map. 
  i. MAFF drafts a contract with the investor and 
     registers the concession with the Ministry of Land 
     Management, Urban Planning and Construction 
     (MLMUPC). 
  j. The investor creates a master implementation plan 
     for development of its concession area, which 
     becomes a legally binding document. 
 
ECONOMIC LAND CONCESSIONS IN PRACTICE 
------------------------------------- 
 
¶7. (SBU) As is the case in securing a private land title (Ref A), 
the official process for securing an ELC is often not followed, 
according to NGOs that monitor land issues.  Investors frequently 
find ways to skirt the rules governing ELCs, usually by exploiting 
loopholes in the Land Law.  For example, Yous Pheary, head of the 
Cambodian NGO Community Economic Development (CED) in Kratie, 
described how companies in his province establish multiple 
subsidiaries, each of which lease adjacent land parcels, creating 
ELCs larger than the 10,000 hectare limit.  He cited one case where 
a Chinese agricultural company created six subsidiaries to establish 
a roughly 50,000 hectare ELC near the town of Sambor.  The UN Office 
of the High Commissioner for Human Rights (UNOHCHR) investigated the 
company and found that five of the subsidiaries even shared the same 
registered office. 
 
¶8. (SBU) This legal loophole is openly discussed among investors and 
developers.  Asia Real Property (ARP), a real estate consulting firm 
in Phnom Penh, advertises everything from 11,000 hectare concessions 
in Mondulkiri Province to 46,000 hectare concessions in Kampot, and 
the company's brochure emphasizes its close connections to the RGC. 
When asked how ARP was able to advertise ELCs above the legal size 
limits, Saroeun Soush, ARP's Managing Director, told Poloff that as 
long as the concessions are broken into 10,000 hectare parcels and 
are leased under different company names, the RGC would not care if 
those companies ultimately rolled up to a single entity.  (NOTE: 
Saroeun Soush was very eager to push ELCs, saying repeatedly that 
investors had to "act now" before available land disappeared, and he 
even tried to offer Poloff a "finder's fee" for bringing in U.S. 
investors.  Despite the lengthy process for establishing ELCs 
described by MAFF, Saroeun Soush said he could secure an ELC for an 
investor in four months.  END NOTE.) 
 
¶9. (SBU) In some cases, companies begin work on their concessions 
before their leases are finalized.  For example, in December 2008 an 
ELC belonging to Cambodian real estate company The Khao Chhuly Group 
became the center of a land dispute in Pech Chreada District, 
Mondulkiri Province, when Khao Chhuly workers began to clear 
forested areas claimed by ethnic minority villagers for a rubber 
plantation.  (NOTE:  The company's owner, Khao Chhuly, is the 
father-in-law of former Public Works Minister and current 
Vice-Chairman of the Council for the Development of Cambodia, Sun 
Chanthol.  END NOTE.)  Although the company had begun preparing the 
land, the concession was not yet registered on MAFF's list of 
approved ELCs.  Ith Nody told Poloff that the Khao Chhuly ELC was 
still in the "exploratory phases".  When asked about villager 
accusations that Khao Chhuly bulldozers were already clearing land, 
Ith Nody shifted focus to human rights NGOs, accusing them of 
inciting villagers to "cause problems" when they learn an ELC is in 
development.  (NOTE:  An ADHOC representative who had been 
monitoring the case at the time of the clash told Poloff that he was 
 
PHNOM PENH 00000285  003 OF 005 
 
 
trying to encourage dialogue between the villagers and the company. 
END NOTE.) 
 
CHANGING LAND STATUS TO ACCOMMODATE THE LAW 
------------------------------------------- 
 
¶10. (U) The Land Law defines two categories of state property:  1) 
state public property (areas of natural origin such as lakes or 
islands, general or public use, conservation areas, historical or 
cultural patrimonies, or royal properties); and 2) state private 
property (any property belonging to the state that does not fall 
under the definition for state public property).  Although the Land 
Law stipulates that ELCs can only be granted on state private land, 
there are mechanisms in place for the RGC to reclassify state public 
land to state private land to facilitate an ELC.  A 2005 sub-decree 
on state land management allows a ministry or provincial authority 
to publicly request reclassification of state public land to state 
private land, and vice versa.  If the provincial state land 
management committee approves the request, the requesting ministry 
or authority can draft a sub-decree reclassifying the state land for 
the Council of Ministers to issue.  For example, in January 2009, 
the RGC issued a sub-decree reclassifying 5,200 hectares of forest 
preserve area in Samlaut District, Battambang Province, to create an 
ELC for the Roth Sambath Company. 
 
CLOSER MONITORING OF ELCs 
------------------------- 
 
¶11. (SBU) In February 2009, MAFF announced that it would undertake a 
nationwide evaluation of ELCs to identify non-compliance with lease 
terms and master implementation plans.  Citing a common NGO 
complaint, Ith Nody acknowledged that in some cases, grantees simply 
clear their concession lands, sell the timber they collect, and 
leave the lands empty.  As the goal of ELCs is to promote economic 
development, MAFF has started to treat these cases as violations of 
lease agreements.  In late 2008, MAFF revoked five ELC licenses over 
failure to meet development plans, and Ith Nody said that MAFF 
planned to audit 40 more ELCs this year.  He also explained that the 
ELC Secretariat was negotiating with nine companies that leased ELCs 
over 10,000 hectares to reduce their holdings to within the legal 
size limits.  Civil society groups note that while closer monitoring 
of ELCs is necessary, MAFF's efforts are too late to prevent 
unnecessary deforestation on those lands already leased. 
 
USE, DEVELOPMENT, OR EXPLOITATION (UDE) LAND 
CONCESSIONS 
--------------------------------------------- 
 
¶12. (SBU) The 2001 Land Law provides few guidelines for UDE 
concessions.  There are no size limits, and UDE concessions can be 
granted on state public land, unlike economic and social land 
concessions.  For example, many of Cambodia's hydropower projects 
are located within protected areas such as national parks (Ref B). 
In another recent high-profile example of state public land leasing, 
the Ministry of Environment (MOE) signed over management of Bokor 
National Park (140,000 hectares, or about 346,000 acres) to 
Cambodian conglomerate Sokimex, which is developing a multi-million 
dollar resort within the park boundaries.  (NOTE:  The resort 
appears to have an eco-tourism component.  END NOTE).  Another 
potential UDE concession is a proposed 100,000 hectare game hunting 
park in Ratanakiri Province, approved by the Council of Ministers on 
February 27. 
 
¶13. (SBU) The Land Law includes some regulations on the general 
leasing of state public land, namely that authorization to occupy 
state public land must be "temporary, precarious, and revocable".  A 
Land Law sub-decree further stipulates that leases on state public 
land must be no longer than 15 years.  However, the RGC only loosely 
applies these guidelines to UDE concessions.  The Sokimex concession 
in Bokor National Park is a 99-year lease.  Many of the proposed 
hydropower dams are managed under 40-year lease agreements (Ref B). 
 
 
¶14. (SBU) When UDE concessions are granted on state private land, 
there are even fewer rules governing them.  For example, NGOs tried 
to use the state public land leasing guidelines to challenge the 
legality of the Phnom Penh Municipality's concession of Boeung Kak 
Lake to a private company for development.  A legal analysis by the 
Centre on Housing Rights and Evictions (COHRE) suggested that the 
99-year concession violated state public land leasing limits, and 
that the conversion of a natural rain catchment area into a 
commercial center violated the usage definitions for state public 
property (Ref A). In response, the RGC issued a sub-decree 
converting the lake to state private land, which does not carry the 
same leasing restrictions, removing the NGOs' legal arguments. 
 
WHAT IS "PUBLIC INTEREST"? 
-------------------------- 
 
PHNOM PENH 00000285  004 OF 005 
 
 
 
¶15. (SBU) Human rights NGOs have expressed concern that the use of 
UDE concessions will increase as the RGC pushes to develop urban 
areas, forcing disputes between poor communities and wealthy 
investors.  In Phnom Penh, municipal government representatives 
argue that any kind of economic development, even the construction 
of a new shopping mall, is in the public's interest, rendering 
concessions of state land for seemingly private ventures necessary. 
The Boeung Kak Lake case is the most visible example of this 
reasoning.  The concession grantee, Cambodian firm Shukaku Inc., 
will completely fill the lake and reportedly build a shopping and 
cultural center.  Communities living along Phnom Penh's old railway 
lines face similar threats from a concession granted to local 
developer Hassan Cambodia Development Limited to build office space 
and a commercial center. 
 
ENVIRONMENTAL IMPACT ASSESSMENTS (EIAs) 
-------------------------------------- 
 
¶16. (SBU) EIAs are required for all major investments and 
infrastructure development, including ELCs and UDE concessions, and 
they could provide a check on unsustainable land exploitation. 
However, the EIA process is beset with challenges.  The construction 
firms responsible for the projects are also responsible for the EIAs 
for those projects, a clear conflict of interest resulting in 
subjective analyses (Ref B).  Puth Sorithy, Director of the EIA 
Department at the MOE, told Poloff that his department lacks the 
technical and human resource capacity to effectively evaluate the 
flood of EIAs that are regularly submitted.  The ADB funded training 
on tools for conducting EIAs in the 1990's, but now focuses its 
efforts on environmental awareness activities. 
 
¶17. (SBU) Because there is no standard template or process for EIAs, 
the assessments and review process can vary in quality from project 
to project.  For example, environmental and human rights NGOs widely 
criticized the August 208 EIA for the Boeung Kak Lake concession as 
being inaccurate and vague.  A March 2009 assessment by Australian 
drainage engineers refuted the August EIA conducted by Shukaku, 
finding that filling the lake would eliminate a major rain catchment 
area, leading to significant flooding issues.  Bunra Seng, Country 
Director for Conservation International, described another scenario 
in which he received a lengthy and detailed EIA for a hydropower dam 
in the Cardamom Mountains, but was only given two days to review and 
comment on it.  Suwanna Gauntlett, Country Director for Wildlife 
Alliance, explained how she planned to hire a technical expert to 
conduct an unofficial EIA for a satellite city project in Koh Kong 
Province, to ensure the project planners had an accurate assessment. 
 
 
INCREASING FOREIGN INVESTMENT 
----------------------------- 
 
¶18. (SBU) A growing wave of foreign investment lies behind the 
increasing number of land concessions in Cambodia.  Chinese grants 
and soft loans have driven much of the recent progress on hydropower 
(Ref B), and some Middle Eastern countries have increased or plan to 
increase funding for agricultural sector development in exchange for 
leases to food supplies.  For example, Kuwait's premier pledged to 
give the RGC a $546 million loan related to agricultural production 
during an August 2008 visit to Cambodia.  Kuwait will also fund the 
development of a 40 MW hydropower dam in Kampong Thom Province.  The 
government of Qatar is reportedly negotiating a $20 million joint 
venture with a Cambodian firm to lease 10,000 hectares of land for 
rice cultivation in Stung Treng Province, as part of a reportedly 
larger $200 million planned investment in the Cambodian agricultural 
sector. 
 
COMMENT 
------- 
 
¶19. (SBU) There is no question that if the RGC wants to develop its 
agricultural sector and general infrastructure, it will have to make 
land available for private investors, who have more financial and 
technical resources.  Ideally the RGC would focus on reducing 
corruption, improving inter-ministerial coordination, and 
streamlining bureaucratic bottlenecks to make the land concession 
process easier for investors.  Instead, the domestic drive for 
development seems to be pushing the RGC to pursue a more 
short-sighted policy of bending rules and skipping processes 
designed to ensure environmentally sustainable and socially 
responsible growth in order to quickly give investors access to 
land. 
 
¶20. (SBU) Decreasing foreign direct investment in the construction 
and agricultural sectors due to the global economic crisis and the 
subsequently lower real estate prices (Ref C) have temporarily eased 
the intense land speculation seen in previous years.  However, 
domestic developers continue to pursue projects that have led to 
 
PHNOM PENH 00000285  005 OF 005 
 
 
some of the more high-profile disputes in the country, such as the 
Dey Krahorm (Ref D), Group 78, Boeung Kak, and Borei Keila cases. 
Economic development under the current mode of granting land 
concessions, combined with the weak private land ownership system in 
Cambodia (Ref A), will continue to contribute to a rise in land 
disputes between developers, the government, and affected 
communities. 
 
The next cable in this series will focus on the fallout of land 
disputes, such as forced evictions, land grabbing and scams, and 
land degradation issues. 
 
 
ALLEGRA