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. Around 10,000 more are expected to be displaced.
Residents are reportedly forced to accept the compensation offered by the government, which some say is “laughable” given the current value of the land. The government has also refused to consider the residents’ proposal to set aside a plot at Boeung Kak for housing.
The World Bank, which has been lending about $50 million to $70 million annually, has repeatedly called for an end to the forced relocations and urged the government to provide fair compensation for the residents or risk losing its support. Annette Dixon, the bank’s country director, said its last loan to Cambodia was in December 2010 and that the country could expect no new loans “until an agreement is reached with the residents of Boeung Kak Lake.”
Cambodian government spokesman Phay Siphan, however, says the government is unconcerned with the bank’s announcement. He reiterated the government’s statement in late 2010 that it ”no longer appreciated” the loans from the World Bank. He also said the government’s only obligation to the bank was to repay the loans, and that the bank “has no power” beyond being a lending institution. The way Phan sees it, the multilateral agency has ”overstepped“ its mandate by using the Boeung Kak lake as an excuse for its decision to suspend new loans for the country.
“The bank is not a proper help to Cambodia in the cause of development,” Siphan was also quoted as saying.
In contrast, the country is being offered more development money by China, and with few or no strings attached. Cambodian tycoons and their connections in the government are said to be profiting from selling or leasing farm lands and prime real estate areas to foreign firms, mostly from China. For instance, the luxury real estate project in Phnom Penh is reportedly being led by the company of a prominent ruling party politician and Chinese firm Erdos Hong Jun Investment.
With Chinese firms like Erdos Hong Jun pledging $3 billion for real estate, metal processing and power generation in Cambodia, China has become the country’s biggest source of foreign direct investment, Reuters cites.
In the first seven months of 2011 alone, China has pledged $8 billion for 360 projects, the same amount it invested in the whole of Southeast Asia in 2008. The country is also Cambodia’s largest source of foreign aid, providing about $600 million in 2007 and $260 million in 2008, according to Reuters.
The World Bank however, says it will continue its existing projects in Cambodia, for which it has committed $400 million. It is also hopeful that it would resume its aid to the country.
“Discussions between the government and residents are ongoing and we look forward to an early resolution of this issue,” Dixon says.
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