April 5, 2011

Analysis: China pumps up Cambodia economy, but at what cost?

(Reuters) - Ly Mom has been driven out of her lifelong home in Cambodia's fast-growing capital. Like thousands of other Cambodians forcibly evicted by the authorities, she is homeless, jobless and angry.

Her grocery store on the banks of Phnom Penh's Boeng Kak Lake is being bulldozed to make way for a luxury housing estate to be built by a Chinese developer and a well-connected Cambodian tycoon.

"People living here have nothing apart from their bare hands," she said. "They have been given no choice."

Ly Mom's story is the flipside of a "no strings" Chinese investment boom that Cambodia's government says will transform its underdeveloped $10 billion economy and improve living standards for millions of impoverished people.

A total of 2,752 families have already been driven from their homes around Boeng Kak.

Ly Mom's family is one of 1,500 refusing to budge, protesting each day and rejecting the developer's compensation of just $8,500, or relocation to a small flat on the fringes of the sprawling city. Their latest demand is for 64 sq meters of lake land to be left for each family.

But no-one is listening to them. Similar protests are held every week in Cambodia as families with no title deeds are told to pack their bags.

Experts warn that Cambodia's government could one day have a rebellion on its hands.

"The long-range economic costs to a country's development impact ultimately on the welfare of the people," said Donald Weatherbee, an expert on Southeast Asian politics at the University of South Carolina.
"The political costs? Well, look at Egypt or Libya."

The luxury housing project is led by China's Inner Mongolia Erdos Hongjun Investment Corp, which has pledged to spend $3 billion in Cambodia on real estate, metal processing and power generation.

China is Cambodia's biggest source of foreign direct investment (FDI). China plans to spend $8 billion in 360 projects in the first seven months of this year -- the same amount it invested in the whole of Southeast Asia in 2008.

Beijing is also Cambodia's largest source of foreign aid, providing about $600 million in 2007 and $260 million in 2008.

But as Chinese, Vietnamese, South Korean and local businesses snap up lucrative concessions and real estate, farmers are being evicted and entire villages shifted to make way for mining, agriculture and hydropower projects.

Rights groups and donor countries are concerned and have threatened to withhold much-needed aid to one of Asia's poorest countries, home to 14 million people and sandwiched between larger neighbors Thailand and Vietnam.



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