VIETNAMESE AGRICULTURAL INVESTMENT IN CAMBODIA AND LAOS: BENEFITS, IMPACTS AND CHALLENGES

Transcription

1 VIETNAMESE AGRICULTURAL INVESTMENT IN CAMBODIA AND LAOS: BENEFITS, IMPACTS AND CHALLENGES December 2016

2 Table of Contents List of acronyms... 3 Executive summary Introduction: Set up of the study Vietnamese agricultural investment in Cambodia and Laos Vietnamese cross-border investment: developments and trends The socio-political and legal context Key actors in land investment and governance Benefits, impacts and challenges Experiences from the field Preparation and approval Land acquisition and compensation Implementation Closure and phasing out Cross-cutting issues Conclusions and recommendations Conclusions Recommendations References Annex A: Outward direct investment projects licensed by main counterparts Annex B: Outward direct investment projects licensed by kinds of economic activity Cover photo: Dong Van Thuc (Oxfam) 2

3 List of acronyms AVIC AVIL CDC CFS CSR EIA ELC ESIA FDI FPIC GSO ha HAGL IEE LIWG MAF MOE MONRE MPI NGO USD VCCI VRG Association of Vietnamese Investors in Cambodia Association of Vietnamese Investors in Laos Council for Development of Cambodia Committee on World Food Security Corporate social responsibility Environmental impact assessment Economic land concession Environmental-social impact assessment Foreign direct investment Free Prior and Informed Consent General Statistics Office (Vietnam) hectare Hoang Anh Gia Lai Co. Initial environmental evaluation Land Issues Working Group (Laos) Ministry of Agriculture and Forestry (Laos) Ministry of Environment (Cambodia) Ministry of Natural Resources and Environment (Vietnam and Laos) Ministry of Planning and Investment (Vietnam and Laos) Non-governmental organization US dollar Vietnam Chamber of Commerce and Industry Vietnam Rubber Group 3

4 Executive summary Governments in the Mekong sub-region rely on foreign direct investment (FDI) as a major source of development funding. From the beginning of the 21 st century, Cambodia and Laos have made large areas of land available for domestic and foreign investors. Vietnamese companies have acquired large land concessions for agricultural investments, including crops such as rubber, coffee, and sugar cane. While Government officials emphasize the contributions of FDI to economic growth and development, the media and civil society have increasingly criticized apparent negative impacts on local communities and the environment. If left unchecked, these impacts may affect the spirit of regional cooperation that cross-border investment is meant to promote. In this complex context, this report presents an overview of the current situation and trends in Vietnamese agricultural investment in Cambodia and Laos; it provides insight on the benefits, impacts and challenges of investment and examines how investment can be more responsive to the destination communities. The increasing trend of regional FDI, including land investments in agriculture, has led to renewed interest in understanding the relationship as well as the dynamics between small agricultural stakeholders, governments, and the private sector. Small agricultural stakeholders and food producers comprise the poorest segments of the economy of Mekong sub-region countries. Although they play a major role in food production, small-scale producers limited access and control over productive resources and markets affects their ability to secure a living. Indigenous (ethnic minority) communities are especially vulnerable to displacement as result of large-scale land development projects. In , Oxfam in Vietnam has joined with the Vietnam Chamber of Commerce and Industry (VCCI), the Vietnamese environmental NGO People and Nature Reconciliation (PanNature), and partners in Cambodia and Laos in a collaborative research project on Vietnamese agricultural investment. These efforts have been supported by Oxfam Hong Kong and are complementary to ongoing research and advocacy regarding Chinese outbound investment. The aim of this project is to build support among investors and government agencies to reduce the social and environmental impacts of investment. From April to July 2016, a desk study was conducted, followed by field visits to Cambodia and Laos. Information was collected from key stakeholders, including companies, government authorities, domestic civil society organizations, and women and men in communities affected by agricultural investment. The primary focus of field research was on investors and communities experiences, with implementation of national policies on investment forming a secondary concern. Vietnam is one of the main points of origin for regional investment in the Mekong sub-region. According to Vietnam s General Statistics Office, Laos, Cambodia, and Myanmar are currently ranked first, second, and ninth respectively as destinations of Vietnamese direct investment. Laos and Cambodia combined count for 367 projects out of 873 total outbound Vietnamese investment projects (42%) with an investment capital of over US $8.4 billion. Mining and agriculture (including forestry and fishing) are the two leading investment sectors. The importance of stable economic and political relations in the region has led to strong business and governmental support for cross-border investment in all countries concerned. In theory, foreign direct investment can bring net economic benefits to all stakeholders. In practice, local residents and affected communities have often been harmed by projects that expropriate land, cause environmental damage, and/or bring negative social consequences without prior consultation or appropriate safeguards. Local dissatisfaction had led in several instances to direct conflicts between communities and investors from multiple source countries, including Vietnam. One of the main obstacles to responsible investment is that local government officials and companies do not always comply well with national rules and regulations. This applies to the granting of licenses for land concessions, social and environmental impact assessments, consultation of affected people, 4

5 the provision of compensation, working conditions, and compliance with contracts. Moreover, there is a general lack of transparency around land concessions, making it difficult to identify who is accountable when violations occur. Vietnamese companies interviewed for this research complained that investment policies and procedures are not always clear and susceptible to change. Companies therefore take a pragmatic approach. In Cambodia, investors may involve brokers at the national level to get access to large areas of land and favorable tax deals. As a consequence, local authorities are often not well informed or consulted, and investment plans are not checked with conditions on the ground. In Laos, inconsistencies in laws and policies and poor coordination between government agencies have led to a lack of oversight and control. Licenses for concessions are often granted despite irregularities; Environmental Impact Assessments (EIAs) are not conducted properly, if at all, or are submitted long after investment projects started. In most of the communities visited in Cambodia and Laos, concessions overlapped with people s agricultural plots, and in some cases demarcations literally crossed residential areas. There is confusion about the exact boundaries of land claimed by the state and that claimed by communities, and even over individual entitlement/ownership papers. Only individuals who can show legitimate legal ownership can claim land, which is problematic since most rural Cambodians and Laotians in the areas visited lack entitlement papers; indigenous people in Cambodia can claim communal land, but the process is cumbersome and lengthy. Compensation, if any, is ad hoc and far below market value; alternative land is often inferior or inappropriate for cultivation. Moreover, no compensation is provided for the loss of common land (forests, water resources, and spiritual sites). In some cases, companies reportedly clear and demarcate the land immediately after licenses have been granted, sometimes with protection from security and military forces. Legal options for conflict resolution remain limited in both countries. Government agencies claim that investments have had a positive impact on the overall economy, infrastructure and employment, but figures to support these impacts are inconclusive. Although there are many examples of companies contributions to roads, schools, health facilities, and other local infrastructure, the impact of investment on local employment has been limited due to a lack of skilled local staff. In this context, companies prefer to hire laborers from other provinces or Vietnamese staff. Moreover, wage laborers in agriculture are often lowly paid, with salaries further reduced through the use of sub-contractors. Despite claims that foreign investment has led to increased government income, revenue generation remains below the potential due to low fee rates, tax exemptions and failure to collect fees and taxes; moreover, it is often difficult to trace these revenues due to a lack of transparency. There are some signs that governments in recipient countries are becoming more sensitive to the problems faced by their people as result of land deals. Both Cambodia and Laos have announced moratoria and/or limits on land concessions in recent years, while Directive 01 (2012) by the Prime Minister of Cambodia to return land to people living in economic land concessions was a positive signal. However, concessions continue to be granted and many local land disputes remain. The responsibility to resolve these disputes and end unsustainable investment practices lies both with investors and host country authorities. Vietnamese companies have an obligation to comply with the national laws of Cambodia and Laos, as well as Vietnamese law and to international standards of good practice that all countries have committed to. Responsible investment practices are crucial to protecting affected communities and ensuring that the economic and strategic benefits of region investment live up to their potential. This research was conducted by a team comprising Kees Swanns (consultant), Pham Quang Tu (Oxfam), Dong Van Thuc (Oxfam), Nguyen Hoang Phuong (PanNature) and Nguyen Minh Duc (VCCI). Special thanks are due to the NGO Forum on Cambodia and the Ministry of Agriculture and Forestry (Laos), who co-organized field visits. Oxfam staff in Cambodia and Laos provided invaluable contextual, logistics and translation support. The report was compiled and drafted by Kees Swanns with contributions from the other team members, and was edited by Andrew Wells-Dang (Oxfam). 5

6 The opinions, analyses and recommendations contained in this document are the combined views of the research team and do not necessarily reflect the official opinions of Oxfam, PanNature, or VCCI. The report starts in chapter 1 with an overview of the study, the methods used and actors consulted. The report continues with description of desk study results in chapter 2, focused on developments and trends in Vietnamese agricultural investment, the socio-political and legal context, key actors, and its benefits, impacts and challenges. In Chapter 3, findings from field based experiences from Cambodia and Laos are combined to gain more insight in the most relevant aspects and issues along the various phases of business implementation. Chapter 4 consists of overall conclusions and recommendations to improve responsible investment, and which can be used as input for the development of guidelines of good practice. As this study was conducted in a limited time period, it does not claim to be fully comprehensive. In particular, it focuses largely on large-scale land concessions, rather than other investment models such as contract farming. Although the number of companies involved in the study was relatively small, the overall picture that emerges of Vietnamese investment is consistent and clear. Specific cases of investment reveal insights into the systemic aspects of land investment in Cambodia and Laos. Among the concrete recommendations from this study are: 1. Companies, with support of Vietnamese agencies (MPI, VCCI) and branch organizations, are encouraged to collectively develop and promote social responsibility guidelines that apply to various aspects and stages of project implementation; these guidelines need be shared and agreed upon with government agencies of Vietnam and host countries, as well as with civil society actors in all countries concerned. 2. Investors should consult with affected communities throughout the investment process, according to the principles of Free Prior Informed Consent (FPIC) and the Voluntary Guidelines on Governance of Land Tenure. 3. Vietnamese banks should conduct environmental and social risk assessments before making loans to external investment, consistent with Vietnamese regulations and host country EIA laws. 4. The Vietnamese government should better enforce provisions of the 2014 Investment Law on outbound investment and monitor compliance with Vietnamese law, host country laws, and international agreements, including through field visits to investment areas. 5. Governments of host countries should enforce existing national regulations and rules, and put monitoring systems and penalties in place; responsibilities and tasks between government agencies and levels need to be more clearly defined in sub-law documents. 6. In addition, host countries should establish and maintain a database of large-scale land investments (at various levels) that is publicly available and regularly updated, and which contains information that is relevant to and usable by members of affected communities, as well as civil society and the general public. 7. Civil society groups, including NGOs, associations, and community groups, have an important role to hold government agencies and companies accountable, while building capacity among local people (in particular on legal issues). Alliances with local communities and networks are an important mechanism to advocate for changes in policies and laws, but civil society is also encouraged to work together with companies, governments and communities to find solutions. 6

7 1. Introduction: Set up of the study From April to July 2016, Oxfam, PanNature, and VCCI conducted a joint study on Vietnamese agricultural investment in Cambodia and Laos. The study included desk research and field visits to Laos and Cambodia, followed by meeting headquarters of relevant Vietnamese companies. Information was collected from multiple key informants and stakeholders, including businesses, government authorities, civil society, and community members. The desk study intended to get a better overall picture of agricultural investments by Vietnamese companies in the Mekong sub-region and particularly in Cambodia and Laos. Data on outward direct investments by Vietnamese companies was retrieved from government websites, while the Ministry of Planning and Investment (MPI) in Vietnam was requested to provide recent data on agricultural investments in Cambodia and Laos; in addition, an Oxfam scoping study on agricultural projects was used as a reference (Wells-Dang and Mai, 2015). Key documents and reports were consulted to get an overview of the social-political and legal context on land investment and governance in the countries concerned, as well as the (claimed) benefits, impacts and challenges. Visits to Cambodia and Laos took place from respectively May and May Oxfam cooperated with partners to conduct field research in order to map key stakeholders, establish contacts, understand impacts and challenges of Vietnamese investment, and to identify opportunities for improved business practices. Table 1 gives an overview of actors consulted. Table 1: Overview of stakeholders and locations (provinces) visited in Cambodia and Laos Communities Civil society Government Companies Cambodia - Village (Kratie) - Village (Kratie) - Village (Ratanakiri) - The NGO Forum on Cambodia, incl. NGO representatives (national) - District level NGO representatives (Ratanakiri) - Prey Lang community activist (Kratie) - Deputy Chief Commune (Kratie) - Chief of Commune (Kratie) - Chief of Commune (and Deputy) (Ratanakiri) - Dau Tieng Rubber Corporation (rubber) (Kratie) - Dau Tu Saigon-Binh Phuoc (SBK) Co., Ltd (rubber/cassava) (Kratie) - 30/4 Gialani Company Limited (rubber) (Ratanakiri) Laos - Village (Attapeu) - Village (Champassak) - Village (Champassak) - Village (Savannakhet) - Global Association of People and Environment (GAPE) - Japan International Volunteer Centre (JVC) - Dept. of Agriculture and Forestry (Attapeu) - Dept. of Agriculture and Forestry (Champassak) - Dept. of Agriculture and Forestry (Savannakhet) - Hoang Anh Gia Lai (HAGL) (rubber, sugar cane, oil palm, fruit, livestock/fodder) (Attapeu) - Tin Nghia Joint Stock Company (coffee) (Champassak) - Viet Lao Rubber Joint Stock Company (coffee/rubber) (Champassak) - Quasa Geruco company (rubber/timber) Other - Researcher (University) - LDP Law Firm - Association of Vietnamese Investors in Laos (AVIL) - Vietnam Rubber Group (VRG) Companies were selected based on the information retrieved from MPI; main criteria included diversity in terms of geographic areas and commodities. In practice though it often proved difficult to 7

8 contact companies (especially in Cambodia) which sometimes led to a more pragmatic approach by visiting companies that were present in certain areas. In Cambodia it was also difficult to organize meetings with provincial authorities. In Laos, government officials from the Ministry of Agriculture and Forestry (MAF) accompanied the team. Additional visits were made to headquarters of relevant companies in Vietnam. Secondary data was analyzed according to main categories and themes, while detailed field notes were examined based on key issues that emerged along various stages of business implementation. Verbatim quotations of actors are included in the report to support key findings. These remarks are presented anonymously to ensure confidentiality of individuals interviewed. While the study provides an overview of agricultural investment in the Mekong sub-region with its benefits, impacts and challenges, it does not claim to be fully comprehensive and conclusive. The focus was primarily on large-scale land concessions, not other forms of agricultural investment such as contract farming. Several limitations were encountered: official investment data were not always easy to retrieve or differed between countries, not all companies and government agencies were easy to contact or willing to share their views, and field visits were often too short to thoroughly check on the situation with often opposing views between key actors. However, the overall picture that emerges is clear and consistent. 8

9 2. Vietnamese agricultural investment in Cambodia and Laos Based on desk research, this chapter provides an overview of the current situation and trends regarding Vietnamese investment, with particular attention on agricultural investment in Cambodia and Laos. It will focus on the scale and type of investment, the socio-political and legal context, and the key actors. In addition, the potential benefits and impacts of cross-border agricultural investment will be cited, as well as the challenges faced. 2.1 Vietnamese cross-border investment: developments and trends As a lower-middle income country, Vietnam is increasingly a source as well as a recipient of Foreign Direct Investment (FDI). The total outward investment reached US $1.786 billion in 2014, compared to total inbound FDI of $21.92 billion, according to Vietnam s General Statistics Office (GSO). Outward direct investment has a great potential to help businesses to expand their markets and improve the country s status in international economic integration. During the past decade Vietnam has seen a strong growth of outward investment in general and agricultural investment in particular, especially along the borders with Cambodia and Laos as part of the development triangle where the three countries meet. By the end of 2015, Vietnam had investment projects in 60 countries and territories with a total value of more than $19.7 billion (GSO). Laos has been the largest investment recipient country with $4.9 billion, followed by Cambodia with $3.5 billion; the other top ten countries invested by Vietnamese businesses include Russia, Venezuela, Peru, Algeria, Malaysia, United States, Myanmar, and Tanzania (see Figure 1A and details in Annex A). Figure 1: A. Vietnamese outward investment accumulated to December 2015 (GSO); B. New investments in 2014 per country (Source: Ministry of Planning and Investment, Vietnam) In terms of accumulated projects as of the end of 2015, Laos and Cambodia are again the leading investment destinations, with respectively 210 and 157 projects out of 873 projects in total (which is 42% for the two countries combined). According to MPI, new Vietnamese investments in

10 comprised 109 projects, of which almost half were either to Cambodia (21%), Laos (12%) and Myanmar (15%). When one compares the accumulative total investment by kinds of economic activity by the end of 2015, the sectors of Mining and quarrying, and Agriculture, forestry and fishing emerge on top with respectively $8.9 billion (73 projects) and $3.1 billion (116 projects); followed by Electricity, gas, steam and air conditioning supply ($2.2 billion), Information and communication ($1.8 billion), and Arts, entertainment and recreation ($1.2 billion) (GSO, Vietnam; see Annex B). Since no country specific data on investments by kinds of economic activity are available from the website of the GSO in Vietnam, data was retrieved from MPI. Updated figures from MPI on Vietnamese investments in Cambodia and Laos as of June 2016, presented in Tables 2 and 3, show that the leading sectors in terms of both capital investment and the number of projects are: (1) Agriculture, forestry and fisheries (combined value $3.1 billion; 124 projects); and (2) Mining and quarrying (combined value $1.1 billion; 81 projects). 1 There are clear differences between the two countries. In Cambodia, Agriculture, forestry and fisheries is by far the largest sector with 72% of total investment; mining is in fourth place with a much smaller share. In Laos there are basically four main sectors: Electricity, gas, steam and air conditioning supply, Agriculture, forestry and fisheries, Arts, entertainment and recreation, and Mining and quarrying, covering 87% of the total investment value. Mining includes the largest number of projects, while electricity generation has the highest investment capital, slightly higher than agriculture and forestry (Table 2). Table 2: Vietnamese accumulative investment in Laos by sector (MPI, June 2016) No. Sector No. of Projects Investment capital (USD) 1 Electricity, gas, steam, and air conditioning supply 6 1,297,029,850 2 Agriculture, forestry and fisheries 47 1,048,753,284 3 Arts, entertainment and recreation 2 1,004,500,000 4 Mining and quarrying ,161,275 5 Financial, banking and insurance activities 9 208,628,000 6 Manufacturing ,449,057 7 Construction 15 63,343,881 8 Real estate activities 5 50,700,999 9 Accommodation and food service activities 4 48,210, Information and communication 5 42,040, Wholesale and retail trade; repair of motor vehicles and motorcycles 22 40,656, Water supply, sewerage, waste management and remediation activities 3 9,371, Professional, scientific and technical activities 5 3,975, Human health and social work activities 3 1,630, Education and training 2 1,346, Transportation and storage 3 1,071, Administrative and support service activities 1 300, Other activities 4 50,375,000 Total 258 4,933,542,434 Table 3: Vietnamese accumulative investment (USD) in Cambodia by sector (MPI, June 2016) No Sector No. of Projects Investment capital (USD) 1 Agriculture, forestry and fisheries 77 2,069,364,871 2 Financial, banking and insurance activities ,800,000 1 Data suggest that total number of projects invested and number of projects in agriculture, forestry and fisheries have continued to increase in Cambodia and Laos since Dec 2015; however, total investment capital for Cambodia based on data from MPI is US $2.9 billion (as of June 2016) compared to $3.5 billion (as of Dec 2015) based on data from GSO. Since data are derived from different sources, comparison of data should be treated with caution. 10

11 3 Information and communication ,605,422 4 Mining and quarrying ,581,708 5 Manufacturing 18 58,527,315 6 Transportation and storage 8 35,560,000 7 Human health and social work activities 6 29,095,528 8 Wholesale and retail trade; repair of motor vehicles and motorcycles 33 18,492,435 9 Construction 16 15,230, Electricity, gas, steam, and air conditioning supply 4 13,812, Accommodation and food service activities 3 2, 630, Real estate activities 1 900, Administration and support service activities 4 850, Professional, scientific and technical activities 6 603, Other activities 8 1,680,000 Total 226 2,859,732,646 Agricultural and natural resources are a focus of both Vietnamese investors and recipient countries. Most Vietnamese companies have historical cross-border links with Cambodia and Laos and have continued to invest in agribusiness ventures, preferably in those parts closest to their shared boundaries. While the largest share of Vietnamese companies in Cambodia have focused on rubber through land concessions, investment in Laos has been more varied, including trees, crops and livestock through land concessions and contract farming. Since acquired data from GSO and MPI in Vietnam do not include country specific information on land investment by Vietnamese companies, Oxfam complemented this data with information from other publicly available sources (Wells-Dang and Mai, 2015). This scoping study recorded a minimum of 51 agricultural investments by Vietnamese companies in Cambodia and Laos. For Cambodia 36 agricultural investments were recorded, of which 94% were rubber investments. Laos comprised 15 agricultural investment projects, of which 77% were for rubber. Other products included timber (acacia, agarwood), cashews, coffee, cassava, and livestock. 2.2 The socio-political and legal context To understand the developments in Vietnamese agricultural investment in Cambodia and Laos, it is vital to place them in the larger socio-political context and the legal frameworks within which they operate. This section starts with an outline of Vietnam s relation with Cambodia and Laos and its investment policy, followed by an elaboration on land investment policy and governance in Cambodia and Laos. Vietnam s political commitment and investment policy Most Vietnamese investment is flowing to neighboring countries in the Mekong sub-region for both geographical and historical-political reasons. Both Cambodia and Laos have a favorable investment climate for Vietnamese companies, which includes easy access to land and tax exemptions (Hirsch and Scurrah, 2015). Regarding investment in the agricultural sector, both countries share the same aspiration of sustainable development of the nation s rich natural capital and land, particularly through encouraging private investment and granting concessions of state land to investors. Especially, the tri-border region where Cambodia, Laos and Vietnam meet, also called the development triangle, is an important geographical focus of Vietnamese investment in the agricultural sector. Laos attracts a large share of Vietnamese direct investment due to several advantages such as rich natural resources and cheap labor. In addition, Vietnam and Laos have had a long history of friendly relationship which lays the foundation for Vietnamese investment in Laos. According to Vietnamese sources, the spirit of the Treaty of Friendship and Cooperation signed between Vietnam and Laos in 11

12 1977 remains a glue for maintaining the special relationship between the two countries, including economic and investment connections. Based on high-level political commitment, Vietnamese businesses have enjoyed a favorable investment environment in Laos for many years. Vietnam maintains a close relationship with Cambodia due to its strategic commitment and support to the country, as well as the mutual benefit that the two countries have had during cooperation. During Vietnam s 10 th Communist Party Congress in 2006, the Communist Party confirmed its commitment for encouraging and supporting Vietnamese enterprises and individuals to invest in other countries. 2 In 2014, the National Assembly of Vietnam approved amendments to the 2005 Investment Law to improve the legal framework for investment in Vietnam. The new Investment Law (Law No. 67/2014/QH13, dated 26 November 2014) is mainly intended to pave the way for increased foreign investment to flow into the country, but a secondary goal is to facilitate outward investment by Vietnamese companies. 3 The Law contains a chapter on outbound investment; Article 51, states: 1. Investors are encouraged by the state to make outward investments in order to expand the market, improve the export of goods/services, and receipts of foreign currencies; improve access to modern technologies, raise the managerial capability and develop resources for socio-economic development. 2. Investors making overseas investments shall comply with this Law, other regulations of law, laws of the countries or territories in which investments are made (hereinafter referred to as host countries), and the international agreements to which the Socialist Republic of Vietnam is a signatory, and take responsibility for overseas investments they make. These statements are relevant within the context of this report, since they explicitly refer the importance of improving access to technology, capacity building and socio-economic development, while emphasizing that investments need to comply with both the Vietnamese domestic law, laws in host countries, and internationally signed agreements. Furthermore, it is significant to note that Article 54 of the same Law states that projects in agriculture with capital of VND 800 billion or more (about $35 million) require approval of the Prime Minister. In other cases, MPI issues an Investment Registration Certificate (IRC). Following the approval of the Law on Investment in 2014, Decree 83 (Decree 83/2015/ND-CP, dated 25 September 2015), has been issued to provide detailed guidance for outbound investment activities. Procedures of registration have been simplified and investors can transfer capital and assets to foreign countries before receiving the IRC. The expectation is that this will allow investment projects to be implemented more quickly and effectively. However, investors are also obliged to frequently report the implementation of the project in writing as well as through online updates, creating more responsibilities for the investors. 4 Land investment policy and governance in Laos 5 With almost 7 million people, Laos has the lowest population in Southeast Asia. Officially 81% of land is classified as forest, and only 6.5% is arable land; but actual natural forest cover was estimated by the government at 40% in 2010, with a target to increase to 65-70% in Some of the area to be recovered, considered damaged forest, is sloping land used for cultivation. With forest, land, water, and mineral resources making up more than half of the country s wealth (World Bank, 2011), the 2 iendaihoidang?categoryid= &articleid= The English translation of the Vietnamese 2014 Investment Law was retrieved from 4 See 5 This section is based on information retrieved from (last accessed 27 September 2016), and on Hirsch and Scurrah (2015). 12

13 national strategy to turn land into capital (and implicitly turn farmers into workers) has brought mining, hydropower, and agri-business land concessions to large areas of rural Laos. The 2003 Land Law specifies that the State is charged with centralized and uniform management [of land] and its allocation, lease, or concession, including to foreign interests (Article 3). Laotian law is written broadly, with no limits to state authority to allocate land to meet its objectives. However, once land titles (bai taa din) are granted to individuals or organizations, they are permanent (Articles 43-49). Titles formally mark the boundaries of land, and the holders of land use rights may protect, use, lease, transfer, and inherit these rights (Art. 53). Customary tenure is not recognized in the Land Law even though communal land use is practiced by all ethnic groups (Seidel et al., 2007). The national socio-economic development plan set a target of issuing one million land titles (out of 2.6 million total land plots); by September-2015, 900,000 titles were expected to be issued. Officials have admitted though that that bribery and corruption are sometimes encountered in the titling process (Sengdara 2015), as well as cases in which provincial and district authorities give overlapping titles for the same land (Vaenkeo, 2015). State land can be granted at multiple levels of government and different ministries (Schönweger et al., 2012). Concessions are described in government documents as being on state land that is not previously allocated to individuals or villages, yet there are many examples of concessions given that overlap with villagers land (Wellmann, 2012). Cases have also been documented of concessions that were approved by levels of government without a legal mandate (Dwyer, 2007). The size of an investment determines which level of authority is responsible for its approval. In addition to land concessions, the Lao government has promoted contract farming since the mid- 2000s. This policy is described as the 3+2 model, with investors providing know-how, capital and market access, while local farmers provide labor and land; in many cases, though, external capital interests secured control over land and/or labor in their own right, marginalizing smallholders. The total area under concessions and leases is estimated to be at least 1.1 million ha, or 5% of Laotian territory and an area greater than that planted for paddy (Schönweger et al., 2012). An estimated 13% of all villages in the country are affected by these concession and leases (Global Witness, 2013). They involve more than 2,600 land deals, however, nearly 90% of the area under concessions and leases is held by just 5% of the largest projects exceeding 1,000 ha in area (Schönweger et al., 2012). While FDI account for only 35% of the total number of land deals, Vietnamese, Chinese, and Thai investors, in this order, control more than half of the areas under concession (Affeld, 2014). These figures do not include contract farming, which is estimated to cover an even larger area than leases and concessions. Land investment policy and governance in Cambodia 6 Cambodia has historically been a country with an abundance of land relative to its population; most of its people have been rural, producing primarily for subsistence of family holdings. Currently, the majority of Cambodia s population of more than 15 million people is engaged in some form of agriculture. While agriculture remains the backbone of the economy (RATE, 2012), demographic pressures, growing land scarcity and lack of investment have placed limits on its capacity to absorb a growing labor force (Diepart et al., 2014). Land lies at the center of debates about Cambodia s socio-economic development. Prior to the French colonial time, all land in Cambodia belonged to the King; the notion of land ownership was introduced under the French Protectorate and was maintained in the post-independence era until the abolition of private property by the Khmer Rouge (Diepart, 2015). With the Paris Peace Agreement in 1991, a 6 This section is based on information retrieved from (last accessed 27 September 2016), and on Scurrah and Hirsch (2015). 13

14 market economy was established, leading to the restoration of private land ownership in the 1993 Constitution (Grimsditch et al., 2012). In 2001, a Land Law was passed, which established a comprehensive legal framework for land tenure and administration in Cambodia. It introduced a number of significant reforms (RGC, 2001): it extended ownership rights to residential and agricultural land and introduced a new categorization system for land ownership, consisting of: state-public land, state-private land, private-individual land, and indigenous/communal land. The Land Law also provided for the issuing of land concessions for economic purposes, such as agribusiness enterprises (Economic Land Concession or ELCs), or for livelihood subsistence purposes as a redistribute measure for landless and land-poor farmers (Social Land Concession or SLCs). Beginning in 2002, the government began to systematically classify and register all land parcels according to the newly defined land categories. The program aimed to remove uncertainty over land ownership that caused conflicts and tenure insecurity. A Cadastral Commission was set up to resolve disputes that emerged during the course of land registration, and included commitments to step up distribution of land to the poor and to provide titles to secure legal ownership. Up to the end of 2015, the government has handed over 4.15 million private land titles, representing 59% of the estimated total number of land parcels nationwide (MLMUP, 2016). For farmers in the fertile lowlands, private land ownership rights have enabled recovery of their livelihoods after decades of conflict (Üllenberg, 2009). However, especially low-income households in high-value urban areas or where ELCs operate have been excluded; many of them live on land where ownership is not recorded in the national land registration system. In these cases, households are protected under possession rights (paukeas) instead of the stronger legal category of ownership rights (kamaset). Yet, according to the 2001 Land Law (Art. 6), only legal possessors have the right to become owners, while households who possess land illegally e.g.in the case of occupation of state private land, do not. While FDI in agriculture has grown significantly in the past decade, it is still modest compared to other sectors, however, in terms of total size of secured land it has been substantial. It is difficult to obtain the exact number of ELCs and the land size they cover. The Ministry of Agriculture, Forestry and Fisheries (MAFF) claims to have granted concessions to 122 companies, covering more than 1.3 million ha, but this does not include concessions granted by the Ministry of Environment (MOE) within protected areas, for which there are no official figures (MAFF 2014, cited in Grimsditch and Schoenberger, 2015). According to the Cambodian NGO, ADHOC (2013), the Cambodian government had leased over 2.6 million ha as concessions by the end of 2012, affecting more than 770,000 people, or almost six percent of the total population. The rapid increase in ELCs had led to a surge of land disputes between concessionaire companies and local residents. It is estimated that 60 percent of the country s arable land is under concessions (ADHOC, 2014). In response, the government issued a new policy on ELCs in May 2012, called Order 01 on Measures for Strengthening and Increasing the Effectiveness of the Management of ELCs. Order 01 suspended granting of new ELCs and called for a review of existing ones. Since then, more than 330,000 ha of ELCs have been returned to people living in the area (ADHOC, 2014). 2.3 Key actors in land investment and governance Within the overall socio-political and policy context of Cambodia and Laos, a number of actors occupy key roles, positions, and interests. These stakeholders include Vietnamese companies; Vietnamese authorities, supporting agencies and branch organizations; local and national authorities of host countries; and host countries civil societies. Vietnamese investors 14

15 Vietnamese companies investing in Cambodia and Laos include both state-owned and private firms. Based on secondary data collected by Oxfam, 41 companies were responsible for 51 agricultural investments in these two countries. However, it is important to realize many of these companies have close links between them; 33 projects were implemented by member companies of the Vietnam Rubber Group (VRG), while 11 projects were believed to be closely affiliated to Hoang Anh Gia Lai (HAGL). 7 VRG is a state-owned conglomerate, established in 2006 by the Prime Minister; it has over 120 member companies, mainly in Vietnam. 8 Business activities are in rubber production and processing, real estate, transport etc., representing a total investment capital of US $5.1 billion. According to the company s website, VRG has 20 rubber plantation projects (6 projects in Laos and 14 projects in Cambodia) with a total investment value of $752.8 million. HAGL is a private company headquartered in Pleiku (Gia Lai province, Vietnam s Central Highlands). The company was founded in 1993, with original business in wood furniture; current business is in agriculture, real estate, energy, and mining etc. 9 The investment capital in 2014 was $354 million. According to website data and the company s annual report, HAGL has 6 subsidiaries in Cambodia and 5 in Laos. The motivations for companies to invest in both Cambodia and Laos is to obtain access to rich forest resources with cheap and diverse forestry products, large mineral reserves, large land reserves and cheap labor; equally important, companies find the business environment in the two countries similar to that of Vietnam. Most companies started negotiations on investment and land licenses in , when the price of rubber was high and land was available at a low price. However, in many cases the land actually used by investors and included in land certificates is much smaller than the total amount in the land concession contract. While some companies, such as HAGL and VRG, have obtained long-term leases on land to plant trees (mainly rubber) and other crops (Global Witness, 2013; Sherchan, 2015), other companies have entered into market relations with smallholders by providing seeds, helping to clear the land and guaranteeing to purchase the harvest (Milne, 2013; Hirsch and Scurrah, 2015). Vietnamese authorities, supporting agencies and branch organizations Vietnamese authorities have the responsibility to ensure that Vietnamese companies comply with the domestic law and Investment Policy. Furthermore, there are several agencies and branch organizations that provide support to Vietnamese companies when investing abroad. Probably the most important agency supporting Vietnamese investment in other countries is the Foreign Investment Agency under MPI. This agency does not only play a role in providing licenses to companies, but also plays an active role in strategy development and in stimulating conditions for Vietnamese investment in collaboration with recipient countries. MPI operates three Centers for Investment Promotion in northern, central and southern Vietnam. These centers are in charge of guidance for registration of outbound investments and serve as one-stop shops for applications for investment registration. The Vietnam Chamber of Commerce and Industry (VCCI), a leading national business organization, assembles and represents the business community, employers and business associations of all economic sectors in Vietnam. The purpose of VCCI is to protect and assist business enterprises, to contribute to the socio-economic development of the country and to promote economic, commercial and technological co-operations between Vietnam and the rest of the world on the basis of equality and mutual benefit Some projects initiated by Vietnamese investors have been subsequently sold to foreign investors, although most project names are still the same

16 Other relevant agencies supporting Vietnamese investment include Associations of Vietnamese Investors, with offices in various countries of the Mekong sub-region, such as AVIL (Laos), AVIC (Cambodia), and AVIM (Myanmar). They provide assistance to companies who want to invest. Sector or branch organizations play a role in promoting certain commodities and guidelines. In addition, the role of banks should not be underestimated. They often play a critical role through the provision of loans to companies that want to invest abroad. Vietnamese banks (but also international ones) often provide loans without an assessment of environmental and social risks (Oxfam, 2016). Local and national authorities of host countries 11 In Laos, there are several key ministries and agencies responsible for land governance and that make decisions with implications for land. The Ministry of Natural Resources and Environment (MONRE), established in 2011, is the main government authority with responsibility for land administration. The Natural Resources and Environmental Information Centre (NREIC), under MONRE, gathers data on land use including leases and concessions. MONRE s roles are shared with the Ministry of Agriculture and Forestry (MAF), which manages agricultural and forest land, and the Ministry of Energy and Mines (MEM) in the case of hydropower and mining projects. Provincial and district governments are important actors in land administration in Laos. For larger projects, district officials have often been required to find land for investors, either for plantation and other resource projects, or for resettlement zones for those affected by such projects. In other cases, medium size land deals have been agreed at the provincial level without reference to the central government, sometimes leading to overlapping claims of authority. Although Laos does not have commune-level governments, village heads play an important role in the administrative system to grant land or verify land use for communities. In cases of compensation for land acquisition, village heads also participate, sign and seal on land papers concerning their village. Additionally, village heads sometimes act as labor management for companies, who make decisions to employ or fire villagers based on the village head s recommendation. The National Assembly of Laos has gradually assumed greater importance in monitoring land policy and channeling citizen feedback. In particular, the Economic, Planning and Finance Committee has raised concerns over inequitable compensation, non-transparent land deals and poor coordination in land management. In Cambodia, multiple agencies and ministries are responsible for land governance and land administration. The Cadastral Commission of the Ministry of Land Management, Urban Planning and Construction (MLMUPC) is responsible to decide who is the lawful possessor of land and to resolve disputes within their jurisdiction (RGC 2002). The Ministry of Rural Development is involved in registering communal title under the 2009 sub-decree on Indigenous Land. Indigenous people seeking to register communal title must first register for indigenous status with the Ministry of Rural Development, then register their village as a legal entity with the Ministry of Interior, and finally get their title issued by MLMUPC (RGC 2009). The Ministry of Agriculture, Forestry and Fisheries (MAFF) is responsible for approving ELCs, although monitoring falls under the Ministry of Interior. Although ELCs for agro-industrial crops can only be granted on converted forestlands that have been reassigned as state-private land, since 2008 various ELCs have been granted inside Protected Areas under the authority of the Ministry of Environment (MOE). The MOE is also responsible for reviewing and approving environmental impact assessments (EIAs), which are legally required ahead of approving ELCs and other investment projects. The Office of the Council of Ministers (OCOM), the government s top executive agency which is chaired by the Prime Minister, also approves the granting of ELCs and SLCs. In addition to the Ministries, the Council for Development of Cambodia (CDC) was established under the 1994 Law on Investment (revised in 11 This section is based on information in Hirsch and Scurrah, 2015 and Scurrah and Hirsch,

17 2003 and currently under review) to oversee private sector investments. The CDC is chaired by the Prime Minister (Subedi 2012). Civil society Civil society in Laos has played a relatively small part in decision making and contestation around land The Land Issues Working Group (LIWG), made up of international NGOs and Lao organizations, promotes awareness and understanding of the social, economic and environmental impacts of landrelated projects, by gathering and disseminating information, facilitating dialogue and carrying out studies. 12 The LIWG interacts with government and is involved in policy advocacy, for example, in consultation over the National Land Use Policy. In March 2013 the LIWG was elected as the Co-chair of the Land Sub-Sector Working Group (LSSWG) established under the MONRE. However, efforts by some international and domestic NGOs to raise land issues at the ninth Asia-Europe Forum in 2012 were widely held to be one factor leading to the still unresolved disappearance of Lao civil society leader Sombath Somphone (Hirsch and Scurrah, 2015). Civil society in Cambodia is relatively strong and well organized with extensive networks from the national to the local level. Initially NGOs and researchers focused on documenting a large number of land cases (e.g. CHRAC, 2009; LICADHO, 2009; ADHOC, 2013; EC and IDI, 2013); reports were also issued by the Special Rapporteur on the situation of human rights in Cambodia (Subedi, 2012). Increasingly, NGOs have provided legal aid to communities to help fight expropriation and land seizures, and have filed lawsuits before provincial and national courts. Some cases have gained international recognition (EC and IDI, 2013). Cases involving foreign investors have opened some doors for accessing transnational justice (Polack et al., 2014, Sherchan, 2015; Oxfam, 2015). The recently approved Law on Associations and NGOs has widely been criticized as an attempt to limit space for independent civil society and freedom of association (Naren and Meyn, 2015). 2.4 Benefits, impacts and challenges The benefits and impact of agricultural investment by Vietnamese companies in Cambodia and Laos have become issues of debate in recent years, reflecting actor dynamics and differences in perspectives on land investment and governance. Vietnamese State agencies report that benefits for Vietnam through outbound investment in Cambodia and Laos include the following (Duong Anh Tuan, 2012): - Investment helps Vietnam s economy to integrate deeper in the global economy; - Vietnam can gain more resources for the country s development; - by investing in the two neighboring countries, Vietnam can enhance its role and status in international and regional relations; - Vietnamese businesses can gain more experience in overseas direct investment so that they can explore investment opportunities in other countries. - Vietnamese businesses can leverage investment advantages in Cambodia and Laos so that they can manage risks when domestic business opportunities become less attractive. Investment in the region is of political importance, as shown from annual investment conferences between Vietnam and Cambodia and Laos, as well as visits of high placed politicians and officials to investments project and other project donations. Government officials in Cambodia and Laos often refer to the positive impact of investment on their economy and the labor market. According to the World Bank (2016), Laos is one of the fastest growing economies in the East Asia and Pacific region with around 7% growth in 2015, while poverty declined to 23.2%. Also Cambodia has seen strong economic growth over time, with poverty continuing to fall. 12 Information on LIWG is retrieved from (last accessed 28 September 2016). 17