Almost half of Cambodia has been sold to foreign speculators in the past 18 months - and hundreds of thousands who fled the KR are homeless once more

Cambodia Country for sale
Almost half of Cambodia has been sold to foreign speculators in the
past 18 months - and hundreds of thousands who fled the Khmer Rouge
are homeless once more. Adrian Levy and Cathy Scott-Clark report

Adrian Levy and Cathy Scott-Clark
The Guardian, Saturday April 26 2008

This article appeared in the Guardian on Saturday April 26 2008 on
p30 of the Features & comment section. It was last updated at 00:08 on
April 26 2008.

Sang Run, his hair stiff with sea salt, chugs out into the Gulf of
Kompong Som in his weather-beaten turquoise boat, looking for
blackling. He scours the shallow, blue water, waiting for a shoal to
appear, before skimming his net across the water. He does the same
every day, taking his catch to auction on Independence Beach in
Cambodia's southern port city of Sihanoukville.

It looks like a scene Sang Run was born into. But 20 years ago the
beach was deserted, and he was a schoolteacher in Mondulkiri, a
forested province hundreds of miles away in the east of the country.
Back then, he could talk all day about palm sugar and betel nuts. He
was something of an amateur botanist, but had never seen the sea - nor
had any of the group who today gather around his silvery haul flapping
in the sand on Independence Beach. Former nurse Srey Pov, who runs a
Khmer restaurant along the beach, also came from a province many miles
away. She still cannot swim, she says, shrugging. Heads nod around
her. Cambodia is a nation that would drown if their boat tipped over;
it is also a country whose citizens mostly do not belong to the places
where they have ended up.

The Khmer Rouge saw to that, eviscerating the kingdom after coming to
power. It was a movement that drew inspiration from Mao's Cultural
Revolution, collectivising all the land; but it grew to love terror
more than ideology. The ferocity of the regime sent more than 300,000
rushing into exile. At least two million urban Cambodians were route-
marched into the paddy fields to near certain death. Worst hit was the
Eastern Zone, bordering Vietnam, where Sang Run came from. Its people
were derided as "duck's arses with chicken's heads" as the Khmer Rouge
grew to mistrust the Vietnamese and accused Mondulkiri people of being
disloyal - too sympathetic to their neighbours across the border.
Their names were added to those who were to be purged; the catalogue
of "crimes" became so long, so general, that anyone could stand
accused. The wave of random violence and retribution that scythed
through the countryside for three years, eight months and 21 days
killed one in five of the population.

Sang Run's family all vanished, but he survived, hiding in the
forests, living off what he could pluck and hunt. When the Vietnamese
invaded in 1978 - overthrowing the Khmer Rouge a year later - Sang Run
found his way, like thousands of others, to Cambodia's 300-mile long
shoreline. Stretching between Thailand and Vietnam, the region had
been a Khmer Rouge stronghold, controlled by Pol Pot's notorious
commander, Ta Mok, who was known as The Butcher. In the 80s, when the
fishing shacks and noodle stores went up along the Sihanoukville
coast, there was no development plan. There had never been a tradition
of thriving fishing communities along the coast - few Cambodians lived
there except in the old French colonial towns. The shoreline had been
empty - miles of palm-fringed beach front interspersed with the few
port towns, including Kep, Sihanoukville and Ream.

Survivors began to build new lives there, learning to love the sea.
Some took boats to a nearby archipelago of 22 coral-fringed,
uninhabited islands, building up clusters of villages on atolls with
names such as Rabbit, Snake and Turtle. Within 10 years, the whole
coastline had been patchily settled by newcomers, among them a former
farmer, Soch Tith, a stocky man with corncob hands, who was sick every
time he got in a boat, but still found his way to faraway Koh Rong,
the largest of the islands - 7,800 hectares of jungle. There he
cleared small patches to grow fruit.

By 2006, these communities had schools, political representation, and
many householders even had papers, stamped by the Sihanoukville
governor, Say Hak, which guaranteed them the permanent right to stay
under the 2001 Cambodian Land Law. The central government in Phnom
Penh had in the 90s designated the entire coast and its islands as
State Public Land that could not be bartered or developed.

Then, during the past couple of years, a disturbing wave of rumours
swept the coastal communities. Sang Run says that in September 2006 he
heard that Snake Island, half a mile out to sea, had been secretly
sold to Russians. He did not check. Cambodians ask little from their
government; a wariness of authority is a legacy of years of blood-
letting under Pol Pot. In any case, it was a familiar story. Shortly
after Hun Sen, Cambodia's prime minister, came to power in 1985,
frenzied landgrabbing began: influential political allies and wealthy
business associates raced to claim land that the Khmer Rouge had
seized, gobbling up such large chunks of the cities, forests and paddy
fields that Cambodians used to say the rich were eating the country.
By 2006, the World Bank estimated that 40,000 had been made homeless
in Phnom Penh alone. But, until now, no one had bothered with the
coast. Sang Run paid no particular attention to the Snake Island
rumour. He should have - it signalled a radical new course for the
Cambodian government.

Three months later, Sang Run was out in his boat at 7am when disaster
struck his village. He arrived back at 11am to find bulldozers had
flattened his home and those of the 229 families who lived beside him.
He heard from neighbours that it had happened in an instant. Uniformed
men, sent in by governor Say Hak, used electric batons to chase
terrified residents from the burning ruins; three of Sang Run's
neighbours were knocked unconscious. Village Number One - a mundane
name that failed to capture the beauty of its uninterrupted sea views
and vegetable gardens that ran to the beach - had been erased. Sang
Run heard that a hotel was planned, although no information was given
to the people evicted from their homes for a further 18 months.

Nurse-turned-restaurateur Srey Pov tells us that, by early 2007,
rumours were buzzing around Sihanoukville's covered market that
virtually every island in the region was up for sale. Over the
following months, Koh Russei and Koh Ta Kiev, Koh Bong and Koh Ouen,
Koh Preus, Koh Krabei and Koh Tres were all snapped up by foreigners,
who then started negotiating for mainland sites, too, among them
public beaches with names such as Serendipity, Occheuteal and Otres.
In February, 47-year-old Srey Pov was evicted, too, her Independence
Beach restaurant shut down to make way for another rumoured hotel.
"All I've got left is the chairs and tables," she says - they're
stacked up in the cramped living room of her Sihanoukville home.
Former farmer Soch Tith, on Koh Rong, was the last to hear that last
month his island had been sold, too, to a British developer.

What none of these people knew was that the troubled kingdom of
Cambodia, a precarious debtor-nation underpinned by more than £500m of
hand-outs from the international community, had suddenly found itself
a refuge for cash and speculators fleeing paralysed western financial
markets. As London and New York, overcome by the US sub-prime crisis,
began grinding to a halt last year, many in the City had moved on,
transferring liquid assets to the east.

Foreign fund managers had started pitching up in Phnom Penh wearing
linen shirts and khaki drip-dry jungle wear, alerted by the country's
unexpected boom in tourism that in 2006 had seen one-and-a-half
million visitors overcome the west's collective memories of Cambodia's
recent past to travel to the temples of Angkor Wat. Enticed also by
indicators that suggested the feeble economy was turning a corner,
super-rich, predominately British, French and Swiss speculators,
fuelled by a high-risk machismo, came hunting for profits of 30% or
more. Their interest was land speculation: buying up large sites in
developing countries that they would then sit on in the hope that,
with the influx of tourists, land values would soar.

Hun Sen and his ruling Cambodian People's Party (CPP) have, in effect,
put the country up for sale. Crucially, they permit investors to form
100% foreign-owned companies in Cambodia that can buy land and real
estate outright - or at least on 99-year plus 99-year leases. No other
country in the world countenances such a deal. Even in Thailand and
Vietnam, where similar land speculation and profiteering are under
way, foreigners can be only minority shareholders.

There were other inducements. Many foreign funds - hedge funds,
property funds, private equity funds - operating on the outer margins
of the financial world thrive on complexity, risk and maximising
profit. In Phnom Penh, they found an ideal partner in the prime
minister, who has created a unique business environment. Since the
mid-90s, Hun Sen and the CPP have declined to enforce money-laundering
legislation and have concerned themselves little with the probity of
investors. Foreign businessmen were offered nine-year tax holidays,
and were allowed to hold their cash in US dollars in banks outside the
country.

"Only recently, no one would touch us," Brett Sciaroni, a Phnom Penh-
based US lawyer who acts for many new western investors, tells us. "We
were dirt. And suddenly we were gold." John Brinsden, a British
banker, now vice chairman of Cambodia's national Acleda Bank, agrees:
"In 2001, only 200 people came to the government's investment
conference. At our most recent, we ran out of chairs."

In July 2007, Hun Sen, gambling on his people's tenuous connection
with the land, changed the designation of the southern islands so they
could be sold. The forests, lakes, beaches and reefs - and the lives
of the thousands of residents - were quietly transferred into the
hands of private western developers. Arguing that Cambodia could
become a tourist magnet to challenge Thailand, the prime minister
began a fire sale of mainland beaches. By March this year, virtually
all Cambodia's accessible and sandy coast was in private hands, either
Cambodian or foreign. Those who lived or worked there were turfed out
- some jailed, others beaten, virtually all denied meaningful
compensation. The deals went unannounced; no tenders or plans were
ever officially published. All that was known was that more than
£1,000m in foreign finance found its way into the country in 2007, a
1,500% increase over the previous four years. It was as if Alistair
Darling, the British chancellor, had decided to raise some extra cash
by trading the Isles of Wight, Man and the Hebrides, throwing in
Formby Sands, the entire Cornish coastline and Brighton seafront -
before trousering the proceeds.

It was abundantly clear to observers, including the World Bank and
Amnesty International, that by making these private deals, Hun Sen was
denying prosperity to most of his people, causing the country's social
fabric to unwind like thread from a bobbin. Today, more than 150,000
people are threatened with eviction. Forty-five per cent of the
country's entire landmass has been sold off - from the land ringing
Angkor Wat to the colonial buildings of Phnom Penh to the south-
western islands. Professor Yash Ghai, the UN human rights emissary to
Cambodia, warned, "One does not need expertise in human rights to
recognise that many policies of the government have... deprived people
of their economic resources and means of livelihood, and denied them
their dignity." He added, "I believe that the deliberate rejection of
the concept of a state governed by the rule of law has been central to
the ruling party's hold on power."

It was Hun Sen who, as early as 1989, realised the power of land.
Rhodri Williams, a researcher for the Geneva-based Centre on Housing
Rights and Evictions, points out that, as Hun Sen privatised the land,
"he simultaneously cut off the rights of 360,000 exiled Cambodians,
awarding prime slices to political allies and friends." The exiles
were Cambodians who had fled the Khmer Rouge into Thailand and beyond
in 1975; they had titles to the land, but this counted for nothing
when they returned to claim it. Hun Sen said Cambodia should start
again.

Although he bathes his speeches in socialist values, even his closest
aides told us that Hun Sen was more often than not a pragmatist. He
joined the Communist party in the 60s and enlisted in the Khmer Rouge
in the 70s, before defecting to the Vietnamese-backed government in
the 80s. In the 90s, he embraced the free market. Tourism was not a
promising prospect in the early days - the remnants of Khmer Rouge,
violently hostile to outsiders, were too much of a risk. When western
travellers did begin to explore, they were taking their lives in their
hands. In 1994, Briton Mark Slater, Frenchman Jean-Michel Braquet and
Australian David Wilson were kidnapped while riding a train through
Sihanoukville, and all of them executed. Two years later, Christopher
Howes, a British de-mining expert, together with a Cambodian
colleague, were murdered as they worked 10 miles north of Angkor Wat.

By 2006, the country seemed safer, and was finally becoming a tourist
destination. That September, the CPP received its first foreign offer
in the coastal area: a Russian investor living in Phnom Penh wanted to
buy an island. This deal would become the template for every developer
to come. Alexander Trofimov created a Cambodian shell company to buy
Koh Puos, or Snake Island. With cash apparently no object, he proposed
to stunned government officials that he would link the island to a
mainland beach - known as Hawaii - with a 900-metre suspension bridge.
"He also asked to buy Hawaii beach," the official who oversaw that
meeting told us. "And we gave it to him." No figures were published.
The official claimed he didn't know them.

Locals who used the beach and island were kept in the dark. No one
quizzed Trofimov. He produced a book of cut-and-paste designs that he
said would encompass a £150m resort consisting of 900 tightly packed
villas, a dolphin aquarium, two hotels, a shopping centre and a marina
- all crammed into an egg cup-sized island. It was enticing stuff for
the CPP, although the project faltered when Trofimov was accused of
having sex with underage girls, and jailed this year. However, two
more Russian businessmen seamlessly emerged to take up the reins,
representing a Cypriot-holding company that, it later transpired, had
owned the Koh Puos project from the off.

Arnaud Darc was quick off the mark, too. A quietly spoken and likeable
French businessman, Darc had arrived in Cambodia in the 90s, building
a hotel and restaurant business in Phnom Penh. In 2006, after hearing
from a French colleague working at Sihanoukville's provincial airport
that the runway was likely to be extended, he identified two massive
beach-front sites totalling more than 220 hectares that he liked the
look of. He brought in Jean-Louis Charon, a Parisian real estate
tycoon, whose Nexity company is the largest in France, and whose name
brought in "40 French high-net worths", as Darc described them; they
raised £12.5m to be held by City Star, a foreign-owned investment
company. "The maths was easy, and the returns potentially fantastic,"
Darc said. City Star's land values quadrupled as soon as the Cambodian
government confirmed the airport rumours, a spokesman for the
Sihanoukville governor's office told us.

The investors could have sold up and come away rich. But this was
development with a difference. City Star investors wanted more, but
did not want to go to the trouble of constructing anything. They were
speculating on the future value of the land, believing that by adding
only modest infrastructure, perhaps attaching big-name hoteliers, they
would reap vast profits in seven to 10 years. Darc's group continued
buying, snapping up 333 hectares on Koh Russei and Koh Ta Kiev, two
islands off Ream. Such was the appetite for easy money that City Star
raised a further £30m in a matter of days from a second group of
French high rollers last July, this time to buy in Phnom Penh.

Darc's model appealed to British investors behind LimeTree Capital, a
Hong Kong-based private equity group that in 2007 bought up chunks of
beach front near Ream; sites it planned to leave idle for many years
until prices peaked. This spring, a third entrepreneur, Frenchman
Alain Dupuis, through his Cambodian company LBL International, bought
Koh Sramaoch. Soon after, Koh Tonsay, or Rabbit Island, was auctioned
off to Chinese investors; 14 fishing families were evicted to make way
for a casino and a golf course.

On the mainland, Sang Run returned to the beach to find his village in
Sihanoukville destroyed to make way, supposedly, for a hotel. A few
hotels have been built, but generally the sites remain empty. The
Cambodian economy has grown by more than 24% over 18 months and land
values have in some cases risen by more than 100%, so there are
fortunes to be made from doing nothing but wait.

Australians Rory and Mel Hunter were the only investors who made an
attempt to incorporate into their plans the people whose land they
were buying. An advertising executive, Rory had come to Cambodia to
work for an agency in Phnom Penh. During a week-long vacation in 2006,
he and his wife, Mel, had set out on a diving trip around the Koh Rong
archipelago and fell in love with the twin islands of Koh Bong and Koh
Ouen, attached to one another by a coral reef and cupped in a shallow
strait - they were known collectively as the Sweethearts. "We dreamed
of a beautiful resort where people could immerse themselves in a new
part of Asia," Mel said. They began negotiations with two village men
to buy their houses and those owned by 60 other families. "They
thought we were nuts," Rory said. "The two head guys wanted £7,500
each. We agreed and signed the contract in a boat out in the strait.
We helped take down their tin shacks, and slowly relocated all the
families and their homes to Koh Rong, across the strait." They worked
for weeks to clear 20 years of debris, while beginning negotiations
with the government to buy the islands themselves.

The Hunters drummed up backing from a handful of British speculators,
including a currency broker who (preferring we didn't use his name)
tells us why he leapt at the opportunity. "I loved the deal from the
start. Let's be honest, who wants 6%? I wanted a deal that would wake
me up in the night, sweating. We could make good money," he says over
drinks in Phnom Penh, his City suit exchanged for shorts and a T-
shirt. "There was a buzz about Cambodia you don't get elsewhere. It's
Cambodia, the killing fields and all that stuff. Something different
to show your mates back home. I show them the visa in my passport. I
have something they don't."

But the Hunters' enterprise would soon be challenged by a cascade of
deals involving neighbouring islands. While they worked on retraining
local fishermen on neighbouring Koh Rong, British property developer
Marty Kaye bought the ground from under their feet. Kaye, who had
spent much of his career working on construction in Hong Kong, had
spotted the island while planning an £800m luxury tourist development
on a nearby Vietnamese island, Phu Quoc. He told us: "I was walking
down the beach on Phu Quoc, seeing where we were going to put the golf
course, and I spotted another island. No one knew what it was. We
looked on Google Earth and it seemed to be Koh Rong, in adjacent
Cambodia. I said, 'Let's see if we can get anywhere on Koh Rong,
too.'"

Kaye, who runs Millennium property fund, began negotiating. "Here was
a chance to buy an undeveloped island almost as long as Hong Kong," he
said. "Nowhere else in the world could you create your own kingdom
from scratch - unlike the car-crash planning of Thai islands like Koh
Samui." The Cambodian government gave him 18 months to produce more
details, and he worked on an outline plan whose initial development
would cost £100m. When the government signed the deal, it made no
mention of the census it had just carried out recording how many
thousands of people (the government won't reveal the figures) live on
the 7,800-hectare island.

Kaye is not worried: "Two guys and a lawyer will see everyone. But
what most of them don't understand is that even if they have papers,
they are not worth anything. All of them are registered only locally,
not in Phnom Penh, so they will have absolutely no case. Others are
just squatters with no papers at all." It helped that Kaye's Cambodian
partner was tycoon Kith Meng, a multi-millionaire with interests in
banking, mobile phones and real estate - and a close friend of the
prime minister, Hun Sen.

"Kith Meng wants everything done yesterday," Kaye said. "We are going
to move as fast as we can. It's fantastically exciting, the
opportunity to zone the whole island, to see where the luxury
exclusive villa plots will be, for the Brad Pitts, etc." It is an
investment that gives the present residents of Koh Rong just over a
year to make a solid case for keeping their homes or finding new ones.

If they are evicted, places in the area to make a new home are
becoming scarce. With all the big islands sold, even smaller outcrops
have gone, too, including a clump of rocks known as Nail Island,
bought by Ukrainian entrepreneur Nickolai Doroshenko, who has
transformed it into a James Bond-style lair, complete with a giant
fibre-glass shark that soars over the fortress-like construction. He
already owns Victory Beach, in Sihanoukville, a restaurant stuffed
with live snakes and a bar that advertises "swimming girls".

The sale of the century continued with the mainland beaches. At the
end of January, the Sokha Hotel Group, run by Sok Kong, a Cambodian
oligarch and Hun Sen ally, was confirmed as the new owner of the
lion's share of Occheuteal Beach, the largest and most popular public
dune in the region, which was closed off to make way for a 1,000-room
hotel and golf course. The deal was originally negotiated in June 2006
when, local fisherman told us, bulldozers and 10 trucks of armed men
demolished 71 homes and 40 local restaurants.

Not wanting to be left out, Say Hak, Sihanoukville's governor,
acquired a small island for himself, on which he built a villa and
jetty; while Sbaung Sarath, the wife of his deputy, bought half of
Sihanoukville's public Independence Beach in February 2008, evicting
scores of families in the process. Among them was Srey Pov. She
travelled to Phnom Penh with 27 other families to protest, but
returned with nothing. "The developer issued a warning," she says.
"They threatened to pay the city authorities to get rid of us. We knew
what that meant." Independence Beach now languishes behind high
fencing, as Srey Pov feared, waiting for the five-star tourists who
will enjoy exclusive access to the powder-white sand.

Days later, Sbaung Sarath struck again, securing part of
Sihanoukville's Otres Beach, one of the last public dunes, where
Queenco, a London-listed casino company, also announced in February
that it had bought 56 hectares. Queenco declined to comment on its
Sihanoukville project, but it has already had consequences - 100
fishing families have been evicted. They have built a row of makeshift
bamboo shacks, held together with plastic sheeting and whatever
rubbish they could recycle, along a 200-yard stretch of a nearby main
road. On the day we visited, they were drying out from an overnight
storm that had filled their ramshackle homes with rainwater.

Aom Heat, 63, used to have a wonderful view over Otres beach and the
gulf beyond. She was forced off her land last April. Now all she can
see are the hubcaps and exhaust pipes of lorries that tear by. She and
many of her neighbours had arrived on Otres Beach after fleeing the
Khmer Rouge in the early 80s, building a fishing village they
christened Spean Ches, or Burning Bridge. "When the eviction notices
were served on us in September 2006, we were determined to fight," she
says. She could not bear to lose everything again. "We lodged a
complaint with the Senate Committee on Human Rights that ruled it was
a matter for the courts." But the Sihanoukville governor's men did not
wait for a court order. They turned up at the seaside village in April
last year, Aom Heat says, and, "they burned down 26 houses and
bulldozed 86 more, destroying all the pots and pans, clothes and food
supplies. We were in a blind panic." Thirteen injured men were
arrested and jailed, including one of Aom Heat's sons. Although made
homeless, they were charged with "wrongful damage of property", and
nine of them found guilty without witnesses or evidence produced.
Despite having served their time while waiting for the case to be
heard, the men were thrown back into jail pending an appeal from the
prosecution, who complained they had been dealt with too leniently.

No one can agree what impact the foreign land sales will have on the
Cambodian economy because so little information is made public.
Although Cambodia is nominally a democracy that has held three general
elections to date, and has a nominal opposition party, the CPP
parliamentarians and cabinet are remote and dismissive of their
people. They are not required to report on their interests or assets,
making it impossible to deduce how much Hun Sen and his cabinet have
personally benefited - although the World Bank reported last year that
corruption, coupled with a lack of transparency, was "choking economic
growth".

Since the land sell-offs, members of the government and its allies
have been splashing huge sums around. A Korean developer told us that
when he marketed Phnom Penh's first skyscraper, the 42-storey Gold
Tower project in February, all two dozen £750,000 penthouse suites
were bought within 24 hours by "an honour roll of the CPP and its
friends in the military". There are other telltale signs, such as the
canary yellow Hummers and hi-spec Range Rovers with blacked-out
windows that rumble around Phnom Penh, in a country where the average
annual income is less than £150.

Simon Taylor, the director of Global Witness, an international NGO
that was forced to leave the country last year, having accused the CPP
of running a logging racket, paints a depressing picture: "A shadow
state has grown up, a government that misappropriates public assets,
extorts from businesses and manages an extensive illicit economy. It
is administered by senior ministers who are fluent in the jargon of
good governance and sustainable development." One of Hun Sen's closest
advisers, who requested anonymity, disagrees, telling us: "Hun Sen
believes that liberal democracy is unsuited to a country whose skills
have been drained and demographics wildly skewed by the Khmer Rouge."

Everything comes down to how much money you have in your pocket,
according to Doug Clayton, from Leopard Asia, a fund of Swiss and
British bankers that is about to invest £25m in Cambodia. "This kind
of money opens any door," he says. How does Clayton pitch the Hun Sen
brand back home? "Candidly? In investment circles, no one knows
anything about this place. It's off the radar. In our pitch I talk up
the new economic figures. I talk up stability." Clayton adds: "When
the dust settles, the government here will probably end up looking
something like the one in Singapore." There, Lee Kuan Yew served as
prime minister from 1959 to 1990. Cambodian pollsters, looking to the
general election that will run this July, predict a clear CPP victory,
putting Hun Sen at the helm for many more years, too.

What will this mean for people such as Sang Run, who is now surviving
in a makeshift home behind Independence Beach? Has the legacy of the
Khmer Rouge been purged? Naly Pilorge, director of Licadho, a local
human rights NGO, thinks not: "Everyone claims Cambodia has come
through the period of barbarism, but the sadism is still bubbling
beneath the surface. Extreme violence, greed and disregard for the
most basic human rights - of giving people a place to live - are still
with us daily. The methods of the past are being used to dictate our
future."
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