'Land grabs' mar Cambodia's boom, rattle investors [-About time!!!]

• As economy grows, forced evictions rise
• Lack of documents cause of land disputes
• EU concerned; duty-free deal may be withdrawn on some produce

By Prak Chan Thul

PHNOM PENH, Sept 1 (Reuters) - Kong Song's farmland was his family's livelihood for three decades until the bulldozers moved in and tore down his home in rural Cambodia to make way for a multimillion dollar foreign-led business.

His family was one of 253 forcibly evicted five years ago in southern Koh Kong province to accommodate a $90.6 million sugar project by a firm lured by duty-free exports to the European Union that were designed to help the world's poorest countries.

This is the flip side of a foreign investment boom in which the rich and powerful cash in at the expense of what rights groups estimate is about 30,000 Cambodians forcibly evicted from their homes a year.

The evictions and so-called "land grabs" have angered donors, putting at stake hundreds of millions of dollars in foreign aid as well as a trade scheme that gives Cambodian produce tariff-free access to the European Union.

Kong Song is fighting back. He and his neighbours have filed a lawsuit against the Koh Kong Sugar Industry Ltd, a joint venture with Thailand's Khon Kaen Sugar and Taiwan's Vewong Corporation. But, as with most legal challenges against Cambodia's business elite, it has gone nowhere.

"We're demanding that Cambodia's development is development for all, not the kind that makes its people shed tears," Kong Song said during a visit to the capital Phnom Penh.

Neither Koh Kong Sugar nor Khon Kaen Sugar responded to interview requests when contacted by Reuters.

Kong Song's story is common in Cambodia. He survived the 1975-1979 "Year Zero" revolution by the ultra-Maoist Khmer Rouge regime and rebuilt his life, cultivating a small plot of land in the countryside.

But land ownership was abolished under the brutal regime and most legal documents were destroyed, leaving Kong Song and millions of Cambodians without title deeds.

That leaves him and others in a legal grey-zone, particularly during a wave of development led by politically connected businesses and foreign firms, mostly from China, that line up to buy up disputed land to start agriculture, mining or real estate projects.

International donors and lenders such as the World Bank have criticised the government and threatened to halt loans until a solution is found. The government's response has been to cancel its annual meeting with donors, citing global economic uncertainty and Western countries "mired in crisis".

ALARMING TREND

The trend has raised questions about whether Cambodia should be entitled to an initiative by the European Union, which allows 48 of the world's poorest nations to export any produce other than weapons to EU states, without paying tariffs.

Foreign firms have capitalised on the deal, known as the Everything But Arms (EBA) initiative, and many more are showing interest in Cambodia, including sugar, rice and rubber exporters from neighbouring Thailand.

The subsequent foreign investment has created thousands of jobs, especially in garment manufacturing, which employs 300,000 of Cambodia's 13.4 million people and is the third-largest revenue source for its fledgling $11 billion economy.

It has also elevated Europe as a crucial export destination. The EU was Cambodia's second-largest export market last year after the United States, generating some 930 million euros ($1.3 billion) up 29 percent from 2009.

The most-recent EU data shows the revenue generated in the first five months of this year is already double that of the whole of 2010. Rice exports are expected to swell further after doubling to 40,000 tonnes in 2010 from the previous year.

The EU's Charge d'Affaires in Cambodia, Rafael Dochao Moreno, said tax incentives had made the country an attractive destination for investment and said the EU was "seriously concerned" about land disputes and evictions.

"Thousands of families have been expelled from their land. We want the government to take the necessary steps to avoid this kind of eviction especially when they are done by force and with violence," he said.

Cambodia's government needed to conduct proper consultations before granting future economic land concessions, he said, adding that certain projects could have privileges withdrawn if found to have been involved in unlawful evictions.

"There are indeed provisions ... outlining the procedure of temporary withdrawal of certain products originating in a country benefiting from the EBA," he said.

Such penalties could undermine Cambodia's efforts to position itself as one of Asia's most-promising frontier markets and instead highlight its struggle to tame corruption.

Alexandra Herbel, head of the French-Cambodian Chamber of Commerce, said Western companies looking to do business in Cambodia were keen to "invest correctly" and most would avoid projects associated with disputed land or evictions.

Cambodian Commerce Secretary of State Mao Thura said steps should be taken to ensure EBA privileges were not withdrawn, but he declined to provide specifics.

"The people who benefit from the EBA are a few million," Mao Thura said during a recent forum on the EBA. "We're not just talking only about the garment sector, millions of our people are farmers."

(Editing by Martin Petty and Jason Szep)