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Logo of Phnom Penh Post newspaper Phnom Penh Post - ELCs: economic benefits not realised

Independent economist, Srey Chanthy, talks to the Post last week in Phnom Penh
Independent economist, Srey Chanthy, talks to the Post last week in Phnom Penh. Pha Lina

ELCs: economic benefits not realised

Since the early 1990’s, the Cambodian government has been granting companies Economic Land Concessions (ELCs) as a tool to stimulate the economy. Today, more than twenty years on, with over 1.2 million hectares of land granted for development (though right’s group’s say the figure is more than two million), but ELCs have become synonymous with land conflicts rather than a positive vehicle for economic development. This week the Post’s Chan Muyhong talks with independent economist, Srey Chanthy, about how well the economic benefits of ELC’s are faring.

What is the purpose of an ELC?
ELCs actually started during the French colonial times, they were dropped and then started again in 1992. At that time ELCs were given to smaller-scale private companies. We only started to see ELCs granted to bigger companies and in larger sizes, hundreds and thousands of hectares of land, in 2000. The goal was to use the eroded forest area, after forest land concessions ended in 1998, for ELCs for the agriculture sector, for economic growth by creating jobs for rural people.

Why would the government use land to boost economic growth?
It doesn’t mean that providing land concessions will simply stimulate the economy as quickly as possible. But why ELCs?, because it is easier. Cambodia does not have anything that stands out to attract foreign investors. In developed countries, there is no space for farming anymore, therefore, granting land concessions is considered to be the most effective tool to attract foreign direct investment.

How have ELC’s contributed to Cambodia’s economy?
The government could earn around $15 per hectare annually from ELC’s when companies start harvesting. However, there is no exact number of how much tax was collected per year from the ELC’s or how much it has contributed to total GDP. But I believe there has been some contribution.

When an ELC works, it creates jobs for people in the community, it will also attract workers from other provinces which will then reduce Cambodian migrant workers moving to Thailand.

Why has there been so much land conflict with ELCs?
This stems from a poor administrative system. ELC’s were granted to companies using dated information and maps, with a shortage of expertise of those who go to the field and study the area. ELCs are a controversial issue now in Cambodia. Cambodia has good laws and regulations on ELCs, but we do not implement them.

I believe that this problem can only be solved when all relevant stakeholders; the government, companies, NGO’s and the victims sit down together and talk. We do not see this kind of discussion happening yet. And the victims are still the villagers.

Serious investors will definitely want to study the area before they invest money. They are concerned about their reputation.

Economically, who receives the greatest benefits from an ELC?
Investors get the best interest. We still see a limited share of interest from ELCs given to villagers by companies. For example, companies investing in a large scale corn or cassava plantation, they only need workers during planting and harvesting season which is short term. The remaining processes are all machine led. Giving out fair wages to workers remains an issue. We still need to ensure a fair wage and good conditions for workers, so they can get their fair share from an ELC.

How is it best managed to ensure the benefits reach farmers?
The thing is, investors do have bigger capital, modern technique and a bigger market. They can do large scale plantations on eroded forest land and bring economic benefits. They bring in modern farming techniques for farmers to learn from. If companies abide by ELC laws and provide a fair share of benefits to villagers, it will bring prosperity to the area. We need better ELC management from the government.

What are the economic costs associated with companies granted an ELC that are unable to deliver on their promises?
This is again about ELC management: to evaluate the capacity of the investors. Investors’ capacity includes their capital, farming techniques and market. We need to look at their capital and the size of the land being given. For example, with the capital and plantation plan they have, they only need 5,000 hectares of land. The law says ELCs can be taken back if investors fail to develop the area. Generally, serious investors will do their project analysis. They will calculate risks and inflation for their investment before they invest.

This interview has been edited for length and clarity

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