The Japanese government is reconsidering a $1 million grant to build hydroelectricity

plants in Mondulkiri province in light of the government's unwillingness to resolve

a land dispute between Japanese and Chinese companies, said officials familiar with

the matter.

The two companies, Wuzhishan of China and Marubeni of Japan, have been allotted overlapping

plots of land by the government in O'Reang district, Mondolkiri. Wuzhishan is in

control of land upstream from the planned hydropower plants.

Two sources at the Japanese embassy said that with upstream land under Wuzhishan's

control, Marubeni could no longer be certain of sufficient water flows down the Prek

Dek Der river to power their hydroelectricity plants.

"The Japanese government is considering whether it will withdraw the grant or

continue with the grant," said one of the embassy sources on condition of anonymity.

While the source stressed that the problem was one of water management, not disputed

land, he acknowledged that the O'Reang controversy and control of Prek Dek Der were

linked.

Controversy over the overlapping land has simmered since last August, when the government

awarded land to Wuzhishan it had already given to Marubeni.

The threat to suspend the power projects appears aimed at motivating the government

to finally resolve the tussle.

Japanese ambassador Fumiaki Takahashi last month raised the matter with provincial

officials when he traveled to O'Reang district for Arbor Day celebrations.

The day's event was held on land covered by pine saplings, according to those who

attended, which suggested that the ceremony was conduced inside the Wuzhishan concession.

Kong Pisith, director of Mondolkiri's provincial Department of Industry, Mines and

Energy, said that Takahashi warned that the power plants might not be built.

"I heard that the hydropower projects would be suspended if the government is

not able to solve the conflict of land concession between the Chinese company Wuzhishan

LS Group and Japanese Marubeni Development Corp," Pisith said.

He said he hoped the dispute could be resolved so that the local community could

benefit from cheaper electricity provided by the hydropower plants.

While the hydroelectricity grant is a separate project to the rubber plantation,

the Japanese embassy has heightened the diplomatic bargaining by linking the two.

Marubeni began consulting with locals in July 2003 in preparation for developing

an 11,231 hectare rubber plantation. In August 2004, the government approved an overlapping

10,000 hectare concession for Wuzhishan.

Wuzhishan has since begun spraying pesticides on the land and planting pine trees,

despite not having completed the environmental impact assessments required by law.

The government has not released maps or any detailed information about the land concessions,

despite repeated requests from the international community and the United Nations.

Nouth Saan, secretary of state at the Ministry of Interior, has been assigned to

investigate the overlapping concessions.

"We are preparing the report and will send it to Samdech Prime Minister Hun

Sen within this week," Saan said.

He did not explain why the Ministry of Interior is heading the investigation into

concessions contracts usually signed by the Ministry of Agriculture, Forestry and

Fisheries or the Council of Ministers.

A second official at the Japanese embassy in Phnom Penh confirmed that a grant of

more than $1 million dollars had been set aside for the three hydropower plants and

planning had been underway for several years.

"Now we are preparing to have an agreement to implement the hydropower projects,

but recently we have considered the projects and we are not clear - it is dependant

on the situation," said the Japanese official on condition of anonymity.

The official said Japanese experts had completed preliminary studies for the electricity-generating

projects that when finished would supply 370 kilowatts of power.

Construction was to begin July 2006, and the power plants were expected to be completed

in early 2008.