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U.S. Investor-Linked Land Dispute Threatens Cambodia’s GSP Access

Teak timbers are stacked up at SRP Cambodia in Tbong Khmum province, Cambodia, Oct. 14, 2019. (Sun Narin/VOA Khmer)
Teak timbers are stacked up at SRP Cambodia in Tbong Khmum province, Cambodia, Oct. 14, 2019. (Sun Narin/VOA Khmer)

On September 11, 2019, people filed into Room 2200 of the Rayburn House Office Building for a U.S. Congressional hearing on the labor and human rights situation in Cambodia. The event was hosted by the Tom Lantos Human Rights Commission and the Congressional Cambodia Caucus, with members of the latter frequent critics of Prime Minister Hun Sen’s policies.

The usual list of rights advocates, foreign policy experts and Cambodia observers were present in Washington DC to testify before the commission. But Daniel Mitchell was an unusual additional to this group. The managing director of SRP International (Cambodia) Ltd., which owns a teak farm in Tbong Khmum province, admitted so himself.

“I am an unusual person to testify before a human rights commission,” Mitchell said. “I am not a labor advocate nor a democracy or human rights activist,”

“Frankly speaking, I am here more as a result of conditions than convictions. My primary concern is the practical issue of rule of law.”

Mitchell was present at the hearing to highlight how SRP International (Cambodia) Ltd. (SRPICL) had seen a sizable portion of its teak farm illegally sold, despite having a 70-year lease for the land and having paid the lease cost upfront. Mitchell and the company have been active in Cambodia for more than 16 years.

The land dispute occurred under the auspices of the Royal Gendarmerie of Cambodia, which temporarily detained the company’s workers and effectively prevented SRPICL from entering the contested land last year. This allowed for the new owner to harvest the teak and sell it in Vietnam, according to documents submitted to the commission.

Daniel Mitchell, CEO of SRP International Group, testified before Tom Lantos Human Rights Commission on Cambodia, at the Capitol Hill, Washington, Sept. 10, 2019. (Ten Soksreinith/VOA Khmer)
Daniel Mitchell, CEO of SRP International Group, testified before Tom Lantos Human Rights Commission on Cambodia, at the Capitol Hill, Washington, Sept. 10, 2019. (Ten Soksreinith/VOA Khmer)

The seizing of the land illegally and the Gendarmerie’s involvement are both not unusual for Cambodia, where numerous, longstanding land disputes remain unresolved, often disproportionately impacting rural Cambodians, many of whom live near or below the poverty line.

Resolutions are rare, and Mitchell and SRPICL had to make the rounds over the last 12 months to get the attention of the relevant authorities.

After local authorities did not resolve the issue, SRPICL approached the U.S. Embassy in Phnom Penh and the United States Trade Representative, asking them to intervene, after which Prime Minister Hun Sen is said to have personally intervened in the dispute.

And the results were swift. A few weeks after testifying to members of the U.S. House of Representatives and sitting for an on-camera, studio interview with VOA Khmer in Washington in September, SRPICL was presented a possible resolution – an unnamed buyer had purchased all the disputed land and was leasing it again to the teak company for 50 years.

But, there was no mention of the more than a million dollars of lost teak or any compensation for losses incurred on the 16-year investment.

“The Cambodian persons are being paid and U.S. investors are told by the Cambodian government to absorb the losses,” Daniel Mitchell told VOA Khmer in mid-October.

“This is neither fair nor equitable, quite the opposite.”

A failure to reach an amicable resolution could see SRPICL making a major move – one they have already considered this year – to petition for an end to Cambodia’s access to the U.S. Generalized System of Preferences trade privileges.

U.S. Investor Sees Opportunity, Starts Teak Plantation in Cambodia

Daniel Mitchell and SRPICL entered the Cambodian market in 2002, when the company leased 300 hectares of land for 70 years in a part of Kampong Cham province which is now under the jurisdiction of Tbong Khmum province, to grow teak trees. The land, not far from the nearly 100-year-old Chup rubber plantations, was leased from two individuals, Keat Hong and Kun Tha, the former is a district councilor for Soung district in Tbong Khmum.

Following the planting of teak trees and a 16-year wait, SRPICL was ready to harvest some of the teak in April 2018. But as company workers attempted to harvest the teak, they were quickly stopped by Gendarmerie officials and six of the workers were detained and sent to the Military Police headquarter.

Sambath, a worker at the teak farm, informed the authorities that the trees belonged to the company.

“[But] they asked me who allowed us in to cut the teak,” said Sambath earlier this month.

It soon became clear that SRPICL was prevented from harvesting the teak after Keat Hong’s son-in-law, Voeung Ramy, filed a complaint, according to a written report signed by Var Sarith, commander of Tbong Khmum military police, dated November 30, 2018.

“After questioning them, we educated them and asked them to stop cutting the teaks on the land of Voeung Ramy,” reads Var Sarith’s report.

However, Mitchell said the workers had to sign agreements preventing them from entering the land or harvesting the timber in order to be released, hours after being detained.

He added that this effectively meant SRPICL workers could not enter the land – a development that involved no arrest warrant or sanction of court officials.

Var Sarith refused to comment on the land dispute and the 2018 arrests.

Additionally, SRPICL was informed that Keat Hong’s seized portion of the land had been sold to a new investor, Lay Hor. The company had not been informed of the sale by Keat Hong.

“We were told that the land had changed hands, which is a violation of the lease contract,” Daniel Mitchell told VOA Khmer in September. “We had physical possession of the land and had no intention of vacating it.”

Lay Hor then directed his associate, Hel Hok, to cut the teak and clear the land, according to a document signed by SRPICL workers in August this year. The workers, according to the document, said the clearing began in April 2018 and lasted for around one month.

“We told Hel Hok to stop cutting since the teaks belong to company. But Hel Hok said that he bought the land and he has the title,” reads the document, signed by SRPICL workers.

Then-U.S. Ambassador William A. Heidt (left) meets with Cambodian Prime Minister Hun Sen to discuss relations between the two countries, Phnom Penh, November 20, 2018. (Courtesy of U.S. Embassy Phnom Penh, Cambodia)
Then-U.S. Ambassador William A. Heidt (left) meets with Cambodian Prime Minister Hun Sen to discuss relations between the two countries, Phnom Penh, November 20, 2018. (Courtesy of U.S. Embassy Phnom Penh, Cambodia)

US officials intervene, negotiated resolution proposed

Last year, the issue was brought the notice of then-US Ambassador William Heidt. Taking cognizance of the dispute, Heidt wrote a letter to Minister of Commerce Pan Sorasak, asking for the protection of U.S. investments in Cambodia.

“Promoting mutually-beneficial American business engagement in Cambodia is one of our top priorities, and we hope that this issue can be resolved quickly,” read the August 2018 letter from the ambassador. “Disputes like this one, though, make it difficult to persuade U.S. companies to invest here and reduce investor confidence.”

The letter seemed to have the desired effect. In November 2018, the Ministry of Land Management issued a directive asking all involved parties to cease any activity on the disputed land. While the order brought SRPICL some relief, it was short lived.

In a surprise move, a Tbong Khmum court granted Lay Hor access to all the contested land in June 2019, despite the Land Management Ministry order. The ruling was quickly challenged by SRPICL.

“They’ve been allowed to start planting. We haven’t received any compensation,” said Mitchell.

With the dispute at a stalemate and the case languishing in Cambodia’s notoriously corrupt judicial system, SRPICL was handed an unexpected offer of a resolution in October 2019. And given the timing, the offer is seemingly linked to Mitchell’s testimony in Congress and a VOA Khmer report on the dispute in September 2019.

A working group of the Ministry of Land Management, tasked with solving such disputes, informed SRPICL that the disputed land had been bought by a new buyer, who was offering the company a new 50-year lease for the land.

Ministry spokesperson Seng Loth said in an interview that a businessman had agreed to buy the land and offer it to SRPICL under similar conditions as the original lease signed in 2002.

“Now we have solved the case,” Seng Loth told VOA Khmer. “We have a businessman, who wanted to [buy it]; bought the land and rented it to [SRPICL] with the same conditions of contract as agreed with the previous owners.”

Seng Loth would not reveal who the new owner is. He said during the third week of October that the case was resolved, adding the hasty resolution was possible because of the intervention of Cambodian Prime Minister Hun Sen.

“The government wants all the investing companies from any country, not only Americans, to do business smoothly in Cambodia,” Seng Loth said.

At the same time, Ministry of Land Management documents accessed by VOA Khmer show that Keat Hong, one of the original owners of the land, attended a ministry meeting in May 2019 requesting that the land dispute be delinked from an investigation into the clearing of the teak.

“He suggested that those who cut the timber should be arrested,” read the minutes from the meeting on May 10, 2019. “Please do not accuse me of being involved.”

Shortly after this meeting, in August 2019, Hel Hok and three accomplices were convicted and handed suspended sentences. Only Hel Hok was directed to pay SRPICL $2,500 in damages.

Keat Hong refused to address the dispute when contacted on October 21, only to say that the issue had been resolved.

“I don’t want to talk,” Keat Hong said by phone. “But I am happy with the solution and I accepted. There is no more problem.”

While Mitchell welcomed the new land lease, he said the company could not accept zero compensation for the losses incurred, which he projected to be around $3.2 million, not including the loss of the stumps that would have regrown into mature trees and much faster than new trees from samplings because of the established, deep and active root systems.

“We refuse to accept the losses as requested by the Ministry of Land Management,” said Mitchell in an email on Monday.

Last Ditch Effort, GSP Challenge For Compensation

In November 2018, with no resolution in sight, SRPICL started discussions with the United States Trade Representative, to explore the possibility of filing a petition to review Cambodia’s access to the Generalized System of Preferences (GSP).

According to the US Trade Act of 1974, the US president can remove a country’s designation as a beneficiary of the GSP trade preferences if it had “taken steps to repudiate or nullify an existing contract or agreement with a United States citizen or a corporation, partnership, or association which is 50 percent or more beneficially owned by United States citizens.”

Preferential access has helped Cambodia bolster its exports to the economic superpower. U.S. statistics reveal that Cambodia exported $3.8 billion worth of goods to the country in 2018, of which 20 percent or $720 million was under GSP.

In April 2019, SRPICL filed a petition calling for Cambodia to be stripped of its beneficiary country status, but withdrew the petition after concerns were raised about the safety of existing assets and staff in Cambodia.

It did lead to Karl Ehlers, assistant U.S. Trade Representative for the Office of Southeast Asia and the Pacific, raising the issue with the Cambodian government during his visit in June 2019, according to Mitchell’s written statement submitted to members of Congress.

But Mitchell said the company was considering filing the petition again if there was no way to recover the company’s losses.

“But if the situation isn’t resolved, then I have a fiduciary obligation to my investors to pursue all legal means to recover their losses, and as such, yes, we would consider the next window of opportunity if we’re not on a path to resolution,” he said this month.

The challenge to Cambodia GSP access, which currently applies only to travel goods, comes as the country faces an investigation into the European Union’s “Everything But Arms” trade scheme on account of consistent violation of human rights.

Reacting to SRPICL’s potential move, Doug Ericksen, whose firm PacRim Bridge has been hired to lobby on behalf of the Cambodian government, said the move would be irresponsible because it would affect “the working people of Cambodia.”

“I think, anybody advocating for that is advocating for harm to the working people of Cambodia and those people who would like greater economic opportunity,” said Ericksen in September. He is also a state senator in Washington state in the Pacific Northwest of the U.S.

“To come out and advocate for removing trade from the entire country based on a single situation does not seem to be a logical move,” said Ericksen.

Ericksen recommended that the case be handled by a local court. But Mitchell argues that it is incumbent on the Cambodian government to protect foreign investments and, at the very least, to ensure equitable implementation of the rule of law to retain, or attract, foreign investors.

He reiterated, as he did at the Congressional meeting in September, that his motives were non-partisan and not politically-linked. But if the government failed to resolve these kinds of disputes, it had itself to hold accountable, even if it meant the potential loss of GSP privileges.

“Ultimately, it is a decision of the Cambodian Government to either provide a fair and equitable resolution to this issue, or to risk the benefits GSP brings to the Cambodian people,” Mitchell said.