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November 24, 2008

As global foreign agribusiness investment grows, so does local resentment

by Ian MacKinnon

The blackened tree trunks say it all. Three times in recent months these tracts of palm oil plantation have gone up in smoke, along with plants and machinery. The neighbouring coconut operation suffered the same fate, but there the Thai owners replanted. Here, the Malaysians had had enough and called it a day.

The sabotage is a testament to growing local resentment at the way land is being sold off to big foreign investors with deep pockets. At face value, leasing agricultural concessions looks like a godsend for Laos, a poor country eager to shed its stigmatic designation of "least developed country."

With a population of less than six million in a country half the size of France, land is its biggest asset. And as food and commodity prices have surged over the past 18 months, neighbouring nations have been snapping up vast tracts on long leases. "The situation is completely out of control," said one foreign advisor in Vientiane. "It's a fire sale. People in power are just desperate to get their hands on the money so they don't miss out. For the companies coming in it's a massive land grab."

Recently, Chinese officials visited Vientiane seeking to lease 1m hectares for rice. Flush with cash from oil that hit $150 a barrel, Middle East states had the same idea, trying to secure 200,000 hectares. Kuwait's prime minister and foreign minister paid two visits in two months.

"Countries were traumatised by the food crisis," said a foreign land consultant in Vientiane. "They've money to spend and they're shopping around. It doesn't matter that oil prices have gone off. They feel this food problem will come back to haunt them. Even if they start something now, they know it'll take years to reach 100% production."

Already between 2m and 3m hectares of land - as much as 15% of Lao territory - has been signed away. Some leases stretch for 70 years. Nationwide, there are at least 150 international agricultural projects. Just six projects valued at £8m were agreed in 2002, but that jumped to 39 worth £262m in 2006.

Thai, Vietnamese and Malaysian companies dominate the southern lowlands where rubber, sugar and cassava plantations carve out vast swaths. Japanese, Indian and Scandinavian farms cultivating fast-growing eucalyptus and acacia trees for paper pulpwood forests dot the centre. Chinese operations lease the most land in the north, principally to grow rice or rubber trees.

The desperation to find land means that village farmers have been stripped of their holdings for minimal compensation. In a country where most are subsistence farmers living on less than $2 (£1.33) a day, some can no longer feed themselves.

Tamang, 56, moved to a village built by the Japanese pulp company Oji Paper when the eucalyptus plantation was developed on his land. His children attend the new school, and he works up to seven days a month on the plantation for £1.40 a day. But the rice paddy that was promised as compensation has yet to materialise. "We're waiting for the government to give us land, but we've heard nothing yet," he said.

Part of the bonanza is explained by the pitiful prices charged for buying up Laos. The norm of $3 to $9 a hectare each year is a fraction of the market rate. "The low rates of land leasing in Laos [...] were well under commercial value or sometimes free," wrote Glen Hunt, a researcher from Sydney's Macquarie University.

Dismal prices are due to the chaotic nature of the "opaque" bidding process that enables Lao district, provincial and national level officials to strike deals. Failure to grasp true land values as Laos shrugs off socialism contributes. But officials desperate to line their own pockets care little for Laos's coffers.

Martin Stuart-Fox, a retired professor and Laos specialist from the University of Queensland, casts the trend not as one of rich foreign countries grabbing what they can, but of local greed. "It's simply a matter of greed. Officials are grabbing what they can. Companies need land and are prepared to pay well. It all goes under the table."

Recognising the system was out of control, the prime minister, Bouasone Bouphavanh, declared a moratorium last May on large land concession allocations "to address the shortcomings of our previous strategy". But the stop order was ignored.

Yet it is becoming clear that Laos does not even have vast amounts of spare land.

Oji Paper was in principle granted 50,000 hectares - and its regimented eucalyptus forests line the roads of Bolikhamxay - but is struggling to find even a tenth of its allocation.

"It's a myth that Laos has so much virgin land," said one expert. "There's no land left. Plantations promised 20,000 hectares or 50,000 hectares can't find it when they survey. They might get 50 hectares here or there. But they want huge plantations. The dream was Brazil."

The Guardian

by Ian MacKinnon

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