How the World Bank funds illegal logging in Cambodia and Laos

PHNOM PENH, Cambodia — Five-months pregnant, Im Chanthy was told that her husband's body had been found in the trunk of his car, brutally hacked to death for reporting on illegal logging and land concessions in Cambodia.

Many of these concessions, a new report by environmental watchdog Global Witness found, are owned by two Vietnamese rubber companies, which — with the financial support of Deutsche Bank, an arm of the World Bank and local governments — have acquired more than 500,000 acres of land in Cambodia and neighboring Laos.

The companies and officials involved have made millions growing resin trees and harvesting their sap to make rubber, while thousands of poor Cambodians and Laotians lost the little they had. Villagers have been sued and prosecuted, intimidated, threatened and shot at while trying to defend their livelihoods.

Heng Serei Odom, the journalist, paid with his life, and his wife Chanthy is now raising their 5-month old daughter on construction sites. She works carrying sand bag after sand bag for $2.50 a day — too little to eat properly, or care for her sick child.

“I move around from one construction site to the other, where I build small tents to stay there temporarily. That's why my daughter is sick a lot, because she has no proper accommodation to shade her and I don't have enough milk to feed her,” Chanthy said.

The companies in question continue undeterred despite allegedly being aware that many of their undertakings, such as the extensive logging of timber in national parks, are illegal, according to "Rubber Barons," the report released by London-based Global Witness on Monday that sheds light on the secretive operations of Hoan Anh Gia Lai (HAGL) and the Vietnamese Rubber Group (VRG).

Germany's Deutsche Bank, according to the report, holds $3.3 million in a subsidiary of VRG, which is chiefly owned by the Vietnamese government, and $4.5 million in the privately owned HAGL. The International Finance Cooperation (IFC), which is an arm of the World Bank, indirectly funds HAGL through its $14.95 million share in a Vietnam-based fund that invests in HAGL.

“We’ve known for some time that corrupt politicians in Cambodia and Laos are orchestrating the land-grabbing crisis that is doing so much damage in the region. This report completes the picture by exposing the pivotal role of Vietnam’s rubber barons and their financiers, Deutsche Bank and IFC,” said Megan MacInnes, who runs Global Witness’ land team.

Both Southeast Asian governments have argued that the land concessions granted to HAGL and VRG will help develop the poor countries and turn simple, self-reliant farmers into plantation workers.

But in reality, the 165,000 acres HAGL, VRG and affiliated companies hold in Laos and the 445,000 acres Global Witness identified in northeastern Cambodia have brought misery and despair to communities that depend on the forests, the report shows.

Bulldozers arriving are often the first sign of a fight for land the poor countryside stands to lose. Houses have been demolished, farms flattened, cemeteries dug up, and trees in which holly spirits are said to live have been uprooted.

“Losing the forest is like losing life,” a villager told Global Witness, describing how essential the fast evergreen and semi-evergreen forests are for the community.

HAGL and VRG have made millions off the plantations and the illegal selling of luxury wood. Between 2001 and 2011, prices for natural rubber increased ten-fold and reached about $3,600 per tonne last year, when Vietnam became the world's third-largest producer of rubber.

Most rubber is shipped to China, where it is processed and exported to the United States and Japan. As demand surges, the tight supply has fueled HAGL's and VRG's land-grabbing in Cambodia and Laos.

In addition, luxury rosewood grows inside the land concessions, which is illegally logged and exported, Global Witness says.

“The revenues are a planned part of the companies' financial plan for the concessions — the impression given is that without these revenues, the concession would not be economically viable,” says Josie Cohen, a researcher for Global Witness.

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In northeastern Cambodia, Dong Nai, a member of VRG is estimated to have logged 30 percent of the total forest in the area, amounting to about 10,000 resin trees, which are used for the production of varnishes or perfumes, for example.

For 100 resin trees, the company offered to pay between $250 to $330 in compensation, a sum the families would make from tapping the tree in two to three months, they said.

But reports and complaints the residents filed regarding Dong Nai's illicit activities went unanswered — most likely due to the involvement of a cousin of prime minister and strongman Hun Sen, who has ruled Cambodia for almost 30 years. Senior government officials, including the minister of land management, have visited the community to convince residents of the company's good intentions.

Residents protesting the illicit timber trade in Cambodia are threatened by police and military police paid to guard the concessions, and have even shot live rounds. May 16 marks the one-year anniversary of the killing of a 14-year-old girl protesting a rubber concession by officials.

Despite Deutsche Bank’s and the IFC’s claim that they are respecting human rights, environmental and anti-corruption standards, Global Witness says that they didn't properly research the companies before investing millions of dollars in HAGL and VRG.

“The suffering that [VRG and HAGL] have inflicted on local people, however, gives claims that they contribute to the two countries’ development a distinctly hollow ring. It also begs the question: What sort of institutions could countenance financing companies such as these?" the report concludes.

And while hundreds of thousands of Cambodians see their existence threatened — or already destroyed — a culture of impunity surrounds those responsible.

“We very much hope — for the sake of the communities whose livelihoods, forests, burial grounds and spirit forests have been destroyed — that those responsible are brought to justice,” Cohen said.

Neither government holds a positive track record in pursuing powerful and well-connected perpetrators. But international pressure has helped in some recent cases, such as the killing of journalist Heng Serei Odom, who worked to uncover similar ties between officials, rubber plantations and illegal logging. Earlier this month prosecutors announced that the case be reinvestigated.

Justice would offer some solace, Chanthy, the young mother, said.

“I am so happy that the court decided to reinvestigate the killing of my husband, and I hope that all perpetrators will be prosecuted and punished,” Chanthy said.