International Finance Corporation and Deutsche Bank bankrolling Vietnamese land grabs in Cambodia and Laos
The International Finance Corporation (IFC) and Deutsche Bank are financing Vietnamese rubber companies driving a wave of land and forest "grabs" in Cambodia and Laos, according to a new report and film by Global Witness.
The report, “Rubber Barons”, reveals how a pervasive culture of secrecy around plantation investments in the region has allowed two of Vietnam’s largest companies, Hoang Anh Gia Lai (HAGL) and the state-owned Vietnam Rubber Group (VRG), to acquire more than 200,000 hectares of land through a series of deals with the Lao and Cambodian governments that lack transparency.
It details how these rubber giants, with close links to the region’s notoriously corrupt political elites, operate with complete impunity, devastating local livelihoods and the environment in the process. Deutsche Bank has significant holdings in both companies, while the IFC 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 the IFC,” said Megan MacInnes, Head of the Land Team at Global Witness. “Both companies are having severe impacts on the human rights of ordinary Lao and Cambodian citizens. Often, the first time people learn of a plantation is when the company bulldozers arrive to clear their farms.”
Cambodia and Laos are undergoing a land grabbing crisis that has seen more than 3.7 million hectares of land handed over to companies since 2000, forty percent of which is for rubber plantations. The report reveals how HAGL and VRG‘s operations are characterised by a lack of consultation with communities, non-payment of compensation and routine use of armed security forces to guard plantations. Large areas of supposedly protected intact forest have been cleared, contrary to forest protection laws, apparently in collusion with Cambodia’s corrupt elite. Global Witness is calling for HAGL and VRG to be prosecuted for their illegal activities and for their plantation concessions to be cancelled.
Rubber Barons identifies various relationships between Deutsche Bank and the IFC – the private lending arm of the World Bank Group – and the rubber companies. These investments stand in stark contrast to both institutions’ public commitments on ethics and sustainability, as well as the World Bank’s core mandate to end global poverty:
The IFC currently invests US$14.95 million in a Vietnamese fund that holds nearly five per cent equity in HAGL (1).
Deutsche Bank currently holds US$4.5 million in shares in HAGL through its DWS Vietnam Fund Ltd (2).
In 2011, HAGL became the first Vietnamese company to list on the London Stock Exchange, using Deutsche Bank Trust Company Americas as its depository bank (3).
Deutsche Bank holds 1.2 million shares in Dong Phu, a member of VRG, which are currently worth US$3.3 million (1).
HAGL and VRG's ultimate ownership of these companies lies behind an intricate web of shell companies. This allows them to disguise the fact that they have massively exceeded Cambodia’s legal limit on land holdings.
Since August 2012, Global Witness has made persistent requests to HAGL and VRG to bring their operations in line with local law, resolve disputes with affected communities and publicly disclose details of their concessions. Neither company has so far acknowledged any wrongdoing, or made any commitment to change their behaviour.
Local people’s testimony, detailed in Rubber Barons, describes the impact of these activities on their communities – increased food and water shortages, loss of livelihood without compensation and poor employment conditions are commonplace, while indigenous minorities have lost burial grounds and sacred forests to the bulldozers. Those who protest face violence, intimidation and even arrest, often by state authorities who are meant to protect them but instead protect the Vietnamese companies.
“These cases are shocking, but they are far from unique,” said MacInnes. “Until governments bring in and enforce regulations to end the culture of secrecy and impunity that is driving the global land grabbing crisis, international banks and financial institutions will continue to turn a blind eye to the human rights abuses and deforestation they are bankrolling.”
When asked, HAGL confirmed holding rubber plantations totalling 46,752 hectares in Cambodia and Laos but denied knowledge of any disputes with local communities or involvement in illegal activities. VRG meanwhile stated the evidence presented to them was not true, but declined to confirm the status or holdings of its rubber operations in either country.
Largely overlooked by the international community since suffering heavy bombing during the Vietnam War, Laos recorded the fastest growing economy in Southeast Asia in 2012. A decade of surging growth has attracted investor attention, with agribusinesses from nearby countries like China and Vietnam flooding in to cash in on an abundance of arable land and cheap labour.
All this investment should herald a new era of prosperity for Laos’ people, who count over 100 ethnic minorities amongst a population of just 6.5 million. But endemic corruption, weak rule of law and widespread official disregard for local land rights have encouraged unscrupulous companies and spawned a rash of state-sponsored land grabs. Almost 20% of all villages in Laos have been affected by at least one land grab, with many families kicked off their traditional lands without consultation or compensation.
With no free press in this highly secretive one-party state, good information about land deals is very hard to obtain, but estimates suggest this government has handed a total of up to 3.6 million hectares of land to agribusinesses. In a country where 80 per cent of the population rely on small-scale farming, this rapid sell-off means more and more people are losing their livelihoods and being pushed deeper into poverty.
The environmental cost of this crisis is also huge. Right across the country, forest cover is giving way to industrial-scale plantations growing export crops like rubber and coffee. Meanwhile, those brave enough to speak out often pay a high price in Laos’ courts and prison cells. Journalists, activists and community leaders are regularly harassed or arrested for speaking out, while some have disappeared completely.
This drive for investment in land is a key element of the Lao government’s national development plan. But the lack of social or environmental safeguards means very few benefits reach the people of Laos, and instead serve to prop a corrupt and repressive regime.
Global Witness’ work in Laos exposes the illegality and corruption at the heart of this crisis. We push for land to be allocated in a transparent and sustainable manner and for the persecution of those who speak out to end. Otherwise, Laos’ land and forests will soon be gone, taking traditional livelihoods and the promise of a more prosperous future with them.
This report shows how vast amounts of land have been acquired for rubber plantations in Cambodia and Laos by two of Vietnam’s biggest largest companies, Hoang Anh Gia Lai (HAGL) and the Vietnam Rubber Group (VRG). The rubber barons are financed by international investors including Deutsche Bank and the International Finance Corporation (IFC) – the private lending arm of the World Bank.
It lays bare the culture of secrecy and impunity that has allowed these two rubber giants to gain rights to more than 200,000 hectares of concession land through secretive deals with the Lao and Cambodian governments. They have close links with the region’s corrupt political elites and operate with complete impunity, devastating local livelihoods and the environment in the process. Rubber Barons is the first exposé of the role of international financiers in these land grabs. Deutsche Bank has multi-million dollar holdings in both companies, while the IFC invests in HAGL.
Global Witness urges the governments of Laos and Cambodia to immediately cancel the rubber concessions in question, suspend and investigate VRG and HAGL’s rubber operations, and where there is evidence of illegal activities, prosecute the companies. It also calls on international governments to bring in and enforce regulations to stop international banks and financial institutions from continuing to turn a blind eye to deforestation and human rights abuses.
When approached by Global Witness in advance of publishing Rubber Barons, HAGL confirmed holding rubber plantations totalling 46,752 hectares in Cambodia and Laos but denied knowledge of any disputes with local communities or their involvement in illegal activities. VRG meanwhile stated the evidence presented to them was not true, but declined to confirm the status or holdings of its rubber operations in either country.