Backed by powerful banks, Vietnamese rubber companies are rapidly expanding their operations in Cambodia and Laos by grabbing land from villagers and disregarding the environment, according to an extensive probe report.

The UK-based development watchdog Global Witness said in the report that Cambodian and Lao officials often look the other way as companies in Vietnam’s rubber industry seize land from local communities without adequate compensation and carry out illegal logging operations both inside and beyond their concession boundaries.

Vietnam’s two largest companies—privately-owned Hoang Anh Gia Lai (HAGL) and state-owned Vietnam Rubber Group (VRG)—have leased huge tracts of land for plantations in the two countries “with disastrous consequences for local communities and the environment,” the report said.

“The huge pressure for land to plant rubber is driven by high prices and soaring international demand, especially from China,” it said.

The Vietnamese companies are backed by top German lender Deutsche Bank and World Bank subsidiary the International Finance Corporation (IFC), and Global Witness called on them to divest their stakes in the companies if they do not adhere to the banks’ legal, environmental, and social requirements.

“As the third-largest producer of rubber globally, Vietnam is a key global player … [but] with limits on the land available at home, both companies have turned to neighboring Cambodia and Laos [for production],” it said.

Megan MacInnes, head of the Land Team at Global Witness and the report’s author, told RFA’s Lao Service that the impact of large-scale rubber plantations has been “devastating” to local communities and to the environment in Cambodia and southern Laos.

“There are major problems in terms of deforestation and illegal logging and forest clearance and destruction of forest resources,” she said.

“But the local communities we spoke to also told us about the fact that these plantations are destroying their access to local water sources—to streams and to rivers—and they also talked about pollution from the chemicals that the companies are using on the plantations.”

The Cambodian authorities criticized the Global Witness report, saying the group has a “political” agenda” against the government. Lao officials did not immediately react to the report.

MacInnes said the villagers her team interviewed for the report are in a “desperate situation” and that many have lost access to their farmlands—leaving them unable to grow rice and vegetables—as well as to forest resources such as medicines and fruits that are important to their household incomes.

“Almost all of the people that we spoke to told us that the impact on their livelihoods by these rubber plantations had been negative—had really impacted their livelihoods very badly,” she said.

By the end of 2012, the report said, 2.6 million hectares (6.4 million acres) of land in Cambodia had been leased, with 1.2 million hectares (3 million acres) allocated for rubber plantations, while in Laos, at least 1.1 million hectares (2.7 million acres) of land had been leased to concessionaires.

It termed the granting of concessions to HAGL and VRG in both countries “a process marked by lack of consultation and forced evictions.”

“Often, the first people know about either company being given their land is when the bulldozers arrive,” the report said.

“When they resist, communities face violence, arrest and detention.”

Flouting local laws

Global Witness said that rubber plantations, particularly in Cambodia, had been supported by corrupt political and business leaders, while dealings in both countries were “cloaked in secrecy.”

“Both HAGL and VRG have very close connections with high-level government and business elites in Cambodia, so they are clearly very well-connected to the government,” MacInnes said.

Global Witness said that government officials in both Cambodia and Laos have licensed concessions “in contravention of their own laws” and have failed to take action when HAGL and VRG ignored those laws.

MacInnes told RFA that her team often found that rubber companies had offered little or no compensation to families affected by concessions, which is required under both Cambodian and Lao laws.

“In some villages there had been compensation offered, but often it was very low—much, much lower than the market value or much lower than the households thought the land or the forest areas were worth,” she said.

“In other places, villagers told us that the companies promised compensation, but nothing was ever paid.”

The report said that the companies were responsible for the illegal clearance of intact forest—including protected species—both within and beyond their concession boundaries.

MacInnes said that the companies denied being involved in illegal activities when contacted by Global Witness, claiming their operations were sanctioned by the government through the granting of concessions.

“We think it’s very, very important that these companies bring their operations in line with the law, and we think that it’s incredibly important also that the Lao and Cambodian governments investigate and prosecute these companies for illegal actions and illegal operations around their concessions,” she said.

Global Witness called on the governments of Cambodia and Laos to suspend all HAGL- and VRG-related operations, fully investigate them, and initiate prosecution where illegal activities are found. It also recommended that a number of concessions made to other rubber companies should be canceled.

Report reaction

“This report doesn't aim to help Cambodia,” said Cambodian cabinet Spokesman Phay Siphan. “This is not a partner who is helping to prevent forest crimes.”

“The report has a political agenda in attacking the government,” he said, adding that the Cambodian authorities provided concessions not only to Vietnamese companies but also to local small- and medium-sized enterprises.

Phay Siphan called on Global Witness to “file a lawsuit if they have evidence” to support their claims.

He said the government’s policy of granting land concessions aimed to encourage practitioners of traditional agriculture to form small- and medium-sized enterprises to improve their yield and profits.

“This is part of an effort to modernize our agriculture sector,” he said.

“We are not only giving concessions to Vietnamese companies. We are giving concessions to any companies that can demonstrate financial and technical expertise.”

But Yim Sovann, a spokesman for the opposition National Rescue Party (NRP), accused the ruling Cambodian People’s Party (CPP) of “serving the interests of foreign countries,” saying that the granting of excessive land concessions to Vietnamese companies was causing the country to lose money.

“We would benefit more from preserving the forest and allowing our farmers to cultivate their land,” he said.

“Under the current model we enjoy a small amount of benefits at the cost of massive forest destruction.”