Playing by the rules ... a novel approach [Western investors are likely to play by the rules than the Asians, like the Chinese, Koreans or the Vietnamese]

Wayne Burton, CEO of Grandis Timber Koam Chanrasmey

Sat, 9 August 2014 Phnom Penh Post

Daniel de Carteret

It is difficult to imagine that a forest once existed in Kampong Speu’s Omlaing commune. The only evidence remaining is the occasional stump of about 30 to 40 centimetres in diameter that sit among patchy scrub, the only remaining foliage capable of growing in a land that has suffered decades of deforestation.

“We have a very degraded forest,” says Wayne Burton, the CEO of forestry company Grandis Timber, surveying a plot of scrubland on his company’s 9,800-hectare economic land concession, or ELC.

The site was logged in the 1970s, removing all the native forest, Burton believes. Today, the rugged terrain in Omlaing is beginning to make way for agro-industrialisation, largely in the form of maize and sugarcane plantations.

Carefully navigating the bureaucracy of Cambodia’s notoriously messy land rights management, Grandis secured its ELC in 2009, and set about growing a teak forest, a cash crop that won’t reach its full potential for another 25 years, when the trees are fully grown.

“Forestry is very long term, that is why it is hard to get investment,” Burton says.

But securing the capital is just part of the challenge. Before being awarded an ELC, investors need to detail how their use of land will contribute to the country’s growth and when that development will take place. Poor enforcement means these requirements are routinely flouted, both in terms of encroachment on protected areas as well as in land left unused or poorly developed.

Grandis stands out as one of those seemingly living up to the intended development model. Before planting its first seed, the company recruited the help of German development agency GIZ, to implement the “leopard skin” approach, a method that accounts for people’s location within the ELC, leaving them to live on “leopard spots”, rather than evicting them from the concession.

“Sure we have had some issues, but we have resolved those locally, there has been no conflict or anything like that,” says Burton.

And though the approach should be the norm rather than the exception, rights groups say, the leopard skin strategy has rarely been adopted, while fear of the unknown is widespread in villages.

“I am scared. I live under the law, but I don’t know how it works, so I worry,” says 46-year old Sam Khun from her small plot on the concession. “But I follow by this company, and it seems OK,” she says.

THE ELC OBLIGATION

In the early 1990s, the government began granting land concessions to companies as a tool to stimulate growth.

In theory. the ELCs provide people with an income, while ensuring livelihoods are maintained, with room for sustenance farming. International companies bring agro-industrial technologies and know how to get the most out of the land, therefore filling state coffers with much needed tax revenues.

But poor land titling and enforcement of laws on the government’s behalf along with investors reneging on their promises means economic goals have been slow to materialize and social outcomes are well below where they should be. According to government figures, 1.2 million hectares has been granted in the form of ELCs, half of which has gone to foreign investors, yet less than a quarter of that in foreign hands has been developed. Rights groups say the total amount granted is two to three times more.

Of those areas that have been developed, last year Licadho estimates that almost 2,900 families had land grabbed with more 460 of these forcibly evicted.

Many of those living on or around the concession have also found work at Grandis, which can employ up to 700 people.

“It is not just cutting the plants, I do different jobs here as the company requires,” says 38-year old Chim Ry, who makes $3.50 a day plus monthly and quarterly bonuses and payment into a social security fund.

Ensuring people have a right to the land is just part of the ELC commitment. Environmental protection or reforestation can benefit locals.

In its most recent report in May, the National Forest Program conceded its target of 60 per cent forest cover by 2015 will not be reached – due largely to forest encroachments and ELCs allocated in forest lands.

Sustainable reforestation means that new plantations can be carefully planned to provide an ongoing source of timber while regeneration can lead to healthier soil conditions and water tables providing for greater agricultural output.

“Promoting legal planted timber production and bringing in experienced forest industries may solve some problems if properly managed and enough time is spent for investment,” says Yukiko Kitazawa, media relations officer at the Japan International Cooperation Agency, whose organisation sits in the Technical Working Group for Forest reform in Cambodia.

Natural teak forests make up less than 2 per cent of global hardwood production, but when viewed in terms of value, the share is much higher. Available data to show where Cambodia fits in the global picture is patchy at best. But plantations of varying age do exist in Kratie, Kampot and Kampong Cham.

Grandis takes a scientific approach to achieving the greatest yields. On the plantation, some 50,000 teak cuttings, each one no taller than 10 centimetres, sit in benches inside a hothouse at waist height.

“Grandis has imported teak clones into the country and they should provide us with a superior tree than we could propagate from seed,” says Burton.

Cloning is a process of taking cuttings from a mother crop of superior plants, or those with proven properties to maximise the potential for a plants’ yield, such as a greater trunk diameter or less branching. These cuttings are tested in a hothouse to determine under what conditions the grafts have the highest success taking to the soil.

“We can get 60 per cent from here, but we have to do better than that,” says Wayne Wren, the nursery development manager at Grandis. “If you can get 80 per cent strike rate in this game, it is considered pretty good.”

Within a kilometre of the hothouse lies a half-hectare test plot where Grandis can measure their success. Despite being twice as old as their cloned counterparts, at three years of age, the seed-grown teak grows with no consistency. The broad leaves of their cloned neighbours, meanwhile, are already forming a healthy canopy.

Though just 3,000 hectares have been planted to date, the healthier clone set the standard for what Grandis is aiming to achieve across the majority of its ELC, planting 1,250 trees per hectare, a figure that will dip to 400 trees over time.

The company is coy about potential earnings; particularly given that they will not turn a profit for decades, when the market may have changed. But if current world prices of anywhere between $350 and $700 per cubic metre provide an indication, a plantation with millions of mature trees has the potential to make for a profitable ELC.

“We are a large project, so we can have negative and positive impacts here. Cambodia is also a very poor country, so people that come here and invest from overseas have some form of responsibility to do the right thing,” Burton says. Additional reporting Koam Chanrasmey.

Contact author: Daniel de Carteret